The rise of smart customers - How consumer power will change the global power and utilities business. What consumers think
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14 Noiembrie 2011 |
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ERNST & YOUNG S.R.L. |
Adresa
Strada Dr. Felix Iacob, Nr. 63-69
Cladirea Premium Plaza, Etaj 15
011033 Bucuresti, Sector 1
Telefon
+40-21-402.40.00
Fax
+40-21-310.71.93
Website
www.ey.com
Executive summary
New smart technology places more power in the hands of energy consumers. What are the implications for P&Us?
Smart technology puts unprecedented power in the hands of consumers to manage and control their energy use. In time, this will fundamentally shift the balance of customer relations. It seems the era of a one-way relationship — where a utility delivers energy to domestic consumers, end of story — is over.
Most P&Us are currently treating the smart transition as an infrastructure upgrade, focusing chiefly on the technology and on fulfilling regulatory obligations. So far, the customer perspective and need for consumer education have not figured prominently in smart implementation programs.
But following customer resistance to implementations in the US and Australia, the sector has been alerted to further challenges. Consumers’ newfound power to say “no” is one that the industry is not used to dealing with. P&Us must learn from the mistakes made so far. They need customer buy-in before they can exploit the host of new business opportunities that smart technology could provide.
To explore the sector’s readiness to respond to the present cycle of change, we asked domestic energy consumers how they viewed their relationship with energy providers. We wanted to know if they understood the benefits of smart metering, as well as their appetite for smart energy services.
Key findings
Consumers around the world have a neutral to poor relationship with energy suppliers. At best, they describe it as transactional, cold and distant; at worst, it appears hostile. We uncovered widespread irritation around issues such as competitive inertia, poor customer service, and lack of clear billing and tariff information. The situation is not markedly better in deregulated markets. For P&Us that want to use smart as a potential route to expand their retail relationship with consumers, this is a serious obstacle.
Consumers generally acknowledge that suppliers are dependable, providing a reliableenergy supply and responding quickly to outages. But overall the energy market is not viewed as dynamic, and P&Us are seen as lacking customer empathy. They lag far behind other home service industries — mobile phone and broadband serviceproviders in particular are seen as setting the benchmark for customer service.
At a basic level, consumers like the idea that meters will help them control energy use and save money. But they are also skeptical about who ultimately benefits from the meters: the consumer, society in general or the utility. They asked whether meters would be easy to use, whether bills would be clear, whether there would be real scope to reduce consumption and whether their privacy would be invaded. In other words, they doubt there is a value proposition for them, which compoundstheir skepticism.
Current negative perceptions of energy suppliers mean that the only services consumers would consider buying from their current energy provider are those directly related to monitoring or managing energy use. To sell them a wider range ofsmart services, P&Us would need to partner with a credible brand.
Key implications for P&Us
Our survey highlights three things P&Us need to do as the industry continues to transform:
1. Assess what threats smart technology could present to the core retail business
2. Assess the impact on business models and strategy. We see three options:
- Continue “business as usual” by treating smart technology as a pure infrastructure upgrade, but incorporating customer feedback into the meter rollout program
- Develop a more customer-focused business model that uses smart data and new joint ventures to promote a range of new services beyond energy supply
- Exit from the retail business in competitive markets where this is possible
3. Take action to improve customer focus:
- Those operating “business as usual,” including networking companies, will need to educate their customers effectively on the rollout of meters.
- Those adopting a customer-focused model need to build trust and present their smart services in a way that appeals to customers (see “Six factors for success”).
