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How COVID-19 is impacting Business and Operations of Utility Service Providers

image credit: Bynry Technologies
Nilesh  Gudhe's picture
Founder Bynry Technologies

Helping small and medium sized utilities with SaaS platform - an integrated digital utility.Technology: Has a total of 20 years of expertise in designing, developing and maintaining web, cloud...

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  • Apr 21, 2020 11:30 am GMT
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The economic impact of COVID-19 is undeniable. In the face of closures and shifting consumer behavior, businesses across the world have had to adapt to rapidly changing economic circumstances.

Utilities businesses around the globe were forced to trim their services only to those considered to be absolutely essential and shift to a Work-From-Home mode. Dedicated field teams who have continued to operate on the ground have been instrumental in maintaining reliable supply of electricity, Water and Gas for Utility service providers. It is necessary, along with doctors, nurses and healthcare workers; we appreciate and acknowledge efforts of Utilities in such unprecedented times.

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This pandemic has a variety of implications for the short and the long term. Ensuring employee safety and business continuity are of utmost concern for Utilities. After COVID-19, business and life are fundamentally changed. Facing them and finding a way to get through them is vital if a company is to rebound and get back on track of being competitive.

Working with our major clients and serving 700,000 consumers, we analysed what COVID-19 entails for utilities, and identified crucial implications.

Impacted Areas

The main impacts identified are:

Significant Drop in Demand

A drastic fall in demand has resulted from the lock down or social distancing advisory. During the lockout period, demand for power, gas and water across global economies is expected to decrease by 20-25 per cent year-on-year. According to an IEA report, global demand for oil has fallen by 90,000 barrels per day in the first half of 2020, compared to the 99.9 million barrels demand per day in 2019. This largely contributed by the shutdown of operations at major industries.

In order to monitor and manage the demand cycle, utilities have had to continually monitor and evaluate the rise and fall. Production also has had to be suspended or decreased in many cases.

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Source/Credits: SPG Global

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Source/Credits: BCG.com

Impact on Commercial Services, Payment and Collection process

The social distancing norms introduced by governments coupled with work-from-home requirements have made it difficult to run commercial services. Utilities providers do not have enough staff on the ground to take readings from meters and generate bills. Utilities tend to generate Average bills in certain situations and rely on electronic payment solutions. Collection and cash flow were significantly affected as a result. 

Maintain Utility Network with reduced Field Services

Because they are operating with a small field team, Utility providers must keep the network running. It is one of the biggest challenges in the present situation, which is being achieved by reducing services to what is deemed necessary while stopping the others.

So much pressure on the digital Services and infrastructure

The world was unprepared for a calamity like this. In the era of lock-down or social distancing, all depends on digital services and available infrastructure. The volume of transactions rose by 30-40 per cent at least for utilities. The lack of an alternative makes this situation more worrying especially if it lasts for an extended period of time.

Productivity and Morale of Staff

Nearly every workplace has switched to a work-from-home scenario. While it has kept companies going, employee productivity has been impacted. The effect can be felt in projects requiring team participation, as staff struggle to operate using online collaboration tools. Operating at home often meant people lived in isolation. This has lowered their productivity and the morale.

"In 32 years of this, I've never seen anything where the conventional wisdom of what needs to be done… seems to change everyday."

Bob Nichols Partner, Bracewell

The Possible Scenarios and Exit Strategies for Utility Players

When businesses are planning a return to work as they knew, three potential possibilities are being considered.

  • The Outbreak is controlled within 3-4 months
  • The Outbreak is controlled within 6-12 months
  • The Outbreak extends for more than a year

The sooner this pandemic is contained and managed, the better it will be for the economies to recover. The last scenario is the most formidable. Not only will businesses take a huge financial hit, those in vulnerable industries may also trigger complications for associated businesses. Utilities will find recovery easier if pandemic is controlled within the next few months. In case, if it goes further, companies need to prepare their plans for continuity. Based on the perspectives we gathered, here are few options:

"Utility leaders can seize this opportunity by taking swift action to navigate the crisis and learn from their peers."

