Helping North American Utilities Transform the Way They Do Business

Utilities are facing a host of challenges ranging from environmental concerns, aging infrastructure and systems, to Smart Grid technology and related program decisions. The future utility will be required to find effective solutions to these challenges, while continuing to meet the increasing expectations of newly empowered consumers. This brings an opportunity to create stronger, more profitable relationships with customers, and to do so more cost effectively.

Since our formation in 1996 as the subsidiary of UK-based United Utilities Plc., Vertex Business Services has grown to serve over 70 North American utilities and retail energy clients, who in turn serve over 23 million end-use customers. Our broad portfolio of Business Process Outsourcing (BPO) and Information Technology (IT) solutions enables our clients to more effectively manage operational costs, improve efficiencies, develop front-line employees, and achieve superior customer experience.

Improving Utility Collection Performances

Utilities can greatly benefit from the debt management practices and experience of industries such as banking and retail that have developed a more sophisticated skill set. Benefits can come from adoption of proven methodologies for managing accounts receivable and managing outsourced agency collections business processes, as well as from the use of appropriate software for these processes. There is also benefit to using analytical tools to evaluate the process of collections and optimizing processes based on metrics collected.

Improve your collection rates and lower outstanding accounts receivable through Vertex’s proven collection services. Our rich heritage results in our ability to implement best practices and provide quality reporting strategies, ironclad credit and collection processes, and innovative training programs.

Handling Demand Response and Efficiency In the Call Center

In the next five to 10 years, utilities will be forced to change more than at any time in their previous history. These changes will be profound, widespread and will affect not only utilities themselves, but virtually all parts of our modern electrified culture. One of the most dramatic changes will be in the traditional relationship between utilities and their customers, especially at the residential level. Passive electricity "rate payers" are about to become very active participants in the relationship with their utility.

Turning Information Into Power

Around the world, utilities are under pressure. Citizens demand energy and water that don’t undermine environmental quality. Regulators seek action on smart grids and smart metering initiatives that add intelligence to infrastructure. Customers seek choice and convenience – but without additional costs.

Around the globe, utilities are re-examining every aspect of their business.

Oracle can help. We offer utility experts, mission-critical software applications, a rock-solid operational software suite, and world-leading middleware and technology that can help address these challenges. The result: flexible, innovative solutions that increase efficiency, improve stakeholder satisfaction, futureproof your organization – and turn information into power.

Utilities can begin with one best-of breed solution that addresses a specific pain point. Alternatively, you can implement several pre-integrated applications to ease the development and administration of cross-departmental business processes. Our complete applications and technology footprint can be standardized to focus on accountability and reduce the resources spent on vendor relations.

Oracle Is A Leader In Utilities: 20 of the Top 20 Global Utilities Get Results With Oracle

Oracle provides utilities with the world’s most complete set of software choices. We help you address emerging customer needs, speed delivery of utility-specific services, increase administrative efficiency, and turn business data into business intelligence.

Oracle Utilities offers the world’s most complete suite of end-to-end information technology solutions for the gas, water, and electric utilities that underpin communities around the world. Our revolutionary approach to providing utilities with the applications and expertise they need brings together:

  • Oracle Utilities solutions, utility-specific revenue and operations management applications:
    • Customer Care and Billing
    • Mobile Workforce Management
    • Network Management System
    • Work and Asset Management
    • Meter Data Management (Standard and Enterprise Editions)
    • Load Analysis
    • Load Profiling and Settlement
    • Portfolio Management
    • Quotation Management
    • Business Intelligence
  • Oracle’s ERP, database and infrastructure software:
    • Oracle E-Business Suite and other ERP applications
    • Times Ten for real-time data management
    • Data hubs for customer and product master data management
    • Analytics that provide insight and customer intelligence
    • ContentDB, SpatialDB and RecordsDB for content management
    • Secure Enterprise Search for enterprise-wide search needs
  • Siebel CRM for larger competitive utilities’ call centers, customer order management, specialized contacts and strategic sales:
    • Comprehensive transactional, analytical and engagement CRM capabilities
    • Tailored industry solutions
    • Role-based customer intelligence and pre-built
  • Oracle’s AutoVue Enterprise Visualization Solutions:
    • Make business and technical documents easily accessible by all enterprise users
    • Expedite document reviews with built-in digital annotations and markups
    • Boost the value of your enterprise system with integrated Enterprise Visualization
  • Oracle’s Primavera Solutions:
    • Effectively manage and control the most complex projects and project portfolio
    • Deliver projects across generation, transmission and distribution, and new clean-energy ventures
    • Optimize a diminishing but highly skilled workforce

Stand-alone, each of these products meets utilities’ unique customer and service needs. Together, they enable multi-departmental business processes. The result is an unparalleled set of technologies that address utilities’ most pressing current and emerging issues.

