Utilities must redefine their relations with customers to deal with emerging issues, J.D. Power says
Energize Weekly, January 23, 2019
Utility companies need to redefine how they interact with their customers to deal with emerging issues, such as time-of-use rates, electric vehicles (EVs) and rooftop solar, according to an analysis by marketing research company J.D Power.
“There is a need for traditional utilities to engage with their customers as things are happening,” Andrew Heath, senior director of J.D. Power’s utility practice, said in an interview with Energize Weekly. “There are some general themes that applied nationwide and some very local.”
To make policies and programs work will require a new level of outreach on the part of utilities, said J.D. Power, a marketing consultant known for its surveys of customer satisfaction and buyer behavior.
Time-of-use (TOU) rates are a good example. The rates, which price electricity based on the level of demand in the system, are seen as a key way of managing peak load and offering special rates, such as ones for EV charging.
“We have found that when pricing options are forced on electric utility customers, they respond with significantly lower customer satisfaction scores,” the J.D. Power analysis said. “However, when these programs are implemented as part of a broader environmental initiative, complete with proactive communications and price guarantee for one year, satisfaction can actually improve.”
Heath pointed to the very different approaches and results in Arizona and Ontario. In Arizona, customers had the choice of opting in to TOU rates and the state’s largest utility, Arizona Public Service (APS), posted both a high participation rate and satisfaction with the program. About 56 percent of APS’s residential customers chose the TOU rates.
In Ontario, TOU was made mandatory in 2014 and led to a higher level of dissatisfaction. “If customers have a choice and they see it as beneficial, they will choose it,” Heath said.
California will be a big test as TOU rates are becoming the default for all residential customers—though a customer can still drop out. By 2020, the state’s three largest investor-owned utilities will have 22.5 million residential customers on the TOU rate scale.
“The challenge for California is that everyone is going on it by default,” Heath said.
The Sacramento Municipal Utility District (SMUD) has been in the forefront of engaging customers having first run a TOU pilot. Now, more than 70 percent of the utility’s customers are on the rate.
“SMUD did a very good job messaging so that there are no surprises,” Health said. “It is more hit or miss across the rest of California. … It will be interesting to see who did a good job.”
How utilities address the growing interest of customers in electric vehicles and solar panels will be another big challenge, Heath said.
“Solar and EVs resonate strongly on the West Coast, but every utility is seeing it have an impact,” Heath said.
“There are customers in Indiana buying Teslas and looking for an EV rate, and it is not available, and that is not a good thing in their mind,” he said.
“Some utilities—particularly those in California—have begun to offer EV-related incentives,” the J.D. Power analysis said. “Some of the most progressive programs are even linked to TOU programs that effectively allow electric utility customers to recharge their automobiles in overnight hours for dramatically reduced rates.”
While still in their infancy, J.D. Power said it is seeing “growing awareness” of these EV programs and rates, with 6 percent of customers in the West region aware of EV pricing plans, compared with 3 percent of customers in the East, Midwest and South regions.
Utilities can also use these trends to their advantage, Heath said. Southern California Edison, for example, adopted an EV program with the stated mission of “cleaning up the system.” This amounted to a “strategic reposition of the utility,” Heath said.
Solar installations, particularly distributed rooftop and solar gardens, are having a big impact on utilities. J.D. Power surveys found 43 percent electric utility customers nationally are considering solar power—with the largest concentrations in Hawaii, Vermont, New Mexico, Oregon and California.
The main obstacle for the 57 percent who said they weren’t interest was price.
When it comes to solar, Heath said, “The question is whether utilities are going to be seen as enablers or inhibitors.”
Even for fundamental issues, such as dealing with aging infrastructure, which has become a bigger issue in the wake of the Massachusetts gas line explosions and the links between power lines and California wildfires, utilities’ relationship with customers will be important, Heath said.
“Two things that need to be done is a physical infrastructure upgrade and changing the process of how infrastructure is managed,” Heath said. “All of those are going to cost money, and if a utility doesn’t have customer support, it won’t get done.”