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CEO FORUM: Dealing with Disruption

Leaders adapt to strategic shifts in the utility landscape.

Fortnightly Magazine - June 2010

offers being made to them in their local area. Customers judge the value of what we’re providing. So that’s driving us to hone our competitive set all the time.

We use all the traditional marketing channels that you’d expect in any retail category. We’re using web communications, social media and onsite customer engagement.

But even with all the innovation that’s happening, electricity pricing is still a difficult concept for people to get their arms around. For most of the industry’s history, utilities and regulators have focused on the supply side of the equation, building bigger infrastructure to deal with growing energy needs. But at some point customers will be equally interested in managing their demand, and we see ourselves as squarely with the customer on the demand side of the equation. There are terrific opportunities for controlling usage, and it might mean paying a little more per kilowatt-hour to get a greater reduction in the total bill.

Everyone would love to have nearly free power and nearly 100-percent reliability, but in the real world there will be trade-offs around technology, and they aren’t free. But we believe the customer must be given the choice to opt in to whatever programs we’re offering. That’s a very different model from the ones built on centralized decision making.

 

Weston, Direct Energy:  Our strategy in North America is building on [Direct Energy parent company] Centrica’s experience in the United Kingdom. Centrica subsidiary British Gas (BG) has a large retail business, including energy and services, such as fixing people’s HVAC systems and making their homes more energy efficient. Also BG is deploying smart metering. All of that experience influences our thinking over here.

In North America, we have about 5 million customers. We’re predominately a downstream company, but in the next few years we’ll be investing a lot of money upstream to get a better balanced business between downstream retail and upstream resources, namely natural gas assets and power plants.

In terms of customer engagement, we’re looking at three things. One is how you use an Internet portal to help customers understand their energy usage. Second is the opportunity for using in-home displays to give customers a clear and simple understanding of how they use energy. We’ll be trying that later this year in Houston. Third is the service element—developing business replacing HVAC systems, providing energy efficiency advice, and being a trusted technical adviser to customers. All these things are about building a customer relationship by engaging and making the company more relevant to the customer.

In the U.K. you have 100,000 customers changing suppliers every week. That’s a dynamic market that will improve innovation as smart meters come into the market. We’ll draw on that experience as we deploy our strategy in North America.

 

Retail Relationship

Fortnightly: How does retail competition affect consumer engagement strategies in the transition to smart meters and new pricing structures?

 

Burke, TXU:  The customer doesn’t have to choose us as a retailer, and they don’t have to choose the program we’re offering. That puts a focus on the

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