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Energy Service Marketing: ESM Supplants DSM

Fortnightly Magazine - July 1 1995

approximately 30 percent in market share during the first few years after the Bell breakup, and has only now regained the level of revenues it enjoyed in 1984. To avoid that fate, utilities must embrace ESM. Don't worry about lost revenue from specific programs. Worry about ESCOs, who are itching to steal utility customers.

The Roots of ESM: Blending DSM With Marketing

Customers gain from higher energy efficiency when they can maintain their level of service while cutting costs. But they can also profit by increasing energy use if the value they derive from the energy outweighs the cost. To the customer, more or less energy is not the issue. Energy use is a continuum in which customers make constant tradeoffs between opportunities to spend dollars in the most appropriate place. Customers look for solutions; DSM that considers only energy savings will not consistently help customers find solutions. Instead, a marketing representative should be able to approach the customer with a vision to resolve its energy and business problems (em not with a myopic view to simply boost sales or savings. Energy savings and growth can be created simultaneously, as DSM impact evaluations prove. The words "snap-back", "take-back", and "program failure" may carry negative connotations in the world of DSM, but they describe what is actually intelligent consumer behavior.

Pacific Gas & Electric Co., a leader in DSM, was criticized last year for running advertisements implying that residential customers might want to keep their homes at 70 to 72 degrees. TURN (Toward Utility Rate Normalization) commented: "It seems odd to tell people in an ad they can keep the house warm and 'We'll finance it for you'" [California Energy Markets, NewsData Corp., Feb. 11, 1994]. In fact, the ad is not at all odd; it is merely consistent with a customer value strategy. A customer value marketing strategy might promote several such "odd" goals: comfort for the homeowner, financing to eliminate cash flow difficulties in high-cost months, weatherization and appliance programs to help lower energy bills, information programs on how to operate the home most efficiently, and or the promotion of new time-saving electrical appliances. These programs may increase or decrease energy use, but that's not important. The key lies with the increase in customer value, based on the customer's own choices.

Developing a Strategy

One can imagine how a consumer marketing expert might describe DSM: The attempt of regulators, consultants, lawyers, and accountants to argue incessantly about the best way to put technologies in buildings, without the customers' input or consent. While IRP may be appropriate under a monopoly environment, the consumer ultimately determines the success of a given product or service in a competitive market. The skills and knowledge developed through DSM must be transformed from a focus on resource obligations to an understanding of customer value choices.

Many utilities find themselves in a precarious strategic position. While they face unprecedented competitive challenges in the retail market, their actions in the retail market are still subject to rigorous regulatory scrutiny. Competitive market forces and burdensome planning requirements are working at