Strategies to Follow

There will be a vast difference between the world before and after COVID-19. Utilities can not now continue to operate with the same strategies as they used to. Change is the need of the hour. Utility service providers must adapt themselves to the different scenarios and plan their recoveries. Some of the strategies that could help are:

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Employee/Site Workers Safety

The company will take every action possible to ensure the safety of its workers. This may include encouraging as much work to be completed remotely as possible, reducing the number of staff in workplaces and investing in protective devices including face masks. In order to reduce the chance of spreading infections, social distancing norms should be practiced as far as possible even after offices reopen. One way to achieve so is to let on-site workers work in shifts, meaning that at any given moment of time there is a limit on the number of staff present.

Strengthen Liquidity

Since demand has dropped and collection might not be as regular as before, businesses need to concentrate on retaining adequate cash reserves for working capital. Companies may need to look at cost cutting steps for the near term, such as hiring freeze; wage reductions, travel restrictions as well as improving profitability by increasing cash reserves, minimizing equity buybacks, postponing Capex projects.

Building Technology to manage Operations and Network remotely

Utilities must develop technology platforms to help employees work remotely, collaborate with others and manage operations remotely. Utility management involves a lot of field work and field assets. Thus, technology must be developed to allow employees to get access to field staff ad field assets remotely. Instead of having to physically visit sites, technology should be used to help the field force monitor the network remotely. This could involve the use of IoT technology, drones, Cloud and Mobile based platforms for service management.

Communication, Communication, Communication

A clear line of communication must be established between leaders and their teams as well as between businesses and their consumers. Utility leadership must be actively involved in all the different components of the business. When talking to consumers, messaging must be cohesive in terms of the content as well as the tone.

Our Two Cents

While planning is critical for every Utility company’s long-term success, all plans must be flexible. After all, his situation is unprecedented and no one can be really sure of how the market will react. What new opportunities will arise? Will consumers go back to their old behavior? How will supply chains operate? So, act thoughtfully, take each step as it comes and keep your organization prepared for whatever happens next.

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Matt Chester's picture
Matt Chester on Apr 21, 2020

Nearly every workplace has switched to a work-from-home scenario. While it has kept companies going, employee productivity has been impacted. The effect can be felt in projects requiring team participation, as staff struggle to operate using online collaboration tools. Operating at home often meant people lived in isolation. This has lowered their productivity and the morale.

I know it's quite early, but are there any data following this? I'm curious how much of the business impact can actually be attributed to the morale and its impact to productivity as opposed to just the logistical challenges associated with the newly work from home arrangements, since that would help to identify some pain points and potential solutions (e.g. virtual happy hours, more informal 'meetings' to chat akin to the water cooler, etc.)

James Koenig's picture
James Koenig on Apr 21, 2020

I think there are two aspects that have to be considered for this situation. The first would be detailing how people are expected to work from home. Do they need to be online during specific time periods or is their work time flexible? Also, what communication practices should be established to keep managers, peers and others updated on work and casual activities.

The second aspect is how managers are to interact and communicate with those work at home employees. Managers should communicate frequently to make sure the employee doesn't feel isolated and working without sufficient direction. The manager and organization should also implement programs and activities to keep the employee engaged, similar to the informal meetings and virtual happy hours that you mentioned above. Interaction is the key and the organization and management needs to take the initiative to establish those practices. 

Matt Chester's picture
Matt Chester on Apr 21, 2020

Managers should communicate frequently to make sure the employee doesn't feel isolated and working without sufficient direction.

This is a great point-- employees may feel guilty if they find they're not working as much, but it's definitely just as much on managers to make sure people have sufficient projects, they're being checked on, and the work is keeping them engaged and feeling like they're contributing

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