The Vision

Cross-organizational business processes and best practices are key to addressing today’s complex challenges. Oracle Utilities provides the path via which utilities may:

  • Address the "green agenda:"
    • Help reduce pollution
    • Increase efficiency
    • Complete software suite to enable the smart grid
  • Advance customer care with:
    • Real-time 360-degree views of customer information
    • Tools to help customers save time and money
    • Introduce or retire products and services quickly, in response to emerging customer needs
  • Enhance revenue and operations management:
    • Avoid revenue leakage across end-to-end transactions
    • Increase the visibility and auditability of key business processes
    • Manage assets strategically
    • Bill for services and collect revenue cost-effectively
    • Increase field crew and network efficiency
    • Track and improve performance against goals
    • Achieve competitive advantage with a leading-edge infrastructure that helps utilities respond quickly to change
  • Reduce total cost of ownership through access to a single global vendor with:
    • Proven best-in-class utility management solutions
    • Comprehensive, world-class capabilities in applications and technology infrastructure
    • A global 24/7 distribution and support network with 7,000 service personnel
    • Over 14,000 software developers
    • Over 19,000 partners

Strategic Technology For Every Utility

Only Oracle powers the information-driven enterprise by offering a complete, integrated solution for every segment of the utilities industry – from generation and transmission to distribution and retail services. And when you run Oracle applications on Oracle technology, you speed implementation, optimize performance, and maximize ROI.

When it comes to handling innovations like daily or interval meter reading, installing, maintaining, and replacing plant and linear assets, providing accurate bills and supporting your contact center and more, Oracle Utilities is the solution of choice. Utilities succeed with Oracle. Oracle helps electric, gas, water and waste management meet today’s imperatives to do the following:

  • Help customers conserve energy and reduce carbon footprints
  • Keep energy affordable
  • Strengthen and secure communities’ economic foundation

Meeting the Challenges of the Future, Today

Utilities today need a suite of software applications and technology to serve as a robust springboard from which to meet the challenges of the future.

Oracle offers that suite.

Oracle Utilities solutions enable you to meet tomorrow’s customer needs while addressing the varying concerns of financial stakeholders, employees, communities, and governments. We work with you to address emerging issues and changing business conditions. We help you to evolve to take advantage of new technology directions and to incorporate innovation into ongoing activity.

Partnering with Oracle helps you to futureproof your utility.

Enabling Successful Business Outcomes Through Value-Based Client Relationships

Utilities are facing a host of challenges ranging from environmental concerns, aging infrastructure and systems, to Smart Grid technology and related program decisions. The future utility will be required to find effective solutions to these challenges, while continuing to meet the increasing expectations of newly empowered consumers. Cost management in addressing these challenges is important, but delivery of value is what truly balances efficiency with customer satisfaction.

Our Commitment

Vertex clients trust us to deliver on our promises and commitments, and they partner with us to generate new ideas that will secure their competitive advantage, while also delivering stakeholder benefits. Our innovative same-side-of-the-table approach allows us to transform the efficiency and effectiveness of your business operations, enabling you to lower your risk profile and enhance your reputation in the eyes of customers, investors and regulatory bodies. Working as partners, we provide unique insights that will generate actionable ideas and help you achieve new levels of operational excellence.

With a long heritage in the utility industry, Vertex possesses an in-depth knowledge and understanding of the issues and challenges facing utility businesses today. We actively develop insights and innovative ideas that allow us to work with our utility clients to transform their businesses, and we can enhance your future performance in terms of greater efficiencies, higher customer satisfaction, increased revenue and improved profitability.

Achievement of desired business outcomes is best achieved with a strategic, structured approach that leverages continuous improvement throughout. Vertex takes a four-level approach, which starts with asking the right questions. Levels 1 and 2 identify business challenges and the corresponding outcomes your utility hopes to achieve. Need to improve customer satisfaction? If so, is moving from the 2nd to 1st quartile the right target? Pinpointing the key business challenges that are limiting or impeding your success is critical. These may include a need to reduce bad debt, reduce costs, minimize billing errors, or improve CSR productivity. Whatever challenges you face, collaboration with our experts will ensure your utility is on the right track to meet or exceed your targets.

Once the challenges and outcomes have been identified and validated, Vertex partners with clients to develop effective solutions. The solutions implemented in Level 3 consist of unique value propositions that, when combined effectively, achieve the desired business outcome for the business challenge being addressed. Vertex’s proprietary “Value Creation Model” enables us to develop and implement solutions that provide measurable business results and ongoing quality assurance.

Inherent to the success of this model is the Vertex Transition Methodology, which has resulted in 200 successful transitions over a twelve-year period. Due diligence yields a clear understanding of how the business operates. Mobilizing activities lay the foundation for the transition, and a baseline for the transition plan is established. The plans developed during the planning stage are implemented, followed by a stabilization period from the business transfer to when things are fully operational.

Another key element of this model lies in Vertex’s transformation capabilities, and what we refer to as our “6D” transformation methodology. Dream, Define, Design, Develop, Deliver, Drive – our Lean Six Sigma methods guarantee successful deployment of continuous process improvement results. In addition to Lean Six Sigma, the Vertex Transformation Methodology includes change management, people and performance management, and project management.

