Category Archives: Customer Relationships

Customer Interviews: An Essential Step in Assessing Technology-Driven Companies

Insight

Over time, I had to interview the customers of many energy, telecom and IT companies in the context of due diligence reviews. I got to appreciate the usefulness of this process to really understand the prospects of a company, especially in emerging business-to-business markets. The managers of these companies were often engineers or scientists that did not always listen well to their customers. Often, interviewing just a few customers pointed to a hidden gem or uncovered a fundamental weakness.

Why Should You Interview Customers?

As a venture capital partner, a senior manager of an acquiring company, or an M&A specialist, assessing a target company in the context of an industry transition is daunting. This is especially true right now in the electricity industry, with its complex regulatory frameworks, its worldwide supply chain, dropping energy generation costs, and changing customer expectations. In many ways, customers are the key to understand the transition: they buy electricity, are looking at distributed generation systems, and elect politicians who legislate new regulations. Then, what better way to assess a company than speaking to the company’s customers? These interviews also shed new light on the company’s sales forecast and help identify key areas of improvement.

In this article, I would like to share my experience and to offer some suggestions to help you get the most of customer interviews. I do not simply want to provide you with a checklist of questions. There is a certain art in contacting people, putting them at ease, getting them to speak, using active listening techniques, and having a structured analysis of the results.

Decide on What You Want to Assess

The first step of a successful customer interview program is to decide on what needs to be accomplished. Customer interviews may cover many topics:

  • Relationships between the customer and the company.
  • How the customer identified and selected the company and the product.
  • Who are the main competitors.
  • Responsiveness of the company’s staff facing the customer. 
  • Strengths and weaknesses of the product or the service.
  • Potential enhancements.
  • Reliability and availability of the offering.
  • Current and forecast sales volume with the company.
  • Pricing level and structure of the price list.

Depending on the needs of the company or the investor’s concerns, the interviews may focus on a few specific points. For example, it may be required to assess whether the features of a new energy product meets the needs and buying habits of customers, which also requires that the interviewer have some technical and market knowledge.

Select Interviewees

The company normally provides a list of customer contacts. This list must include the name of the company, the name and title of the contact person, a telephone number and an email address. Obviously, the company will tend to give the names of “friendly” customers. A good question to ask is how many customers have been excluded from the list and why. It could be necessary to examine service or returned merchandise records and to ask to contact some problem customers or even former customers. In order to avoid excessive screening by the company and accounting for unavailability of some customers, it is required to ask for a contact list twice as long as the expected number interviews. It may also be that the number of possible interviews is limited merely by the number of customers. This is especially common for companies using an indirect distribution channel or for early-stage companies. Even interviewing just a handful of customers can bring interesting information, but a greater number is required for a large product portfolio or if the distribution channel is complex or reaches many countries.

Another essential step is to get information on the customers being contacted. This information is obtained from internal sources and external sources. In a due diligence, it is common to verify material transaction records or contracts. If the interview program aims at validating these documents, it is necessary to have them in hand during the interviews. External sources, such as the company’s Internet site and the associated LinkedIn, Facebook and Twitter profiles should also be read prior to an interview. 

Many startup technology companies accelerate market entry through an indirect sale channel of distributors and OEM agreements. For example, in a recent case, the channel is comprised of national distributors, local dealers, customer companies and end users. Interviewing representatives at each layer of the distribution channel leads to better data than only interviewing one set of intermediaries. Similarly, it is ideal to contact people from various business functions (operations, marketing, upper management, etc.).

When approached professionally, people are usually genuinely interested in helping a supplier. However, many interviews may fail because of customer time constraints and last-minute emergencies. Also, pay attention to the order of the interviews. Some customers will be recognized as more important and should be interviewed at the end of the process in order to first practice with other customers. Similarly, in the case of a distribution channel, it is preferable to start with the end users in order to validate the selection of the distributors.

Get the Logistics Out of the Way

High-tech companies are often exporting a large share of their products. Interviews must then be done by telephone to minimize costs. Although convenient and inexpensive, telephones raise communication barriers that must be minimized. For international interviews, language can also become an issue.

