Are you focusing enough on your large customers?

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The threat to the traditional utility business model is real and coming up fast. Rapid changes are impacting the utility industry, primarily driven by the proliferation of distributed energy resources, the introduction of new technologies and the entrance of new competitors. From a scale-driven, centralized model, the sector is evolving into a digital, distributed and dynamic model.

Given the rapidly declining technology costs, customers are reshaping their behavior overall and demanding more value-added products and services. In the face of these fundamental changes, utility leaders need to re-examine their business model and look for new revenue streams. This is something that European utilities have been working on for several years now, even as US utilities are just getting started — with a few bellwether utilities currently building new business models.

While C&I customers have always been key for sustained earnings from utilities, going forward their importance will increase given their evolving requirements and the risk of defection. Today, these customers have options to satisfy their energy and other requirements through competitive retailers, emerging project developers or self-generation. Other key trends observed in the C&I customer servicing space include:

  • Evolving and expanding scope for utility-managed customer accounts
  • Emerging competition driving the need for utilities to create a stronger preferred-provider status
  • Reliability and power quality emerging as key demand drivers
  • Increasing corporate procurement of renewables
  • Environmental corporate social responsibility (CSR) now considered a core business

Breakdown of key products/services interest and preference by large C&I customers in the US

(Interest of customers versus preference to procure from local utility)

EY - Market Strategies

Sources: Market Strategies International, Cogent Reports™ Utility Trusted Brand & Customer Engagement™: Residential, June 2018.

*Note: The Market Strategies-Morpace Cogent Utility Trusted Brand & Customer Engagement: Business study assesses market demand for over 70 different offerings based on nearly 9,000 responses from business customers of the 60 largest electric and combination utilities nationally. These offerings range from traditional billing programs like budget bill to new energy technologies like solar and electric vehicles. Among the information collected is overall interest, preference for the utility or a third party for competitive offerings like solar, immediate demand and awareness of utility offerings. The adjacent graph shows offerings that have the potential to generate new revenues for utilities, and which ones have the strongest interest from business customers and logical adjacency for utilities to provide as a guide to utility product portfolio management.

Utilities could potentially turn the emerging risks to their business models into opportunity by developing the right level of customer engagement, focusing on underserved customers, and offering new product and services. To achieve these goals, utilities will need to build a culture of innovation, which has proved difficult in the past. Such areas of innovation should include technology, operating models, products and services offered, marketing and branding.

Download the report to explore the financial outlook for US utilities and the key drivers impacting future utility demand, with a focus on the growing importance of C&I customers, along with the recent trends in providing retail services to these customers. We also provide a detailed framework for utilities to consider in connection with developing long-term strategies for serving their C&I customers.