In Level 4 of the Vertex solution approach, Vertex measures the effectiveness of a solution by determining if it achieved the desired business outcome. We utilize a Balanced Scorecard approach to ensure that the business outcome positively impacts all of the key elements of a client’s business: Customer, Employee, Operational, and Financial. As desired business outcomes evolve, Vertex will remain committed to adapting our solutions in partnership with our clients to meet these changing needs.

Transforming Your Organization

If you’re ready to transform to an outcomes- based business, Vertex has the capability to help. Our service lines include: Consulting and Transformation, IT Applications Services and Products, Debt Management, and Meter-to-Cash Outsourcing.

Our transformation approach blends innovation and business process improvement, focusing on achieving your strategic objectives via our proven expertise and insights. We bring business transformation that secures greater efficiencies, improved effectiveness and enhanced services for your organization. All the while we never forget that our employees represent your brand.

We’ll work collaboratively with you, rapidly implementing services and delivering on continuous improvement to meet your goals. We’ll build on your business needs, sharing ideas and jointly developing options for change – working together to deliver real value.

Empower Your Customers To Reduce Energy Demand

The Energy Information Administration (EIA) forecasts a continuing gap between total domestic energy production and consumption through 2030. This delta will not be closed by supply alone; customer behavior changes are needed to reduce total consumption and peak load. Electric and gas utilities face tremendous challenges meeting energy supply and demand needs and will play a pivotal role in determining practical solutions. With the right approach, utilities will deliver on the promise of energy efficiency and demand response.

Energy market projections are highly speculative as the market is characterized by high price volatility and rapid market transformation. Adding to the uncertainty is the voluntary nature of demand response and energy efficiency programs, and the critical importance of customer behavior change. Utilities are spending billions of dollars, making program penetration essential – and customer education paramount. At an end-point cost of up to $300, a five percent penetration is not the answer. Vertex can help mitigate these risks through highly effective management of customer care, CIS integration, pilot programs, and analytics. Vertex’s core “meter-to-cash” capabilities have undergone a major revolution in response to the new world of AMI, energy efficiency, and demand response. A robust set of new services will allow utilities to transform how they do business.

Smart meters put new demands on CIS platforms and traditional business processes – innovative rates, distributed generation, demand response and new customer programs all require creative change. Vertex is currently helping utilities develop and manage customer programs to fully exploit smart meter deployments and provide customer care to customers migrating to time-based rates. We deliver customer management services to drive penetration and designed to meet the unique customer care needs generated by smart meter installations, energy efficiency and demand response programs to empower customers to manage their energy use and reduce consumption, and cost-effective customer care and billing solutions to support smart meters.

Water utilities are not immune to the need for conservation. In the past 30 years, the U.S. population has grown over 50% while the total water use has tripled. On average, Americans use approximately 75 to 80 gallons of water per person per day. Vertex can help water utilities address the unique conservation challenges they face, including customer care and program support, MDMS solutions to organize data for forecasting, code enforcement, business and customer insight, and other services.

Case Study – Hydro One

Hydro One is an Ontario, Canada based utility that is one of the five largest transmission utilities in North America. As the stewards of critical provincial assets, Hydro One works with its industry partners to ensure that electricity can be delivered safely, reliably, and affordably to its customers. Vertex has been providing Meter-to-Cash outsourcing services to Hydro One since 2002.

Applying the Vertex 4-level solutions approach enabled desired business outcomes:

Level 1: Identify Business Challenges

In 2006 Hydro One approached Vertex and indicated that one of their corporate goals was to dramatically improve customer satisfaction as a result of the Hydro One customer satisfaction survey. At that point, Hydro One customer satisfaction scores on agent-handled calls had hovered in the 75-76% range for several years. Up to that time, the relationship with Vertex had focused on significant reductions to cost with no erosion to service offered to customers. Now, Hydro One was looking to Vertex to help lead the drive to improve the customer experience.

Level 2: Identify Desired Outcomes

In 2007 Vertex and Hydro One entered into collaborative discussions to evaluate and analyze the historical customer satisfaction scores, and to work jointly to develop a plan to radically modify the customer experience and improve customer satisfaction. Those discussions led down several paths, and the parties mutually agreed to target the following areas for change:

  • The Vertex/Hydro One Quality program
  • A cultural adjustment that would reflect the change in focus
  • Technology that could help support Hydro One’s goals
  • End-to-end process review

Level 3: Develop & Implement Solution

Vertex has worked closely with Hydro One to help them deliver on their goal of significant improvements to customer satisfaction. Changes were applied to process, call scripts, quality measures and performance scoring at all levels in the organization, including incentive compensation and recognition programs.

Level 4: Measure Solution Results

  • Customer satisfaction scores on agent-handled calls increased from 76% in 2006 to 86% in 2008
  • Quality monitoring program changes yielded a 10% increase in first-call resolution
  • Introduced bi-weekly Process/Quality forums
  • Monthly reviews with the client to reinforce success and progress toward targets

Thinking Smart

For more than 30 years, Newton- Evans Research Company has been studying the initial development and the embryonic and emergent stages of what the world now collectively terms the smart, or intelligent, grid. In so doing, our team has examined the technology behind the smart grid, the adoption and utilization rates of this technology bundle and the related market segments for more than a dozen or so major components of today’s – and tomorrow’s – intelligent grid.