The telephone is a somewhat impersonal communication system, and the use of videoconferencing is too complex. Even for a phone interview, it is preferable to make an appointment. Appointments are especially important if interviews have to be at unusual hours because the customer is overseas. To make the communication more personal, I take advantage of the email confirming the call to send a picture of myself. It is a simple gesture, but a good way to begin breaking the ice. 

It is important not to be disturbed during the interview. Also, keep a pencil in hand to scribble notes to remember to raise some points later during the interview. Finally, a headset frees the hands and permits more natural and relaxed posture and voice.

Have an Interview Guide

We are talking here about general guidelines, and not a rigid script. To get the most from an interview and to keep its natural character, it is necessary to deviate from the expected course and to take advantage of twists and turns of the discussion. The interviewee must not feel interrogated, but in confidence to talk about points that could be sensitive. 

Some base rules in preparing an interview guide include:

  • Agreeing with the interviewee on objectives and duration at the start of the interview.
  • Establishing an atmosphere of trust by offering anonymity.
  • Starting with mundane topics (ex.: confirming the contact’s title) and progressing toward more sensitive issues (ex.: prices).
  • Going from general to specific topics.
  • At the end, asking for global assessments of the company and its products.

Make the Interview Dynamic

Active listening is a good way to get someone to speak more and to ensure that what has been said is well understood. Using open questions (ex.: “How would you qualify the technical knowledge of the customer support staff?”) is preferable to closed questions that are answered by yes or no (ex.: “Is the customer support staff qualified?”).

Lighten the atmosphere by offering tidbits of information, for example by sharing experiences or by giving information previously obtained (“While speaking to other customers, I heard that… Would you agree?”). This transforms the call from a one-way questioning session into a two-way discussion. Obviously, an interviewer with some knowledge of the industry can better get into bilateral exchanges, especially for technology products.

It is important to keep a polite and respectful tone. Appreciate the fact that interviewees are without pay and may be very busy. Thanking people with a small gift after the interview is a mark of appreciation and can help strengthen the future relations with a customer, but first make sure not to breach company policies. 

Analyze the Results

The interview logbook that I use regroups in a table the highlights of the interviews. The table, which spreads over several pages, presents the salient pieces of information gleaned of the interviews organized in columns according to the structure of the original interview guide. At a glance, it is then possible to do cross references on the main topics. The interview logbook is a convenient analysis tool that supports results presentation while permitting to drill down quickly to specific points and to compare what customers have said. For example, it becomes easy to see if end-user perceptions are the same as those of distributors. It is just as revealing to make comparisons between what people from different functional groups have said. 

The analysis can point at possible corrective actions and opportunities. It may also support revised sales forecast. A customer’s marketing staff does not see the same benefits as the end users? There could be an opportunity to better communicate features and functions, or perhaps to review product packaging. Are the dealers waiting for the next version of the product before promoting of it? It could be worth to pay close attention to the product development schedule. Do distributors, fearing technical problems, only want to introduce a new product gradually? Maybe the sales forecast should be pushed back one quarter. Obviously, an investor may judge the situation too uncertain and decide against proceeding.

Plan Enough Time

For a typical half-hour phone interview, an experienced person will have to prepare by making an appointment and reading information. One or two hours are required to write down notes and fill in the interview logbook for each interview. You should plan for at least 3 hours of sustained work for each interview. 

To this, add the preliminary work for selecting interviewees and adapting the interview guide. This can evidently take longer if the interviewer cannot rely on prior work. Analysis and presentation of the results can be formatted in a slide show or a formal report. Analysis and presentation can also be integrated to a global due diligence report. Regardless of the format, count on a minimum of one day of preparation and 2 or 3 days of analysis and writing for a 10-interview program. For a complete and professional result by an experienced interviewer, budget about 8 days of sustained work for a 10-interview program. The work will have to take place over 2 or 3 weeks assuming normal delays for reaching interviewees. 

To this point, one can appreciate why interviews are often outsourced to a third party. Some customers could be unwilling to speak directly to a supplier’s investor. Besides, experience shows that close to half of people interviewed ask for some anonymity – they are more willing to speak to a seemingly neutral party. Furthermore, a report prepared by an external firm will have greater weight when presented to other investors involved in a transaction. 

Closing Words

Making good interviews is an art that takes some practice. To take advantage of the experience, stop a moment, think about what could have been done better, and update the interview guides. The interview skills will also improve over time.

