This special interest group is where customer care professionals share tactics on how utilities are improving interactions with their customers. 

WARNING: SIGN-IN

You need to be a member of Energy Central to access some features and content. Please or register to continue.

Post

Utility Product Lifecycles - They do exist.

image credit: depositphotos.com

Product life cycle management is defined as follows: “In industry, product lifecycle management (PLM) is the process of managing the entire lifecycle of a product from inception, through engineering design and manufacture, to service and disposal of manufactured products”.  In the utility industry, the predominant products are rates, or tariffs.

For utilities, product lifecycle management includes:

  • Determining the revenue target, typically through a cost to serve model,
  • Designing rates to achieve the target revenue, and possibly influencing customer behavior, Gaining approval for the rates,
  • Performing customer rate education and marketing,
  • Operationalizing the rates to allow customers to purchase (enroll) in the rate and receive bills
  • Evaluating the performance of the rate.

Before the era of smart meters, DERs and EVs, the utility product life cycle process was largely nonexistent.  With policy goals to reduce peak load, promote EVs, and enable DER adoption, utilities are leveraging their smart meter investments to create new products on a  much more frequent basis.

In today’s utility it is common to have program managers developing new rate products to meet these policy and business goals.  The parameters of the products vary widely, but many include time-of-use rates, critical peak pricing, special EV rates, and incentives for enlisting in community solar.

“In 2018, 89 utilities—or nearly half of all major U.S. electric utilities—tried to change electricity rates by filing rate cases with state regulatory commissions; this number was the largest number since 1983.” – eia.gov

An Enterprise Rating Engine is a critical tool used by leading utilities to manage the product life cycle process.  It sits separate from the CIS, but is integrated and calibrated for accuracy.  The Enterprise Rating Engine calculates bills on multiple rate plans for the entire utility’s customer population within a short amount of time – millions of bills in hours.  This is commonly known as a whole population rate analysis.

During the rate design step, whole population rate analysis can be used to assess how a potential new rate structure impacts every individual utility customer bill using 12-month historic customer load profiles.  Customer classes, such as low-to-medium income for example, can be analyzed to ensure that no single customer class is adversely affected.

For rate marketing, the whole population rate analysis can identify the best rate plan for each individual customer.  The utility can then use the results for rate marketing and education, notifying each customer of their best rate plan and potentially defaulting them to the new best rate.

When the new rate plan is live, the enterprise rate engine can provide high speed bill simulation for the utility and the customer via the call center and my account online.  As customers’ electricity patterns change, their ‘best rate’ plan can change.    The Smart Energy Consumer Collaborative recently released a case study on SCE’s TOU rate transition in which SCE provides an online Rate Plan Comparison Tool allowing customers to view how their last 12 months of consumption would be priced on four different rate plans.

New rate programs can have significant effects on customer satisfaction and can affect the utility’s overall revenue, success is critical.  JD Powers says, “that any rate changes are likely to impact customer satisfaction in one way or another”.  Using an enterprise rating engine with high speed bill simulation helps ensure a new rate program has a positive effect on customer satisfaction.

Rob Girvan's picture

Thank Rob for the Post!

Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.

Discussions

Matt Chester's picture
Matt Chester on Mar 30, 2020 12:08 pm GMT

Are these lifecycles anything that the customer are cognizant of or asking questions about? Or are these topics more behind the curtain?

James Riley's picture
James Riley on Mar 31, 2020 5:05 pm GMT

Matt,

I would say more behind the curtain which feels very Wizard of Oz in many ways!!!

But, as Rob quotes from JD Power, the process has a profound impact on customer experience and satisfaction, as well as utility revenues.

While utilities are having to deal with increasing rate complexity, further complicated by behavioral changes and EE programs, the customer wants simplicity. They wanto to know from their utility which rate is best for them and to have their utility reach out to them if over time that changes.

James.

Matt Chester's picture
Matt Chester on Mar 31, 2020 9:18 pm GMT

Wizard of Oz was exactly the image I had when I asked my question! Thanks for the response

James Riley's picture
James Riley on Mar 31, 2020 5:19 pm GMT

Rob,

Very much in agreement. 

I worked about 4 years ago with a water utility that had just finalized and was implementing rate changes to raise revenues in support of a major and much needed capital investment. Design of the rate changes, and the assessment of customer impacts, was done at an aggregate level (by customer groups) in Excel.

At the time I had the opportunity to perform a proof of concept using a new database technology to do exactly what you describe i.e. simulate 12 months of historic bills for all customers.

What did we learn from this?

1. Not suprisingly this is more accurate than calculating at aggregate in Excel.

2. You can better understand the impact on each and every customer not just the impact at a customer group level.

3. You can better understand not just overall revenue but cashflow from seasonal variations.

Personally, my biggest take away, was that the introduction of fixed charge based upon pipe size, combined with moderate reductions to tiered consumption charges, had profoundly different impacts on individual customers that were masked at the group level.

Worst case was for customers with a large pipe and low consumption. The increase in fixed charge overwhelmed any reduction in consumption charges and could potentially double a customer's bill. Remember that the customers more than likely had no say in the size of pipe installed.

James.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »