Are Utilities Suffering From a 'Sea of Sameness?'
- Aug 27, 2021 3:48 am GMT
“Find a tired category that really is a sea of sameness and then figure out what is the cultural shift that the category is missing. In between this space is the business opportunity.” While the advice from Method co-founder Eric Ryan was meant for entrepreneurs, his point about identifying a problem and then providing a service that corrects that problem applies to all businesses. The question is, are you the company providing the solution or suffering from ‘a sea of sameness.’ Industry shakeups bring benefits to consumers because they force change. Popular examples of companies shaking up old industries include, Purple for offering a best-in-class spinal support mattress at an affordable price. Not to mention the success of their direct-to-customer model that cuts out the middle man. AirBnB is creating competition for some of the most luxurious hotels. And of course, Netflix has disrupted the movie industry twice by allowing customers to rent movies that are delivered to their door, and again by turning their delivery service into a streaming service. Obviously, streaming services, hotels and household products don’t compare with utilities. But the underlying message is clear, utility companies must adapt or they will lose to the competition.
In Arizona, Green Mountain Power is shaking things up. The company has applied with the Arizona Corporation Commission (ACC) to enter the market. If approved, they will compete with long-standing energy providers Arizona Public Service and Salt River Project. The two companies have serviced the Valley exclusively for the past 100 years. Green Mountain General Manager and Vice President, Mark Parsons said, “Really what we want to do is to be able to provide Arizona with a choice in their electricity service that they are provided.” Green Mountain argues that a 2020 Arizona Supreme Court Ruling makes clear that competition is allowed under the state’s Energy Competition Act. Because the company markets and sells 100 percent clean renewable energy plans ratepayers might welcome a new option. The ACC will evaluate the application but haven’t released an expected date for their decision.
Creating a competitive market has its benefits but for some the opposite holds true. In a competitive market, multiple energy suppliers compete for customers in the areas they serve. Customers can compare energy suppliers and select the one that best meets your needs. In Massachusetts, about 450,000 residents get their electricity from a competitive supplier, an option created under a 1997 law that deregulated the state's electricity generation industry. However, that is all-out to change. Announcing a major disruption, Attorney General Maura Healey proposed a ban on the competitive market for residential electricity consumers. "I know it is a big deal for us to call for the banning of an industry. I don't make that call lightly, but I make that call based on the documented data, as well as the anecdotes, but more importantly the data that we have studied that show why this industry is harming our residents," Healey told the Joint Committee on Telecommunications, Utilities and Energy. The data revealed that electric customers in Massachusetts who switched to a competitive electric supplier paid $426 million more than they would have had they stayed with their utility company from July 2015 to June 2020. Healey did concede that commercial electric customers might benefit from competition in the supply market because "commercial customers have access to expertise when purchasing electric supply and have greater negotiating power than an individual residential consumer."
Competition is healthy within any industry but soon there may be a new threat. Tesla’s Autobidder is a real-time trading and control platform for its energy assets, like Tesla’s Powerpacks, Powerwalls, and Megapacks. The software uses machine learning to monetize the assets. A new report from Handelsblatt states that several power companies in Germany are taking notice of Tesla’s entry into the local electricity market. In an interview with the magazine, a representative of an energy company confessed, “Just as Tesla changed the rules of the game in the automotive sector, we also trust them to disrupt the energy market.” Tesla hasn’t become a major competitor for energy companies just yet but Klaus Kreutzer, a German energy market expert commented, “If the company starts to put together large bundles, it will become a serious player on the electricity market. Established suppliers can no longer get hold of customers who have been tied to Tesla for so long. The brand alone is already pulling.”
The utility industry is facing a difficult period that will force changes in the way they do business. An all out industry shakeup is unavoidable. How will your utility compete, adapt, operate differently, embrace industry shifts and differentiate themselves successfully?
No discussions yet. Start a discussion below.