Digital Utility of the Future Conference

Last month, I chaired the Digital Utility of the Future Conference in Toronto (http://ikonnect.world/DigitalUtilitiesoftheFuture2/). Based on feedback from many participants, the event was a clear success and I am looking forward to the 2020 edition. Having mostly been out of the country on business since then, I would now like to share some reflections on the event.

First, the multiple presentations highlighted the extent to which digital technologies now permeate the utility world. The energy transition adds tremendous sophistication to the electricity distribution network, relies on renewed engagement by customers, and brings many new regulatory and environmental constraints. As the transformation of other industries have shown, such complexity can only be dealt with through better management of corporate resources, especially information.

Second, adapting to the energy transition and leveraging information a big task. The rule book is still being written. Many innovations were presented. In a few years, we will look back at some of these ideas and admire the foresight of their promoters; other ideas will be dead ends. However, it is clear now that the future of the utility industry will depend on innovations to a much greater extent than was the case a few years ago.  

Third, participants were a mix of utility and vendor representatives, with many presentations being made by representative from both. I think that the best combination. Utilities know their business but may be insulated behind a regulatory wall. Vendors see multiple clients, inside and outside the energy industry, but may not understand all the subtilities of a regulated business. Having both can get sparks flying (in a good way). 

Finally, I would like to thank all participants, sponsors and presenters. I think that we all had a great time debating what the digital future of utilities may look like.

A Trojan Horse: Time-Varying Rates

A majority of Canadian households and small businesses are in provinces where time-varying rates or peak pricing or rebates are available or proposed, thanks to smart meters installed over the last few years. Tariffs for large business already include a demand charge that makes up a big chunk of their bills, inciting them to have a constant power draw. Many businesses also have critical peak pricing or rebates. Therefore, most of the electricity in Canada is sold to people having financial incentives to not only be energy efficient (i.e., consume fewer kWh overall), but to manage when electric power is drawn from their utility. However, with the possible exception of large electricity users, most customers simply do not want (or can’t) manage the minutia of consuming electricity on an hourly or daily basis. This is to be expected, as it’s a lot of work and inconvenience for little pay: running the dishwater off-peak rather than on-peak may save a dime, but it means noise when people are trying to sleep and emptying it during the morning rush to school or work. Although all the saved dimes may add up to significant dollars at the end of a year, human nature makes us lazy, and we just go on whining about high hydro cost instead.

In aggregate, everybody’s dimes also add up to a lot of money for the society. For most people and businesses, electricity is not something to get passionate about. It is a significant – but not the largest – component in the budget. We mostly notice electricity when it is not there, as we can’t do much without it. Most people don’t know or care how electricity get to them, as long as they can benefit from it and that its rates appear to be fair. The significant yet stealthy nature of electricity makes it the perfect commodity. Electrons have no brand, no color, no flavor. It becomes easy to rationalize outsourcing the management of electricity to a third party if it reduces cost and make our lifes easier.

Time-varying rates and peak pricing or rebates thus create the financial incentives for new energy services to emerge and help individual customers save money – they are a Trojan horse inside the utility castle. Essentially, energy service companies are introducing themselves in the value chain – it’s a form of value-added intermediation, although energy service companies are not allowed to resell in most provinces. In addition to rate arbitrage, the business model of energy service companies leverages the dropping cost of rooftop solar power and energy storage, supported by mass-market smart home devices (for residences) or off-the-shelf building management systems (for businesses) connected over the Internet. Lower electricity costs with cool gadgets and better comfort. Voilà! A competitor is born.

Energy service companies are offering what amounts to a partial substitute for electric utility services. Rooftop solar panels, batteries, smart home thermostats, water heaters and lighting, building management systems, EV chargers, thermal storage and other technologies marketed by energy services companies, engineering firms and solar developersdo not replace mains electricity. However, energy service companies provide financing and remove the complexity of managing electricity rates and provide other benefits such as comfort or backup during outages. In the process, energy service companies capture a decent chunk of the electricity value stream as they turn electricity service into even more of a commodity service. Less energy (kWh) gets delivered by utilities, pushing rates up for all, although few customers will actually go off the grid.

Storms on the horizon. Ouch. That’s competition, and it is new for many in electricity utilities.

