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What a Switch!

What a Switch!

Before deregulation, utilities didn't have to worry about customer service. Now they do. Buying CRM software won't do the trick.

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Nobody at Lakehead Pipe Line Partners knew it, but a motor at one of its sites was about to go on the fritz. If the malfunction could be caught in time, if the motor could be fixed before it needed to be replaced, it would save Lakehead, a Minnesota-based pumping company, a lot of time, money and grief. But how could Lakehead know - how could anyone know - that a motor was about to malfunction?

Enter Nordic Electric.

Reviewing Lakehead's bills, Nordic, a five-year-old Michigan-based independent power supplier, noticed that one of Lakehead's plants was consuming more energy than usual. Putting two and two together, Nordic called Lakehead and informed it that there was a problem at that specific plant - most likely a motor about to fail.

"They were surprised that we were able to diagnose stuff like that," says Richard Polich, vice president of operations and regulatory affairs at Nordic. "At first they wanted to know why we were even calling them."

In another case, Nordic's system noticed that Martin Marietta Materials, a North Carolina-based chemical and construction material supplier, had a power spike every morning when employees switched on all the equip-ment at the same time. Nordic suggested that by staggering the times for turning on the machines, Martin Marietta Materials could save 20 per cent on its electric bill.

"This is a partnership," Polich says. "Our desire is not to have a customer for just one year."

Nordic, which uses a CRM system from Peace Software to cull its customers' bills in order to provide these types of services, is symbolic of a new world order: power suppliers emerging in deregulated markets to challenge the traditional gas and electric monopolies. Armed with the latest technologies and offering advan-ced Web-based applications, they are cropping up in most metropolitan markets. But whereas utilities in England, Canada and Australia are old hands at using IT to compete in deregulated markets, many US utilities are still wrapped in stifling monopolistic shrouds. They're wrestling with new supply-and-demand paradigms that have pushed companies like California-based Pacific Gas & Electric into bankruptcy. They're reluctant to make investments in CRM technology even as a new breed of providers begins picking off their most lucrative customers.

As the old monopolies are beginning to discover, competing in this new deregulated, customer-centric world is not just a matter of acquiring and implementing new technology; it demands dramatic and profound philosophical shifts.

The old industry joke that describes customers as "meters at the end of the bill" doesn't cut it any more.

Putting a Face on the Meter.

"Every day our customer wakes up is a day that he can choose to stay with us . . . or choose to leave," says Rick Larson, director of sales and customer service for Enmax, a Calgary-based electric utility and until three years ago a monopoly owned by the city.

As of January 1, 2001, Enmax will be competing in a market open to all newcomers. As a result, it has taken an aggressive approach to customer service.

As part of the company's new strategy, it has changed some key employee performance metrics. For example, Enmax marketing employees are measured not just on customer brand awareness but on how customers feel about the brand, as measured by focus groups. In addition, finance and accounting employees will be measured on overall customer satisfaction. Again, this will be measured through focus groups and by calls made by a third party to customers who have reached the call centre. The sales team will be measured by more traditional metrics, such as the revenue generation, but they will also be measured on customer satisfaction.

In addition to tying customer-care metrics to employee performance measures, Enmax is moving to link all its processes together through a CRM system from Onyx Software in an effort to add value to all its interactions with customers.

"You can never anticipate where and how a customer will enter an organisation," Larson says. "We want to be ready so when that customer decides to interact with us, we fully leverage that."

For example, in case a customer walks through the front door with questions, even Enmax receptionists will have full access to account information. If an executive comes to the office for a meeting, the receptionist will have an accessible bio of the executive. The receptionist could ask the executive how she likes Enmax and capture her responses. "A casual comment is now captured as a usable piece of information about that customer," says Larson.

With the CRM system, Enmax salespeople will know before calling a customer if he had asked about a bill the day before and whether his issues had been satisfactorily resolved. In addition, customer service can query customers about how they found the company and then feed that information to marketing and product development departments.

The company also plans to use a portal to give employees access to internal systems. They can customise it to add weather data or news, but the customer data will always be in full view. "It's our employees' interface into our company," Larson says. "They'll be viewing customer data to get to our company, which brings the customer right to their desktop every day."