This white paper contains information on eight of these key components of the smart grid: control systems, smart grid applications, substation automation programs, substation IEDs and devices, advanced metering infrastructure (AMI) and automated meter-reading devices (AMR), protection and control, distribution network automation and telecommunications infrastructure.

Keep in mind that there is a lot more to the smart grid equation than simply installing advanced metering devices and systems. A large AMI program may not even be the correct starting point for hundreds of the world’s utilities. Perhaps it should be a near-term upgrade to control center operations or to electronic device integration of the key substations, or an initial effort to deploy feeder automation or even a complete production and control (P&C) migration to digital relaying technology.

There simply is not a straightforward roadmap to show utilities how to develop a smart grid that is truly in that utility’s unique best interests. Rather, each utility must endeavor to take a step back and evaluate, analyze and plan for its smart grid future based on its (and its various stakeholders’) mission, its role, its financial and human resource limitations and its current investment in modern grid infrastructure and automation systems and equipment.

There are multiple aspects of smart grid development, some of which involve administrative as well as operational components of an electric power utility, and include IT involvement as well as operations and engineering; administrative management of customer information systems (CIS) and geographic information systems (GIS) as well as control center and dispatching operation of distribution and outage management systems (DMS and OMS); substation automation as well as true field automation; third-party services as well as in-house commitment; and of course, smart metering at all levels.

Space Station

I have often compared the evolution of the smart grid to the iterative process of building the international space station: a long-term strategy, a flexible planning environment, responsive changes incorporated into the plan as technology develops and matures, properly phased. What function we might need is really that of a skilled smart grid architect to oversee the increasingly complex duties of an effective systems planning organization within the utility organization.

All of these soon-to-be-interrelated activities need to be viewed in light of the value they add to operational effectiveness and operating efficiencies as well as the effect of their involvement with one another. If the utility has not yet done so, it must strive to adopt a systems-wide approach to problem solving for any one grid-related investment strategy. Decisions made for one aspect of control and automation will have an impact on other components, based on the accumulated 40 years of utility operational insights gained in the digital age.

No utility can today afford to play whack-a-mole with its approach to the intelligent grid and related investments, isolating and solving one problem while inadvertently creating another larger or more costly problem elsewhere because of limited visibility and “quick fix” decision making.

As these smart grid building blocks are put into service, as they become integrated and are made accessible remotely, the overall smart grid necessarily becomes more complex, more communications-centric and more reliant on sensor-based field developments.

In some sense, it reminds one of building the space station. It takes time. The process is iterative. One component follows another, with planning on a system-wide basis. There are no quick solutions. Everything must be very systematically approached from the outset.

Buckets of Spending

We often tackle questions about the buckets of spending for smart grid implementations. This is the trigger for the supply side of the smart grid equation. Suppliers are capable of developing, and will make the required R&D investment in, any aspect of transmission and distribution network product development – if favorable market conditions exist or if market outlooks can be supported with field research. Hundreds of major electric power utilities from around the world have already contributed substantially to our ongoing studies of smart grid components.

In looking at the operational/engineering components of smart grid developments, centering on the physical grid itself (whether a transmission grid, a distribution grid or both), one must include what today comprises P&C, feeder and switch automation, control center-based systems, substation measurement and automation systems, and other significant distribution automation activities.

On the IT and administrative side of smart grid development, one has to include the upgrades that will definitely be required in the near- or mid-term, including CIS, GIS, OMS and wide area communications infrastructure required as the foundation for automatic metering. Based on our internal estimates and those of others, spending for grid automation is pegged for 2008 at or slightly above $1 billion nationwide and will approach $3.5 billion globally. When (if) we add in annual spending for CIS, GIS, meter data management and communications infrastructure developments, several additional billions of dollars become part of the overall smart grid pie.

In a new question included in the 2008 Newton-Evans survey of control center managers, these officials were asked to check the two most important components of near-term (2008-2010) work on the intelligent grid. A total of 136 North American utilities and nearly 100 international utilities provided their comments by indicating their two most important efforts during the planning horizon.

On a summary basis, AMI led in mentions from 48 percent of the group. EMS/ SCADA investments in upgrades, new applications, interfaces et al was next, mentioned by 42 percent of the group. Distribution automation was cited by 35 percent as well.

Spending Outlook

The financial environment and economic outlook do not bode well for many segments of the national and global economies. One question we have continuously been asked well into this year is whether the electric power industry will suffer the fate of other industries and significantly scale back planned spending on T&D automation because of possible revenue erosion given the slowdown and fallout from this year’s difficult industrial and commercial environments.

Let’s first take a summary look at each of the five major components of T&D automation because these all are part and parcel of the operations/engineering view of the smart grid of the future.

