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Now that the utility industry is facing deregulation, electric and natural gas companies are looking to customer relationship management systems to help retain current customers and to recruit new ones. Even so, the development of interactive customer services is still in its infancy in this industry.
Posted Jul 21, 2000
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Now that the utility industry is facing deregulation, electric and natural gas companies are looking to customer relationship management systems to help retain current customers and to recruit new ones. Even so, the development of interactive customer services is still in its infancy in this industry, according to Andersen Consulting.

In a recent worldwide survey, Andersen found that the e-commerce efforts of most utilities leave them vulnerable to newer companies, a couple of which are already making inroads into what once were protected geographic territories.

"E-commerce gives companies the opportunity to greatly extend their relationships with customers by interacting with them on a very personal and customized level," says Ian Gibson, Andersen Consulting associate partner. "Unfortunately, many utility companies are not taking steps to do this, despite the fact that most are either already or soon will be facing a much more competitive marketplace."

Many utilities work on extremely tight margins with their small customers, and the cost-savings offered by interactive services could turn an unprofitable customer into a profitable one. With customers numbering in hundreds of thousands, even a $20 annual difference per customer can make a significant difference in the company's bottom line.

Some utilities have yet to catch on to even simple interactive customer services such as e-mail, according to Gibson. Andersen Consulting found that only 27 percent of utility companies responded to e-mail messages within 24 hours. A shocking 34 percent of utilities failed to respond to e-mails at all, and 11 percent of utility e-mail systems malfunctioned. Hardly the kind of statistic to reassure companies that their utility will provide reliable service.

New Opportunities

This gives new utility companies like Utility.com of Albany, Calif., and NewEnergy of Los Angeles the opportunity to capture customers by building interactive customer services. Utility.com, which bills itself as "the first Internet utility," has a Web site that enables visitors to view and pay bills, monitor electricity usage, and buy refrigerator and home wiring warrantees. The company opened its virtual doors in March 1999 and had close to 50,000 customers by the end of 1999, says CEO Chris King.

Utility.com focuses on residential and small business customers, with the company buying energy on the wholesale market, then reselling it to customers. Though selling electric power only in California and Pennsylvania today, Utility.com expects to expand its services to other parts of the country, moving into different states as deregulation takes effect.

Utility.com is one of an increasing number of utilities that offer Internet bill payment not only as a customer interactive tool, but also as a way to save on administrative expenses. Citing a Boston Consulting study, King says that offering billing services online saves up to 80 percent over traditional billing methods. "Presenting this information online results in a much richer customer experience," King adds. The billing information is also available to the marketing department, which uses it to target customers via e-mail for discounts on off-peak usage, when the company can buy power less expensively and pass those savings along to customers.

According to King, the company is also test marketing Internet service and other utility-related products and services on a national basis, because they aren't restricted by state regulations, unlike energy distribution. E-mails are usually answered within the same business day and almost always within 24 hours, King says. To improve response time even more, the company is installing automated e-mailing answering software that will analyze incoming e-mail messages for questions, then search the company's database for the appropriate response and transmit it to the e-mail sender. When the system becomes operational, responses should take only one to two minutes.

New Energy

While Utility.com targets the residential and small business market, NewEnergy focuses on large commercial customers. NewEnergy offers customers and potential customers extensive e-mail access to company contact across the business, rather than to a couple of individuals or to just the customer service department.

The online information includes access to hourly energy consumption information and savings details. Meters at customer locations transmit this data to NewEnergy every 15 minutes. Customers can access the information the next day, enabling them to see if energy consumption is higher than it should be. For example, if there are two identical stores and energy consumption is significantly higher in one than in the other, it could mean that faulty, energy-wasting equipment needs to be replaced, or that there are other money-saving steps the customer can take. "Under the old process, companies wouldn't get this information until they received their bills at the end of the month," says NewEnergy spokesman Dave Potter. By getting the information within 24 hours, customers can react more quickly to make changes in their energy consumption and expenses.

However, NewEnergy's target market, large electrical customers, typically want paper bills for their records, so the company does not yet provide online bill payment capabilities. If state regulations permit it, NewEnergy provides customers with consolidated bills--one bill for a customer even if facilities are in separate territories. Again, if state regulations permit it, NewEnergy will also include all elements of power usage on a single bill, which includes separate line items for electricity usage and for delivery (usually by the local utility).

Because the customers are large and each one presents promising profit potential, NewEnergy uses live customer service representatives to visit companies as warranted in addition to providing interactive customer service via the Internet. NewEnergy's Web site also provides visitors with up-to-date, state-by-state deregulation information. Offering this information enables prospective customers to know in advance about deregulation so that they can start thinking about switching service when the option becomes available.

"This way they know what to expect when we come into a market," Potter says, adding that there are plenty of disgruntled customers ready to leave monopoly energy providers as soon as another option becomes available. "NewEnergy is taking advantage of the Internet," Potter adds. "When companies like Utility.com and NewEnergy can come in and be successful like this, it should be a wake-up call to the entire utility industry."

New Directions

While start-ups like Utility.com and NewEnergy might be on the lead with Internet-based services, some traditional utility companies are also taking advantage of the Web.

