Category Archives: Customer Relationships

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 attache 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.