Control Systems Outlook: Driven by SCADA-like systems and including energy management systems and distribution management software, this segment of the market is hovering around the $500 million mark on a global scale – excluding the values of turn-key control center projects (engineering, procurement and construction (EPC) of new control center facilities and communications infrastructure). We see neither growth nor erosion in this market for the near-term, with some up-tick in spending for new applications software and better visualization tools to compensate for the “aging” of installed systems. While not a control center-based system, outage management is a closely aligned technology development, and will continue to take hold in the global market. Sales of OMS software and platforms are already approaching the $100 million mark led by the likes of Oracle Utilities, Intergraph and MilSoft.

Substation Automation and Integration Programs: The market for substation IEDs, for new communications implementations and for integration efforts has grown to nearly $500 million. Multiyear programs aimed at upgrading, integrating and automating the existing global base of about a quarter million or so transmission and primary distribution substations have been underway for some time. Some programs have been launched in 2008 that will continue into 2011. We see a continuation of the growth in spending for critical substation A&I programs, albeit 2009 will likely see the slowest rate of growth in several years (less than 3 percent) if the current economic malaise holds up through the year. Continuing emphasis will be on HV transmission substations as the first priority for upgrades and addition of more intelligent electronic devices.

AMI/AMR: This is the lynchpin for the smart grid in the eyes of many industry observers, utility officials and perhaps most importantly, regulators at the state and federal levels of the U.S., Canada, Australia and throughout Western Europe. With nearly 1.5 billion electricity meters installed around the world, and about 93 percent being electro-mechanical, interest in smart metering can also be found in dozens of other countries, including Indonesia, Russia, Honduras, Malaysia, Australia, and Thailand. Another form of smart meters, the prepayment meter, is taking hold in some of the developing nations of the world. The combined resources of Itron, coupled with its Actaris acquisition, make this U.S. firm the global share leader in sales and installations of AMI and AMR systems and meters.

Protection and Control: The global market for protective relays, the foundation for P&C has climbed well above $1.5 billion. Will 2009 see a drop in spending for protective relays? Not likely, as these devices continue to expand in capabilities, and undertake additional functions (sequence of event recording, fault recording and analysis, and even acting as a remote terminal unit). To the surprise of many, there is still a substantial amount (perhaps as much as $125 million) being spent annually for electro-mechanical relays nearly 20 years into the digital relay era. The North American leader in protective relay sales to utilities is SEL, while GE Multilin continues to hold a leading share in industrial markets.

Distribution Automation: Today, when we discuss distribution automation, the topic can encompass any and all aspects of a distribution network automation scheme, from the control center-based SCADA and distribution management system on out to the substation, where RTUs, PLCs, power meters, digital relays, bay controllers and a myriad of communicating devices now help operate, monitor and control power flow and measurement in the medium voltage ranges.

Nonetheless, it is beyond the substation fence, reaching further down into the primary and secondary network, where we find reclosers, capacitors, pole top RTUs, automated overhead switches, automated feeders, line reclosers and associated smart controls. These are the new smart devices that comprise the basic building blocks for distribution automation. The objective will be achieved with the ability to detect and isolate faults at the feeder level, and enable ever faster service restoration. With spending approaching $1 billion worldwide, DA implementations will continue to expand over the coming decade, nearing $2.6 billion in annual spending by 2018.

Summary

The T&D automation market and the smart grid market will not go away this year, nor will it shrink. When telecommunications infrastructure developments are included, about $5 billion will have been spent in 2008 for global T&D automation programs. When AMI programs are adding into the mix, the total exceeds $7 billion. T&D automation spending growth will likely be subdued, perhaps into 2010. However, the overall market for T&D automation is likely to be propped up to remain at or near current levels of spending for 2009 and into 2010, benefiting from the continued regulatory-driven momentum for AMI/ AMR, renewable portfolio standards and demand response initiatives. By 2011, we should once again see healthier capital expenditure budgets, prompting overall T&D automation spending to reach about $6 billion annually. Over the 2008-2018 periods, we anticipate more than $75 billion in cumulative smart grid expenditures.

Expenditure Outlook

Newton-Evans staff has examined the current outlook for smart grid-related expenditures and has made a serious attempt to avoid double counting potential revenues from all of the components of information systems spending and the emerging smart grid sector of utility investment.

While the enterprise-wide IT portions (blue and red segments) of Figure 1 include all major components of IT (hardware, software, services and staffing), the “pure” smart grid components tend to be primarily in hardware, in our view. Significant overlap with both administrative and operational IT supporting infrastructure is a vital component for all smart grid programs underway at this time.

Between “traditional IT” and the evolving smart grid components, nearly $25 billion will likely be spent this year by the world’s electric utilities. Nearly one-third of all 2009 information technology investments will be “smart grid” related.

By 2013, the total value of the various pie segments is expected to increase substantially, with “smart grid” spending possibly exceeding $12 billion. While this amount is generally understood to be conservative, and somewhat lower than smart grid spending totals forecasted by other firms, we will stand by our forecasts, based on 31 years of research history with electric power industry automation and IT topics.

Some industry sources may include the total value of T&D capital spending in their smart grid outlook.

But that portion of the market is already approaching $100 billion globally, and will likely top $120 billion by 2013. Much of that market would go on whether or not a smart grid is involved. Clearly, all new procurements of infrastructure equipment will be made with an eye to including as much smart content as is available from the manufacturers and integrators.