Energy service companies are not directly competing with utilities – not like, say, Bell or Telus competing with Rogers or Vidéotron – but it is competition nevertheless – a bit like Bell being in a strange love-hate relationship with Google. In fact, customers must buy still their electricity from their local utility in most provinces[i]. If energy service companies are not direct competition, it has almost the same effect: skimming profitable segments.

Canadian generation, transmission and distribution utilities are affected at different levels and in varying ways, depending on provincial regulations and on their position along the electricity value chain.

One issue is that the tariffs structure for electricity generators and for T&D networks poorly reflects the underlying system cost structure. If rates along the electricity value chain were perfectly set, then utilities should not care if customers shift their energy consumption – after all, that’s the objective of time-varying rates and demand charges. In practice, rates are far from perfectly matching costs. For example, demand charges for small business accounts are typically set for a year or two based on the peak power demand (in kVA) in a past month. This rate structure is essentially a leftover from electromechanical meters where a meter reader would come to a business every month to read energy (kWh) and power (kVA), and then reset the power register on the meter with an actual physical key – the power register would ratchet up until the next read, when they would be reset again. That’s as good as it could be with electromechanical meters, but the maximum demand that was registered didn’t likely coincide with the peak demand on the system. The resultant tariffs structure incites business customers to minimize monthly maximum demand (and, hence, demand charges), but still allow them to draw a lot of power during a system peak, although energy management systems could have reduced demand during the peak and shift it to a different time. Working on behalf of their customers, energy service companies may end up optimizing customer demand around prevailing tariffs to minimize customer charges but may increase overall system costs in the process.

Upstream in the value chain, traditional generators and independent power producers are affected by energy efficiency and demand management initiatives that can potentially reduce energy and power demand of customers. The effects vary depending on the market structure in each province. Contracted generators are less exposed; in Ontario, the “global adjustment” mechanism compensates large generators, while Alberta has a capacity market. However, spot generators may face large variations in prices. Overall, generators are at risk of having stranded assets as energy efficiency improves in the economy and as customers contract with energy service providers to better manage power demand.

Many distribution-only utilities in Canada are partially shielded[ii]. They charge their customers a energy and power rates set by the province and a separate distribution charge that is intended to pay for the costs of their stations and network. The energy and power generation charges are pass-through, and transmitters and generators bear any issues. The distribution charge is often allocated on a per-kWh basis, plus a fixed monthly charge. Because of the per-kWh allocation of their costs, local distributors are somewhat exposed to the vagaries of energy service companies. However, the distributors have more operating costs and lower capital costs than transmitters and generators, meaning that a per-kWh distribution charge is not as far off the mark.

Mid-size municipal utilities also face a different reality than large integrated provincial utilities. Owned by the city, they are accountable local actors, close to their customers (or constituents), using their agility to respond to issues in a way that is just not happening with large integrated utilities. Municipal utilities become instruments of the local mayor and city council, like water, sewers, snow removal and other municipal services. Mayors’ challenges are about their constituents getting sick, having clean water, being warm or cool, holding productive jobs, commuting efficiently, surviving disasters. They see that the local utility supports the needs of a smart city, to be both resilient to face increasing disasters and be sustainable to reduce its environmental impact and to improve quality of life – while being financially affordable. In this context, working with third parties, like energy service companies, just becomes another means to satisfy the needs of citizens and local businesses[iii].

Large vertically integrated provincial utilities face more complex challenges than municipal utilities: the impact of energy service companies on generation can be significant, the feedback loop from constituents to the government and the utility is more tenuous, the customer base has more varied needs, and the integrated utility has a large impact on the finances of the province. Not surprisingly, they tend to prefer to maintain a greater control over the relationship with customers. Whether they can maintain control and reduce choice without antagonizing customers is uncertain, especially when consumers get used to energy service alternatives ranging from large telecom companies to Google and Amazon.

 

[i]       The exceptions are Alberta, the most deregulated market in Canada, and Ontario, although wholesale and retail rates in Ontario are such that about95% of Ontarians choose to buy electricity from their local utility. See https://business.directenergy.com/what-is-deregulation#deregmarketand https://www.oeb.ca/about-us/mission-and-mandate/ontarios-energy-sector, retrieved 20181023.

[ii]      However, municipal utilities in Québec pay large business rates, with demand charges.

