Why Electricity is Important for Us?
Hi and welcome back. I just have to tell you that while I pretty much love talking anything about electricity, yeah, I know that's not exactly going to get me invited to many dinner parties. But I'm most excited to talk to you about customers. It's hands down one of my favorite topics. True confession here I might be just a little bit biased because I'm a career marketer. What I've personally seen is that when industries give the customers a seat at the table not necessarily literally of course, but some actually do invite them in then some really good changes occur. I believe companies and industries make some of the best decisions when they take the time to understand and engage customers when it comes to making decisions. But I think is truly exciting is that a lot of the transformation that's occurring in this industry is happening for exactly that reason, to meet evolving customer needs. It's really cool that when we're hearing about the unprecedented pace of change going on it's our needs and expectations as customers and utilities and regulators responding, that's really driving a lot of this.
Customer Choice of Electricity
It's no secret that competitive industries have understood the value of the customer in the equation for a really long time. Just think about retail stores, banking, mobile phone service, hospitality, and entertainment. They figured it out a long time ago. They know customers have a choice each and every time they make a decision to buy. And these companies really focus on the customer, as a way to gain competitive advantage. Even companies that traditionally haven't focused on customers directly like prescription pharmaceuticals in the US and healthcare are caring more about attracting and keeping customers. That's why you see mass advertising directing us to patients to tell our doctors what to prescribe. And even billboards encouraging us where to go to seek medical attention for specific conditions. It hasn't always been like this, we used to put all of our trust in others namely doctors to make this decision for us, and now companies are encouraging us to choose them.
Electrical Market and Competition
We've already talked about the fact that by definition as natural monopolies, many electric utilities generally have a set market. I know what you're thinking, so then why would they even care about customers? Electric utilities care about customers because when a company has satisfied customers it means it's more easily able to make the investment it needs to maintain and operate its current assets. Building constructor, infrastructure and of course remain financially healthy. We all know that it's important not just for those electric utilities with investors, but also utilities like co-ops and municipalities that have other requirements in place to make sure they spend their money wisely.
There have actually been studies that link sustained customer satisfaction to better financial returns. So why would this be? This is because regulators really view themselves as customer advocates. And when we see the customers' needs are being met, they feel more confident in the decisions that company is making. The net of it is, well-run companies take good care of their customers. Drew Bolan of the Colorado Public Utilities Commission talked to me about how commissions look out for the best interests of the public, and what they look for when utilities are seeing their approval.
And what's really important, I can't stress this enough. But the guiding principles for the Public Utilities Commission is safety, reliability, and affordable cost for the services that are provided by all utilities. Ranging from the electric ones all the way up to the transportation utilities. And so those principles guide a lot of the decision-making, but it also sets the stage For what the utilities want to do and what they want to propose. But along those lines, it's very important that the rates in the different technologies aren't benefiting a few, at the expense of others. And there's a real tough balance there. So that's why the decisions that the commissioner made are so very, very important.
Public Safety Commutation
The regulators now are auditing public safety communication. This isn't just safety communications and this does have a direct impact on rate cases. So, they're coming in and they're saying what are you doing to communicate with the public. And ten years ago, this used to be a check in a boxing exercise. We're sending out these communications, we're collaborating with the ten utilities in our area. And now regulators are asking smarter questions. And they're saying, do you know that the end user is receiving them and reading the information? And do you know what impact that is having on their safety knowledge and awareness? And can you quantify behavior change? It basically comes down to how effective is what you're doing. And that's why we have to keep doing ongoing research to make sure we're using the effective channels to reach these end users, and that it's target audience specific, and that we collect follow up information to make sure that there is behavior change.
Positive Changing in Electric Utilities
Let's be honest here, electric utilities might be late to the game by some standards. But the good news is we are seeing a positive change of more electric utilities giving the customer a seat at the table when it comes to major decisions and I do mean this literally and figuratively. More electric utilities are listening to their customer through market research and including them in stakeholder processes beyond what they're required to do. Let me give you an example. There was a survey conducted among 144 executives by Utility Dive on behalf of NTC Corporation. The survey found that over half of the executives say they've already moved towards becoming a more customer-centric business. And then an additional 20% said they are considering it. Now the truth is it hasn't always been this way. Jo Ann Newton an industry veteran who is public policy executive at Southern California Edison and PNM which are two fortune ranked publicly rated utilities paints the picture of how the industry has evolved and changed and how it thinks and how it treats its customers.
For the electric utility industry specifically, customer paradigm is not natural and for all regulated companies, because of the monopoly position of the companies. Traditionally customers have been seen as ratepayers. So the price takers and essentially the companies primary relationship was with the regulator. And the customers are just the price takers so we always even referred to them as ratepayers. And as the industry has begun to change as parts of the industry have become deregulated or even where it's still fully regulated but with new forms of electricity generation, such as solar and wind and new market entrance who can play around the edges and provide electricity from other sources. We recognize that we have to build relationships with our customers. That they're not just price takers. In addition, all of our stakeholders can impact the outcome of regulatory proceedings, can impact the perception of the company, publicly in the media.
Let Customer to Say – Public Power
Like investor in utilities, municipalities care about what their customer has to say. Let's hear with Dan Hodges, Executive Director of Colorado Association of Municipal Utilities thinks about how public power or municipalities value the critically important customer relationship.
Anyone of those legs of the stool, if you pull it out the stool, will collapse. And especially in the municipal utility space, I can't speak directly to how it's viewed with our peer utilities, but I would imagine it's not much different. Our job one, our concern one is our customers because they are our shareholders. And if our customers aren't able to pay their power bill, we're not doing our job, as municipally owned utilities, because at the end of the day, we're there to provide that public service to them. And that includes making sure that we're doing our operations as efficiently and as cost competitive as possible. To ensure that our communities stay powered and that the power does stay affordable. In fact, we live in those communities too. So, it's not just an esoteric or academic conversation for us. These are pocketbook issues. We go home to our families in municipally owned communities, and talk about it's something I sit and talk about my family with, is when we're looking at our bills. What's the power bill look like?
What Customers are Looking for?
So, what are customers looking for and how is this reshaping the business? As customers, our expectations are pretty high and they're getting higher. Of course, underpinning everything customers overall demand reliable and affordable service. But let's talk about some of the trends around what we're expecting beyond that. As customers, we're looking for more options and choice to protect the environment and give us more control over our energy use. In the next lesson, we're going to take a closer look at this from the standpoint of topics you've liked and even see more off, energy efficiency and distributed generation. In fact, these are some of the game changers that are going to move some utilities away from being just a commodity to something a lot more valuable. I promise you these are the areas to keep an eye on because they will be so important as the industry evolves.
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