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Utility Renaissance After the Shotgun Wedding

The digital portal to electric utility customers is finally in place and utilities are realizing that this connectivity may be the real prize

The electric utility industry begrudgingly began its journey down the aisle with deregulation in the early 1990s in classic shotgun wedding form. From the start, experts, industry leaders and a host of observers involved with industries like the airlines and telecoms who went down the deregulation path before electric utilities told everyone from the power industry who would listen that the most important asset on this new journey is the utility-customer relationship. The advisors almost shouted, “…Guard those customers, guard their data and most important, guard the physical connection to their homes and businesses…” because it is the avenue to continued and new business with those customers.

Well, it has taken 20 years, but it appears that many, if not all, electric providers have learned the lesson that the first deregulated industries tried to tell them. Some learned the hard way by losing to competitors large customers or residential customers in high-cost areas. Now with the help of digital technology like advanced meter infrastructure, utilities are collecting valuable information that can help them provide a better product to their remaining customers. In fact, more than a few utilities have learned well and are attracting new customers. At the end of 2015, approximately 65 million smart meters were installed by electric providers according to the Energy Information Administration. Some of these meters are real-time devices with built-in two-way communication that is capable of recording and transmitting instantaneous data. The stage is set for that next level of service. Also, digital leaders like ABB that grew up with the industry are already well positioned to help utilities on this next leg of the journey.

At the same time, the digital revolution is making some things that were ridiculously challenging just a few years ago almost a cake-walk today. Take residential demand management for example. A number of energy management solution providers are coming up with apps that allow consumers to take control of their energy usage. One in particular, Bidgely, provides energy consumption information for nearly every major household appliance using disaggregated data from smart meters. Consumers can use their phone to view consumption patterns, historical usage, billing alerts and special offers such as demand response signals from their utility, all without the use of any mandatory hardware. It is not hard to visualize how much better the response will be to utility demand response programs, energy audits and other customer engagement offers when the pain related to participating is minimized.  

The digital portal to electric utility customers is finally in place and utilities also are finally realizing that this connectivity, as they were told, may be the real prize. Yes, finally at the intersection of enlightenment and technological advancement, the electric industry faces an exponential number of future possibilities. One theory is that utilities will look at the challenges presented by renewable energy, distributed resources and demand management and simply conclude that the safest future is to take advantage of their enhanced customer access by functioning as platform providers. They could do this with the help of third-party providers and have very little skin in the game, so to speak. Then, the utility has not placed its investors’ capital at risk when technology advances or changes direction in a few years. This might be the smart move for some companies, particularly in states committed to a new competitive paradigm. 

This author’s bet is that most utilities will conclude that investment in cloud-based software, advanced metering infrastructure, software development, communications networks or whatever is needed to compete for all of the customer’s business is the way to go. Yes, there are still myriad questions to answer: Use cloud-based or legacy network systems; hire third party providers or develop the expertise internally; seek to capitalize new systems or expense services; and so on. And the industry may indeed see another regulatory driven shotgun wedding or divorce. However, hopefully, this time around we will be much more attuned to customer preferences and armed with the service offerings needed to maintain customer allegiance even if someone tries to change the rules of competition.  

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