[iii]     And, perhaps, in the process, help the mayor get re-elected.

A Perspective on Canada’s Electricity Industry in 2030

I wrote this piece with my friend Denis Chartrand as a companion document for my CEA presentation back in February 2018 (See http://benoit.marcoux.ca/blog/cea-tigers-den-workshop/) but I now realize that I never published it. So, here it is!

Canada Electricity Industry 2030 20180221

Barbarians at the Gate (or: How to Stop Worrying and Love Your Customers)

This mouthful title was the title of my presentation today at the Smart Grid Canada conference in Montréal.

As usual, it is written in my somewhat funky style and provocative, but was well received.

Let me know what you think!

SGC20180912 BMarcoux

Customers of Electric Utilities Are Redefining Quality

Traditional utility wisdom in Canada is that customers are satisfied with the current level of reliability and that improving reliability would only increase costs and push rates up.

The new reality of electric utilities upends this traditional wisdom.

Customers are redefining what is meant by quality. Traditionally, Canadian Utilities used duration of interruptions per year, or SAIDI[i], as their main measure of reliability. Some utilities report the frequency of interruptions per year, SAIFI, as well. A limitation of SAIDI and SAIFI is that interruptions of less than a minute are not included, presumably under the assumption that customers do not care that much about short interruptions. This might have been true in the analog world of years past, but it is not anymore, with even a short interruption resetting our electronic devices. Furthermore, with the fuse saving protection strategy that most Canadian Utilities have adopted on their distribution feeders, short interruptions happen more frequently than longer ones, and are therefore noticed more.

Even a short interruption resets common electronics, like my microwave oven above. This gave birth to the “blinking clock” syndrome, a stark reminder to residential customers that an outage occurred and that their utility has failed them – again. (Photo by the author)

ENMAX, when justifying its distribution automation projects within the performance-based regulation scheme of Alberta, based its analysis on the cost of sustained and momentary service interruptions, with the values for its various customer classes as shown in the table below.[ii]

Table: Estimated ENMAX Customer Class Interruption Costs

Duration Residential Commercial Industrial Weighted Average
30 Minutes

 

$3.02 $992 $3,641 $92.77
Momentary
(% vs. 30-Min.)
$2.71 (90%) $757 (76%) $2,354(65%) $69.12(75%)
Customer mix 92.2% 7.3% 0.5% 100%

The table is interesting for two reasons:

  • On average, the costs to customers of a momentary interruption is 75% that of the cost of a 30-minute interruption, but up to 90% for residential customers. The very small difference in cost between a momentary outage and a 30-minute outage explains why outage frequency is a higher concern than length of outages for residential customers.[iii]Due to the prevalence of the fuse saving protection strategy on electrical distribution feeders in Canada,[iv]there are far more momentary service interruptions than sustained ones – momentary interruptions therefore become the primary concern of customers.
  • The bulk of the economic cost of service interruptions is borne by commercial and industrial customers. While residential customers are far more numerous, the cost per interruption is low. However, residential customers can be more vocal in their complaints in social and traditional media.

This situation is likely to get worse with widespread customer-owned distributed energy resources: owners of distributed energy resources actually lose money during power disturbance. Distributed generators or resources may be thrown offline often for minutes, for safety reasons and to protect the equipment. This results in loss revenue for owners of distributed generators selling back to the grid, or additional costs for those who were offsetting power otherwise purchased from the grid. Overall, the percentage of time when distributed generators are offline because of service interruptions is relatively small, and so is the unsold energy or the energy additionally bought by the customers while waiting for generation to come back online. However, those interruptions may also cause power generation or grid support contracts to be broken, which may carry penalties. Customers may also have to pay additional demand charges, often a large share of the utility costs of business customers.

Service interruptions also cost money, to utilities which is ultimately paid for by customers through higher rates – another key determinant of customer un-satisfaction. First, service interruptions cause power flow and voltage fluctuations as distributed generators trip and come back, and loss of generation and dynamic resources for the grid operator. In an electric network relying partly on distributed energy resources, service interruptions mean additional complexity to maintain stability of the grid and higher costs for network operators who then have to rely on backup resources. Service interruptions even increase operating costs. Fuse saving does not always work: on average, about half of fuse replacements have unknown causes or causes that should normally have been eliminated by fuse saving, such as animal contact.