What we are limiting our definition to is edge investment, the components of the 21st century digital transport and delivery systems being added on or incorporated into the building blocks (power transformers lines, switchgear, etc.) of electric power transmission and delivery.

Customer Relationships and the Economy

A little over a year ago, the challenges facing the global energy and utilities market were driving a significant wedge between utilities and their customers. In Western European markets, price increases across gas, electricity and water, combined with increased corporate earnings, left many utilities in the uncomfortable position of being seen as profiteering from customers unable to change suppliers for significant benefit.

Headline-makers had a field day, with gross simplification of the many utilities’ business models. They made claims about “obscene profits,” while citing the “long-suffering” consumer position [1]. Now, more than a year later, gas and electricity prices are falling, but the severity and pace of the wider economic downturn has given no time for utilities to re-position themselves with customers. Brand and relationship-enhancing programs such as smart metering and energy efficiency are still largely in their infancy.

The evolving relationship with the customer base, where customer expectations are resulting in a more participatory, multi-channel engagement, comes at a time when the evolution of smart networks and metering solutions are on the cusp of driving down cost to serve and improving service levels and options. Significant benefits accrue from consumption measurement and management capabilities. Benefits also result from the opportunity to transform the consumer relationship by pushing into new areas such as home device management, more personalised tariffs and easier debt arrangements. The position for utilities, therefore, should be favourable – finally being seen as working on a more participatory relationship with their customers.

For consumers, the consequences of recession include an increased pressure on household spending. In competitive markets, there could be increased churn as the ever-changing “best-buys” attract customers. For utilities, increased churn rates are obviously bad news – the cost of new customer acquisition often wipes out profit associated with consumption by that customer for months, even years. Moreover, while utilities are working on marketing the best deals to acquire and retain customers – and on piloting smart technologies in the home – consumers’ familiarity with new technologies and their allegiance to some brands presents an opportunity for third parties to gain greater hold on the customer relationship.

Take the case of smart metering, for example, where many utilities are engaging upon pilot and larger rollouts. This is an area of innovation that should deliver benefits to both consumers and utilities. The assured business benefits to the utility companies come not only from applying the technology to lower operational costs, but also from enhancing their brand and customer service reputation. To the customer, smart technologies offer consumption details in an understandable form and give the promise of accurate commodity billing.

The risk is that the potentially lucrative relationship between customer and utility is currently damaged to a point where telecommunications providers, retailers or technology companies could step in with attractive, multi-service offerings. That could relegate the utility to simple supply activities, unable to gain a significant hold in home engagement. Certainly, utilities will still witness savings from automated meter reading and improved billing accuracy, but this commoditisation path for the utility company will limit profitable growth and push them further away from customers. Combine this with increased churn, and suddenly the benefits of smart technology deployment could be wiped out for the utility company.

This is not just an issue associated with smart technologies – the entire customer relationship journey with a utility is under threat from non-utility entrants (See Figure 1). Consider the area of consumer marketing and sign-up. Third parties that simply market other companies’ services have already taken a position in this part of the customer journey by providing Internet sites that allow tariff comparison and online switching of suppliers. The brand awareness of the comparison sites has already begun to gain the trust of the customer and the utility brand becomes more remote – the start of an uneasy decline. Additionally, in receiving fees for bringing customers to utilities, these companies thrive on churn – driving up utility cost and driving an even greater gap into the consumer-utility relationship.

Further credence to the challenges comes in the areas around presentation of information to customers. Any utility information channel will demand attention to “stickiness” when using technology such as the Internet for displaying utility bills and consumption data. This information has to be pushed to consumers in an attractive, understandable, and above all, personal format. Does the traditional utility information quality and flow have enough appeal for the average consumer to repeatedly view over time? It could be argued that third parties have the ability to blend in more diverse information to improve stickiness on, for example, handheld devices that give the consumer other benefits such as telephony, traffic and weather updates.

Customer Experience Risks

Traditionally, utilities are seen as relatively “recession proof,” operating on longer- term cycles than financial and retail markets. It is this long-term view that, coupled with an already disjointed customer relationship, poses a significant risk to utilities in the next two years. Customers will react in the competitive markets to the feeling of being “cornered” in an environment where few utilities truly differentiate themselves on customer service, product, tariff or brand. Research suggests that consumers are driving change in the relationship with their utilities, and it is this change that opens up opportunity for others (“Plugging in the Consumer”, IBM Institute for Business Value, 2007).

Reaction may not come soon; rarely do new entrants come into a recessionary market. But the potential for non-utilities to begin exploiting the gap between customer and utility should be cause for concern.

The parallel of these changes and risks was seen in the telco landline market over the last two decades. Several of the big, former-monopoly landline carriers are now perceived as commodity bandwidth providers, with declining core customer numbers and often-difficult regulatory challenges. Newer, more agile companies have stepped into the role of “owning” the consumer relationship and are tailoring the commodities into appealing packages. The underlying services may still come from the former-monopoly, but the customer relationship is now skewing toward the new entrant.

There are strategies that can be proactively deployed, individually or in combination, that improve the resilience of a utility through a recession, and that indeed redraw the client relationship to the point where profitability can increase without attracting the appearance of excess. These strategies resist the potential demise of the utilities to commodity providers, allowing for a value-add future based on their pervasive presence in the home.

The five steps outlined below revolve around the need to focus on the fundamentals, namely customer relationships and cash:

  1. Know Your Customer. Like most companies, utilities can benefit greatly by knowing more about customers. By engaging upon a strategy of ongoing information collection, customer segmentation and profitability analysis, plans can be put in place to detect and react to customer attrition risks. This includes early identification of changes to a customer’s circumstances, such as the ability to settle debt, allowing the utility to work proactively with the customer to address the issue. An active relationship style will show consumers that utilities care and understand, increasing brand loyalty, and hence, lowering the cost to serve.
  2. Free Up Locked Cash. Although recession-resistant in the short-term, identifying organic sources of improved cash flow can be an important source of funding for utilities that need to invest in improving customer relationships and capabilities. Industry benchmarks indicate that most utilities have opportunities to plug leaks in their working capital processes, with the potential of tapping into a significant and accessible source of free cash flow. For example, consider the traditionally neglected, under-invested area of consumer debt. With the economic downturn, debt levels are likely to rise, and, if unchecked, costs and cash flow will be adversely impacted.

    Focus areas for addressing the issue and freeing up locked cash include:

    • Using process management techniques such as activity-based management or Lean Six Sigma to identify opportunities for performance improvement across the billing, collections and credit-management processes;
    • Focusing on developing the skills and operational structures required to better integrate the meter to cash functions; and
    • Optimizing the use of utility-specific debt tools that work with the core systems.

Additionally, gaining insights through precision analytics to better manage debt functions – similar to best practices in banking and telecommunications – needs to be accelerated.

  1. Focus on the Future. Cost cutting is inevitable by many companies in this economic environment. It is important to understand the medium-to-long-term impact of any cuts on the customer relationship to determine if they could hurt profitability by increasing churn and related cost-to-serve metrics. Thus, utilities must achieve a clear understanding of their baseline performance, and have a predictive decision-making capability that delivers accurate, real-time insights so they can be confident that any actions taken will yield the best results.
  2. Innovate. Utilities traditionally work on longer investment cycles than many other businesses. When compared to consumer-facing industries, that can result in consumer perception that they are lacking innovation. Many consumers readily accept new offerings from retailers, telcos and technology firms, and the promise of a smart home will clearly be of strong commercial interest to these individuals. That’s why utilities must act now to show how they are changing, innovating for the future and putting control into the hands of the consumer. Smart metering programs will help the utilities reposition themselves as innovators. The key will be to use technology in a manner that bonds the customer better with the utility.
  3. Agility is King. Longer investment cycles in the utility sector, combined with the massive scale of operations and investment, often restrict a utilities’ ability to be agile in their business models. The long-term future of many utilities will depend upon being able to react to new consumer, technology and regulatory demands within short timescales. Innovation is only innovative for a short time – businesses need to be ready to embrace and exploit innovation with new business models.

Take Action Now

Many will argue that the current utility programs of change, such as core system replacement, smart metering and improving customer offerings, will be enough to sustain and even enhance the customer relationship. The real benefit, however, will be from building upon the change, moving into new products, delivering personalized services and tariffs, and demonstrating an understanding of individual consumer needs.

Still, utilities may struggle to capture discretionary spending from customers ahead of telcos, retailers, financial firms and others. Simply put, action needs to be taken now to prevent the loss of long-term customer relationships. For utilities, doing more of the same in this dynamic and changing market may simply not be good enough!

References:

  1. Multiple references, especially in the British press, including this one from Energy Saving Trust: http://www.energysavingtrust.org.uk/Resources/Daily-news/Gas-and-Electricity/Probe-demanded-into-energy-rip-off/(energysavingtrust)/20792

Be a People Person

I have to admit it. Despite all the exciting new technologies out there, I am finding myself to be a people person when it comes to building smarter grids and more intelligent utilities. Granted, technology is rapidly developing and the utility industry is finding itself in the middle of more and more automation. However, people – from linemen to consumers – will remain critical components for delivering information-enabled energy.

In the many conversations I have with utilities and other industry thought leaders, we often start out talking about smart technology, but eventually our chats settle on people. People can ultimately make or break even the most promising technologies – from personnel and consumers adopting and using the technology to executives driving technology investments. So, in a world buzzing with new technologies, it is important to reacquaint ourselves with people. This article traces some of my conversations about what an intelligent utility is, how people fit in – both on the consumer and utility personnel side – and what the utility industry can do to better involve people. As is my usual style, I will serve up these critical subjects with a side of humor and perspectives outside the utility industry. So be prepared to learn more about yoga, Nashville, crystal balls and the telecom industry, too.

What Is An Intelligent Utility ?