While Enmax is leveraging a portal to provide employees with a constant reminder of customer service, BC Gas - which provides energy and utility services in Western Canada and the US Pacific Northwest - is preparing for deregulation in November 2002 by replacing its 20-year-old Unisys-based customer information system with CRM software from Peace. With the new system, more than 250,000 utility customers in British Columbia's interior are able to view billing and consumption information, request interactive customer service, and retrieve other information about their accounts over the Internet. In addition, customers will be able to enter their own meter-reading data via the Web. And BC Gas is in the process of converting its remaining 500,000 customers in the Vancouver and coastal area to the same Peace system. BC Gas has already linked the CRM system with its interactive voice response (IVR) system and provided computer-telephony integration features designed to streamline customer service. For example, when BC Gas customers enter their account number and PIN in the IVR system, their account information is automatically retrieved from the database and displayed on the customer service representative's workstation.

As it hones its service focus, BC Gas has started to think of customers as "people not premises", says Patrick Lloyd, senior vice president of business technologies and support. Until a few years ago, he says, the company's databases were premise-centric - tracking the gas usage of a specific house. Now, the databases are customer-centric - focusing on people even as they move from home to home.

Competition Down Unde.r

While a handful of states in the US have begun in recent years to open their electric utilities market to competition, deregulation has been a driving force in Australia since 1996. While most states have tailored their deregulation plans so that customers will automatically remain with their monopoly supplier unless they choose another, in Australia all customers must choose a provider; the entire country is in effect one big market. This creates a competitive field for a company like Advanced Energy, a former monopoly that is based in rural New South Wales but counts large customers from various areas in the country - such as the Sydney Opera House - among its customers.

Competition from utility start-ups have kept Advanced committed to continually refreshing its CRM solution, which it first launched in 1993, says Ken Stonestreet, general manager of information services at Advanced.

Advanced was one of the first utilities in Australia to begin offering its customers Internet access to account information, and last December the utility began to offer electronic billing and online payment options. Commercial and industrial customers can download electricity consumption information at half-hour intervals.

"This is particularly relevant to consumers who may be interested in pursuing ways to modify their usage patterns to take advantage of tariff or rate structures," Stonestreet says.

"In addition to being able to download the data, customers can view their consumption patterns in 3-D graphical format online to help them easily visualise overall patterns and detect any anomalies." In addition, Advanced has used its CRM system from Peace to tie its customer service systems to its back-end databases to initiate automatic processes. For example, a customer can request a final meter read and disconnection via the Web site. That request is sent directly to the company's main system to be scheduled without an intermediary keying in that information.

This tight integration has helped the company differentiate itself from some competitors, which might offer a "flashy front-end" Web site offering online access to tailored customer data without having back-office integration in place to provide detailed account information, Stonestreet says. He credits CRM with enabling Advanced to retain 93 per cent of its contestable customers since the 1996 deregulation date.

Wait and Drift.

While some utilities like Nordic have taken a proactive stance toward customer attraction and retention, only one-third of US utilities offer online access to account information, and most of those do not offer advanced applications such as online bill payment, says Bill Brownell, former vice president and director with the Boston Consulting Group, which has worked extensively with utilities facing deregulation. The remaining two-thirds of utilities in the US have taken what Brownell calls a "wait and drift" attitude. "They're not as far along as they should be," says Brownell. "They are fairly risk averse with respect to investing in technology and behaviour and cultural changes."

While most former monopolies are making an effort to deliver customer service, the frame of reference they use is not broad enough to be successful, argues Paul Grey, CTO of Peace. For example, utilities frequently cite call-handling statistics as evidence of improving customer service but, says Grey, they often do not know whom they have been servicing.

"Is the call centre actually delivering quality customer service to the best, most profitable customers?" Grey asks rhetorically.

Most utilities, he suggests, cannot answer that question because monopolies could assume that their customers were not going anywhere and therefore did not bother distinguishing between them.

For many energy consumers, their main interaction with the utility comes with the monthly bill. So service for those customers could be equated with the quality of the billing and payment process. Yet utility bills are famously confusing. And to date, e-billing, which could offer great advantages in terms of convenience when making payments, often replicates the bad, old utility bill electronically.

Utilities that opt to take a less aggressive stance on customer service need only look to England, where approximately half of all utilities have disappeared since deregulation began there in the mid-1990s.

"Companies that didn't do [customer service] well are out of the retail business," Brownell says. "They ended up essentially being pushed out of the retail market or ended up being acquired."

Those utilities that remain are heavily investing in CRM-style technology, says Barry Moxley, partner at Newburn Consulting, a Swindon, England-based IT consulting group. One English utility, United Utilities, has even identified CRM and customer service as an opportunity for providing billing and customer service outsourcing to other companies, Moxley says. Centrica, the retail spin-off from British Gas, was worth 27 per cent of British Gas when it was spun off in 1997. Today it is worth $US13 billion, almost as much as British Gas. Centrica's CEO Roy Gardner says his top priority is customer service. The company manages customer data centrally, which it culls in order to cross-sell other services.