By the way, the telecom industry also went through a redefinition of what customers mean by quality. It used to be that the main quality measure was voice sound quality during a call[v]. However, voice sound quality has actually gone down in the last decades – the rotary black phone in your grandmother’s old house sounded better than your new iPhone. Nowadays, customer satisfaction is driven more by the convenience of mobility and the possibility of easily doing videoconferencing or multiple parties calls.

In summary, with increasing dependence on reliable power for modern way of life, plus distributed generation earning revenue for customers, outage frequency will become a more and more important factor for customer satisfaction. All this being said, there is hope – new smart grid approaches and protection strategies can result in fewer service interruptions, leading to higher customer satisfaction and lower cost for utilities.


[i]       SAIDI means System Average Interruption Duration Index. SAIDI is the average duration of all the outages seen by customers over the course of a year. In Canada, only interruption durations of more than 1 minutes accrue to SAIDI. Interruptions of less than a minute are considered momentary and do not count toward SAIDI.

[ii]       Evaluation of PowerMax Distribution Automation Strategy, ENMAX Power Corporation, prepared by Quanta Technology, November 29, 2011, page 23.

[iii]     Assessing Residential Customer Satisfaction for Large Electric Utilities, Lea Kosnik et al., Department of Economics, University of Missouri—St. Louis, May 2014.

[iv]      Fuse saving is an electrical protection strategy used on many distribution feeders in Canada. The objective is to avoid that fuses installed on lateral taps blow for a non-persistent fault, such as an animal contact or a lightning strike. With fuse saving, a mainline or station a circuit breaker or recloser is used to operate faster than the lateral tap fuses. A few seconds after an initial fault, the breaker reclose, re-establishing power. If the fault is non-persistent, power will be restored. If not, it may retry later. If the fault is persistent, the breaker will eventually reclose and let the lateral fuse blow, isolating the fault. Because most faults are non-persistent, fuse saving prevents needless fuse blow, avoiding sustained service interruption for customers on the affected lateral. The main disadvantage of fuse saving is that all customers on the circuit see a momentary interruption for lateral faults.

[v]       The quality of a call is given by its Mean Opinion Score (MOS), a subjective measurement where listeners sit in a quiet room and rate a telephone call on a scale of 1 to 5. It has been in use in the telephony industry for decades and was standardized in an International Telecommunication Union (ITU) recommendation.

CEA Tigers’ Den Workshop

On February 21, 2018, I presented at the annual T&D Corporate Sponsors meeting of the Canadian Electricity Association. This year, the formula what similar to the “dragons” TV program, with presenters facing “tigers” from utilities. They asked me to go first, so I didn’t know what to expect, but it went well. Or, at least, the tigers didn’t eat me alive.

The theme was a continuation of my 2017 presentation, this time focusing on what changes utilities need to effect at a time of low-cost renewable energy.

I’ve attached the presentation, which was again largely hand-drawn: CEA 20180221 BMarcoux.

Utilities Should Really Show Customers What They Do

The electricity business is highly technical and customers do not understand what their utility is doing for them. This deserves more attention in plain words, and customer communications should not be limited to storms, grid problems and feel-good messages. Plain communication is especially important since the correlations of customer satisfaction with verifiable objective measures of service delivery (such as SAIDI and SAIFI) are very low! There is, however, very strong relationship between the customers’ overall assessment of reliability and their feelings about how the company manages to minimize the number and length of outages and provides accurate estimates of when power will be restored.[i]

Insight:
There is a strong relationship between customer satisfaction and
feelings about what the utility does to reduce outages and provide repair estimates, but
low correlation with actual measures of reliability.

Obviously, this implies that the utility must show what it does to manage outages.

Florida Power & Light (FPL) is a great example of this approach. FPL turns installing smart new devices to its network into local media events – adding an automated recloser to a line becomes newsworthy! The following 3 news clips illustrate FPL’s strategy:

During hurricane Matthew in September 2016, FPL initiated proactive and frequent communications to keep customers and key stakeholders informed, with unity of messages across all channels:[iii]

  • Multiple robocalls to ~3.4 million customers in advance of the storm.
  • Embedded reporters provided with open access to restoration effort.
  • Multiple press conferences (daily) at the FPL command center, in the field and at county EOC’s leveraged new satellite technology.
  • Use of Twitter, geo-targeted paid social media and Facebook Live highlighted challenges in hardest-hit areas reaching millions of customers.
  • Print, radio, TV and billboard advertising prior to, during and after the storm.
  • Daily email updates to employees.
  • Customer service kiosks in hardest hit areas.
  • Thank you letters to stakeholders after the storm.