Potomac Electric and Power Company (Pepco), Washington, D.C., redesigned its Web site a year ago to offer customers interactive functions. "Our goal was to be more customer-focused, to build our relationships with our customers, particularly with the advent of deregulation," says Tom Welle, manager of brand advertising. The Pepco Web site now enables customers to pay their bills, conduct an energy audit and lease generators online.

The energy audit, HomePowerNet, is an online customer survey. After finishing the survey, the customer receives a report complete with recommendations on how to reduce power consumption. HomePowerNet is available to Pepco customers and non-customers alike. Pepco wanted to give customers in nearby areas the ability to monitor their energy costs, with an eye toward entering those markets through selling electricity and other services. Due to state regulations, Pepco can't give the information to its non-regulated subsidiaries that can already do businesses outside the Washington, D.C. area. But the subsidiaries are revamping their own Web sites to add similar interactive capabilities.

In addition to simply paying the bills, the Pepco customers can also handle items like stopping service and changing address online, alleviating the need and expense of live customer service agents to perform those duties. The primary goal in offering this capability was customer service, according to Welle, though he admitted the company also saved an undetermined amount of money.

The utility's largest customers enjoy an additional interactive feature--the ability to monitor their energy usage. Customer usage information is fed into Pepco's database, which produces a report enabling the customer to see if energy usage can be managed better in order to save money. While online billing is starting to catch on with a number of companies, most have yet to enable customers to plug in the meter information themselves. One utility that does this is Brooklyn Union Gas, New York, a subsidiary of Keyspan Energy.

The company had developed a proprietary system enabling customer service representatives to do the same thing. Officials thought it would help further leverage the investment while moving more customers from the call center to the less expensive Internet channel. Customers can also get six-month energy usage and three-year billing information histories online.

"It's our hope in the next few years to do 20 to 25 percent of customer interaction via the Internet, where they can use self service, rather than the call center," says Martin C. Gately, Keyspan project director, applications development.

Another utility company offering interactive promotions is Southern California Edison, Rosemead, Calif. Late in 1999, Edison, in conjunction with the Anaheim Mighty Ducks hockey team, offered consumers Edison Power Play. Consumers received game pieces at Mighty Ducks hockey games or could request one by mail. To see if he won, the consumer needed to go to the Edison Web site, click on the Edison Power Play link, then hold the game piece up to a blue field in front of a hockey net. This would reveal whether the holder's game piece contained that week's winning word. The visitor would also visit the Mighty Ducks Web site, which had a different winning word each week.

"Customer service is the focus of our online customer service center," a company spokesperson says.

Southern California Edison enables customers to request various information online, though many of those requests are handled via snail mail rather than electronically. Among the items customers may request are:

? One-year histories of energy usage, bills and payment.

? Pamphlets of energy saving strategies (only for business customers using less than 500 kilowatts per month).

? For businesses and customers moving into new homes, toll-free phone numbers for new service and other information that current residential customers can request online.

Drilling down through the home page, customers will also find:

? SCE Business Advisor, with advice for start-ups and growing businesses alike, along with electric innovations to help a business prosper.

? SCE On Location--information regarding hundreds of properties, facilities and thousands of miles of rights-of-way in Central and Southern California available to the film and television industries.

? SCE Real Estate--an online database of Southern California properties available for sale and lease.

? Southern California Edison Electric Transportation--the history, future, safety and inner workings of electric vehicles and local trips one can take with this new technology.

Another valuable service utilities can provide online, Gibson says, is the ability to e-mail information regarding power outages. That might sound a little odd at first glance because power outages would mean that a person's home computer wouldn't be working. But Gibson says that people often call in power outage problems from another location, such as work, where they do have Internet access. Sending the information via the Internet avoids jammed telephone lines, enabling the customer more time to explain the problem in detail, giving the utility a better chance of finding and correcting the problem quickly. Florida Power & Light, one of Gibson's highest rated utilities, does this not only with power outage concerns, but also with a direct link to a form to fill out for street light outages. Company spokesman Bill Swank points to the availability of the Internet technology, rather than deregulation, for the company's advancement in interactive customer services.
The Florida Power & Light home page also includes phone numbers for customers to call based on where they live. If the automated response unit can't fulfill a customer's needs, the customer is forwarded to a live call center agent. The system also notifies the customer how long he will need to wait before speaking to a live call center agent.

Customers will have to wait a while before water utilities catch up with natural gas and electric utilities in terms of interactive customer services, according to Gibson. However, one company he rates highly is the Salt River Project, Phoenix, the largest water utility in Arizona. SRP is also the third-largest public power utility in the U.S., with more than 700,000 electric customers in the greater Phoenix metropolitan area.

The Salt River Project's home page includes prominently displayed online functions, including environmental information like water quality monitoring the utility's canal system. Consumers are becoming more wary of water quality information, Gibson says. Even though many of the water utilities, including the Salt River Project, still enjoy monopoly status in the areas they serve, investing in interactive customer services still makes sense. Interactive customer services tend to lower customer service costs. That means investors in private water utilities, like the Salt River Project, can make a better rate of return than regulating authorities had expected.

On the electric side, the site includes energy analysis functions; interconnection guidelines for generators; key facts about SRP generating stations; and various power quality information. Visitors to the Website can also view the two-page (print) quarterly customer newsletter; the quarterly shareholder newsletter (also print); general health information; and link to SRP territory tourism sites.

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