However, the cultural shift required for monopolies to get their competitive juices flowing has taken several years and is still evolving, Moxley says. "I recently shocked a customer by saying: ‘You actually don't have a relationship with the majority of your customers. The only person they see is the meter reader. All you're doing is sending them a bill. What sort of relationship is that?'." So how can utilities used to one way of doing business learn to change their tune?

Learning to Change.

Brownell says one of the first steps successful utilities in deregulated markets take is to separate the retail arm of the utility from the traditional "pipes and wires" function so that employees of each division feel that they are working for a separate business. In addition, the skill base of employees has to be changed, either by bringing in new people from competitive industries or by improving the customer service skills of existing workers.

BC Gas had to close 23 of its small, remote payment and service centres, consolidating their function into one centre in order to isolate 100 employees from other company operations and hone their focus on customer service. Only a handful of employees were willing to move to the new office, and the company replaced those who would not move with new ones who had call-centre experience.

During the past three years the utility's management has turned over 75 per cent, including the CEO, senior vice presidents and vice presidents, with their replacements coming from more service-oriented industries like telecommunications, consulting and marketing. Honing the focus on customer service has also meant that BC Gas has decentralised its IT application development operations, says Lloyd. "The customer-care people make most of the application decisions now," he says. "They're closer to the customers; they have a better understanding of what they need. Our field service people now have their own business systems application group. They are very picky and choose their particular business systems and are actually responsible for installing them because they've got to respond to a changing customer environment fast."

Southern Company in Atlanta has also concentrated on moving its 1000 IT employees closer to its customers to ensure that their applications are focused on service, says former CIO Robert Beason, who recently retired. Southern is the largest producer of electricity in the US and the parent company of Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric.

"We [IT people] have a tendency to be people who are in the basement," Beason says. "I've often heard people say: ‘You never want to get them out and interfacing with the customer'. That's changing. Our folks are working on Web-based customer-care systems - they're part of the customer-care team. They're a part of that business unit."

The company is rolling out several systems targeted toward different customer segments. For its large industrial customers, Southern offers real-time pricing information via the Internet. Commercial customers can look at usage patterns online to compare consumption at various company locations. For the residential customer, the company was planning to roll out an electronic bill presentment and payment system. That system will be integrated with an outage messaging system and the voice system at the call centre. When customers call during an outage, the system will detect their location and tell the caller how long the outage may last based on current restoration work.

As for the electronic bill presentment and payment system, company officials hope they can knock 20 per cent off their total costs for printing and postage for the four million bills the company mails out each month, for a whopping saving of $US13 million annually.

To instil a focus on customer service in the company culture, all Southern employees go through a training program that spans eight weeks, and employees are continually reminded of customer service goals. Every newsletter has columns written by executive leaders on the importance of customer service. The company also provides IT service level agreements to all of its business units to foster the feeling that service to all of its customers is vital, even internal ones.

In addition, the IT staff constantly benchmarks its 15 products, including voice systems, mainframe systems, IP data networks and energy management systems to others offered in the market.

"You look at what you do and see what the market will do it for," Beason says. "You create a culture that says: ‘We're going to continuously look at our products and services from a market perspective'. We show that information to our employee base in IT. We've got 10 or 12 of our products that we believe are undermarket. We've got three or four that might be overmarket."

The Utility Challenge.

The utility industry is unique and so are the challenges confronting it.

"If I'm Amazon.com and I know you read a book by this author, I can go back and sell you another book from that author," says Bill Swanton, vice president of the utilities practice at AMR Research. "But once you buy your electricity, there's not much more I can sell you. People are going to make money by preventing churning, by keeping the customer. The issue [for utilities] is customer retention."

In addition, in many US states, state law prevents retail energy providers from mining customer databases maintained by their parent company - often the former monopoly incumbent - in order that they not have an unfair advantage over new players. Many incumbents are only allowed to share this information with retail providers.

As a result, the pressure to compete effectively by revamping deep-seated cultural attitudes often means utilities must take drastic measures to mould themselves into retail players.

"In any of these unregulated opportunities for the energy service providers, they're just bringing in fresh people," Swanton says. "They're grabbing a bunch of telecommunications and consumer products people. The culture of the [utilities] bureaucracy is so deep and so long that it makes the cultural problems faced by getting a sales force to use CRM pale in comparison."

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