Not surprisingly, FPL won the ReliabilityOne National Reliability Excellence Award in 2015 and 2016, and the Southeast Region award in 2017 (despite hurricane Irma in September 2017).[iv]

[i]         Assessing Residential Customer Satisfaction for Large Electric Utilities, Lea Kosnik et al., Department of Economics, University of Missouri—St. Louis, May 2014.

[ii]        See https://patch.com/florida/bradenton/fpl-announces-new-storm-hardening-plan-including-major-investments-enhance-electric-system-serving, retrieved 20171230.

[iii]        Grid Hardening & Hurricane Matthew, Ed DeVarona, Senior Director, Emergency Preparedness, Florida Power & Light, https://www.midwestreliability.org/MRODocuments/Hurricane%20Matthew%20Performance%20Presentation%20by%20Ed%20DeVarona%20to%20MRO%20BOD%2003162017.pdf, retrieved 20171230. .

[iv]       See http://www.paconsulting.com/newsroom/releases/we-energies-wins-national-reliabilityone-excellence-award-at-pa-consulting-groups-17th-annual-reliabilityone-awards-ceremony/, retrieved 20171230, for the 2017 awards.

Power to (from) the People

With low-cost renewables, many customers become power producers, and it will transform the relationship of utilities with them.

You saw that in media and telecom. My grandchildren loves to watch amateur baby video on YouTube. This one has been viewed 178 million times.

Every time, there is an ad and the daddy or mommy who produced the video gets a bit of money. Overall, videos that people put on YouTube generate $15 billion a year in advertising revenue.

In the electric utility industry, low cost solar means that many customers will generate power, with or without incentives or net metering. It will just make sense. They may just take the free electrons when they can, and wasting them if they can’t neither use nor sell them.

And by the way, we have cut down on our cable TV subscription. Customer-owned generation will have a similar effect on utilities. Many will have solar panels and they will buy less from utilities.

In essence, for the first time, utilities will see competition from their own customers.

Strained Customer Relationships in the Future of Electric Utilities?

Low-cost renewable energy and energy storage are reshaping the Canadian electricity industry (see http://benoit.marcoux.ca/blog/canadas-electricity-industry-in-2030/). Along the way, new regulatory frameworks, energy choice, and competition from new energy service providers will transform the relationships between utilities and their customers. If what happened in other industries that went through similar transformations is any indication, such as airlines and telecoms, those relationships could be strained. Utilities should learn and apply lessons from those industries, hopefully not making the same mistakes again.

Twenty years ago, an Angus-Reid survey put Bell Canada #2 among most admired corporations in Canada. In 2017, Bell Canada ranked #291 in a University of Victoria brand trust survey. People love their Apple or Samsung phones, are addicted to Facebook to stay in touch with friends, and use Microsoft Skype to see remote family members, but they mostly hate their phone company.

The transformation of the telephone industry in Canada really started in the 1980s with businesses being able to lease high-capacity dedicated lines from other providers, such as CNCP Communications. Businesses were clamoring for more, and the Canadian regulator, the CRTC, allowed resale of telephone companies services, first dedicated lines and then local phone services. Canadian long-distance market developed slowly until 1992, when Canada unbundled local and long-distance telephone services and allowing competitor entry into long-distance services. When cellular service became more popular around the year 2000, it also offered an alternative to local services. However, if competition in residential long-distance services is seen as a milestone, the fact is that it all started with businesses leasing high-capacity lines from competitive providers — businesses were already resenting being coerced by phone companies. Later, when residential customers got choice, they too got dissatisfied.

It is still early, but we may be seeing the same unfortunate trend with electric utilities. When listening to renewable energy developers or commercial businesses, you already hear an undercurrent of dissatisfaction, although the reality is that there is not much they can do. With low-cost renewable energy, energy storage and microgrids, businesses will start to see alternatives. Eventually, the same will happen with residential customers. Unbundling of the wire business from energy retail will bring more choices. You can readily see a parallel with telecoms .

This is a very real risk for utilities: in 2030, there will be many more potential friction points between utilities and customers than there are now. In addition to traditional transactions such as new connects, outage reporting, energy efficiency and bill payment, there will be multiple demand response schemes, EV charging and energy sales, bringing new expectations along. Even if customer satisfaction surveys are good now, they may not stay that way.

I have worked in the telecom industry as head of marketing, in customer care and as a business consultant — I have seen what happened there. I have also seen some of the best and the worst of stakeholder communications at electric utilities — including while I directed a large smart meter deployment, a very challenging activity for customer relationships. Beyond the obvious like using social media, online self-support, and efficient call center operations, here is what I have to offer to electric utilities in improving their chances to maintain healthy customer relationships as the industry is transforming:

  • Lead the change. Customers want solar panels on their roofs and go off-grid? Make it easy for them! Green Mountain Power (VT) does it. Regulation will be performance-based? Propose it now! ENMAX (AB) did it. Customers want behind the meter energy storage? Install it for them! PG&E does it.
  • Show what you do. The electricity business is complex and not appreciated well enough. For instance, grid upgrades should be media events — see this FPL (FL) video, “crews will be installing automated switches”: https://youtu.be/cs-lMREscpY. The electricity business is highly technical and sometimes dangerous — it deserves more attention in plain words.
  • Understand changing customer expectations. With increasing dependence on reliable power for our vehicles and electronic devices, plus distributed generation earning revenue for customers, outage frequency will become a more and more important factor for customer satisfaction.
  • Partner with community leaders. Mayors and other community leaders, acting locally on a short feedback loop from their constituents, view the challenges of clean energy and climate change on a daily basis — it is about their people getting sick, having clean water, being warm or cool, holding productive jobs, commuting efficiently, and surviving disasters. Yet, few electric utilities work with cities on resiliency and sustainability challenges.

Even with all the talk from consultants about customers wanting more participation, the fact is that electricity will never have the emotional content of communicating with friends and family, would it be telephone or Facebook. This only makes it harder to ensure that electric utilities can maintain healthy customer relationship. Still, it can be done.

Are you up to the challenge?

AIEQ Conference on Smart Grid

Today, I moderated a panel on microgrids at a smart grid conference hosted by the electric industry association of Québec (AIEQ). I think that it went quite well. Chad Abbey (Smarter Grid Solutions), Michel Carreau (Hatch), Teddy Chettiar (S&C) and Ronald Denom (Ossiaco) were on the panel. Chad presented 3 microgrid cases, including one on the Shetlands Isles off Great Britain – an obviously remote community. Michel continued by presenting the challenges of microgrids (and the recent progress) in the Canadian North. Further South, Teddy both in-front and behind-the-meter examples, including one in North Bay. Ron focused on behind-the-meter applications, with the “nano grid” concept.

Other panels focused on the smart grid proper, with Greg Farthing (ABB) moderating Gary Rackliffe (ABB), Jayant Kumar (GE) and Mark Feasel (Schneider), and on cybersecurity, with Oral Gürel (Schneider), moderating and Dominique Gagnon (CGI) , Robert Nastas (PM SCADA), Bruno Lafeytaud (Accenture) and Pierre Taillefer (Vizimax) presenting.

The panels were followed by a dynamic luncheon presentation by Eric Filion, VP Customer Service at Hydro-Québec Distribution. Éric highlighted the goal of Hydro-Québec to become more of a lifestyle service provider and increase customer loyalty (going well beyond customer satisfaction). Éric presented 5 innovation trends (see picture) which, I think, are worth sharing.

Thanks to all panelists and to the AIEQ for organizing this very successful event.

Telecom as a Model, not a Service, to Electric Utilities

On September 27, 2017, I presented at the Utilities Technology Council of Canada. I have attached the presentation, and here is the abstract.

Abstract: The telecom industry has seen tremendous changes, replacing in just a few short years the Plain Old Telephone System that took over a century to build with the Internet and cellular networks. Since telecom and electric utilities have a lot in common, like linear assets, large customer base and territory, and technology-driven culture, what can we learn from the transformation of telecom to better manage the ongoing technological changes in electric utilities?