Before understanding the importance of people, let’s take a moment to understand where people fit into smart grids and intelligent utilities. Utilities are no longer exempt from change. From economic stimulus plans to carbon controls, to the impending electric vehicle flood, we must face the fact that the utility industry will undergo significant changes in the coming years, months and even minutes. Now, it is not so much a question of what changes will happen, but how – and how well – will the utility industry adapt to these changes?

A frequent answer to this question has been a “smart grid,” but most smart grid discussions inevitably lead to these questions:

  • How do we get to a smart grid?
  • When do we know when we are there?
  • What is a smart grid anyway?

These are not easy questions. Many groups define the smart grid, but how can you tell when a utility has one? Better understanding this challenge requires an unusual, but useful comparison: Nashville and Nirodha – a state of mind in yoga. Let’s say you are traveling to Nashville. You would see landmarks that you could only find in Nashville, such as the Grand Ole Opry, B.B. King’s Blues Club and the Bell- South Tower. Smart grid landmarks, however, are harder to come by. Utilities can install smart meters and other smart sensors on their grid, but having these technologies does not necessarily mean they have arrived at a smart grid. To add to the confusion, other smart grid components, such as demand response, distribution automation and more advanced metering, have already been around for years.

Although such technologies can support a smarter grid, the smart grid is more than just acquiring certain technology landmarks. So, although it is a nice place, you shouldn’t just think Nashville when you think smart grid. Think Nirodha. For those of you who aren’t yoga enthusiasts, Nirodha is a state of mind in yoga in which you become more focused and aware of an object. In the case of a utility, the object is primarily the transmission and distribution network. As a utility becomes more aware and ultimately more knowledgeable about its network, it can make better decisions about its operation.

Furthermore, as a company builds more knowledge about its grid, it develops not only a smarter grid, but also a more intelligent utility. An intelligent utility overlays information on energy that goes beyond the transmission and distribution network all the way from generation to end users, maximizing its reliability, affordability and sustainability. Essentially, utilities are delivering information-enabled energy. And technology is just one piece for delivering this sort of energy. Here is a quick run-down of the key components in an intelligent utility:

  • Process & technology: Utility objectives and their impact on business process change and smart technology deployment;
  • Economic models: The challenges and opportunities of new paradigms. So this is not just the changes involved with upgrading a technology – like a customer information or geographic information system – but the changes from initiatives like electrifying transportation and microgrids that could radically alter utility companies and the roles of generators and consumers;
  • Finance: Investment trends associated with smart technologies;
  • Public policy: The impact of politics on energy – including efforts by regulators and legislators. These groups ultimately set up the framework that determines whether and how intelligent initiatives move forward; and
  • People: The knowledge, skills and abilities required for both the workforce and consumers in an information-enabled environment.

Involving Workforce

The rest of this article will take a little bit closer look at the last component – people. As we move toward information-enabled energy, the utility workforce will undergo some significant changes – from new job titles, to new knowledge, skills and abilities (KSAs), to new people joining utility companies from other industries.

Ryan Cook, vice president of the employment services division at Energy Central, has pointed out that “In today’s utilities, employee KSAs are based primarily on providing electrical power as a product. These KSAs support the rules-based, process-oriented, functionally structured, and cost-focused business needs of today’s utility. In the future, however, there will be a massive paradigm shift from providing just a product to providing customers with customizable services and solutions for their unique energy needs. The result will be a shift toward KSAs that support a more agile, innovative, collaborative, cross-functional, service-oriented utility of the future. Employees will need to deal with constantly evolving technology.”

So, digitizing the grid will change personnel needs. We know that much, but the big unknown is how exactly will those needs change? And where is a good crystal ball when you need one? Since my snow globe wasn’t working, I thought about other industries that have gone through a digital revolution, which brought me to the telecom and cable industry. I learned much from Alan Babcock, president of Broadband Training Associates. As this industry digitized its grid over the last 13 years and began to focus more on services as opposed to products, it saw significant workforce changes – touching everyone from field crews, to executives, to marketing folks – that could happen to the utility industry as well.

Out In the Field

Before digitizing the telecom and cable industry, many field crews were still pencil and paper, and some still are today. But digitization changes weren’t just about figuring out how to use a truck-mounted laptop. The workforce has a whole new job to do today. In particular, they now have to troubleshoot new problems on multiple services in the network and become experts at devices on an end user’s premise.

Before digitization, field crews dealt with one service – like video in the cable industry – but now they have to balance multiple services in the same network, including voice, data and video. The decisions you make for one service will ultimately impact the others. So, with multiple services, it changes how you do regular maintenance, how you troubleshoot networks, and how you take the network down to make repairs. On top of that, technicians may not be able to take down certain parts of the network because of service level agreements with customers.

Besides dealing with multiple services, field crews have to better understand the devices that extend into customer premises – including modems for Internet or set-top boxes for cable. It can be embarrassing for a telecom or cable company when the consumer knows more about consumer devices than the technician.

Back In the Office

Digitizing the network not only changed KSAs for field crews, but has changed things in the back office of telecom and cable companies as well. These changes occurred in the areas of marketing, customer service, planning and IT.

  • Marketing to customers: Digitization provides cable and telecom companies with increased visibility into the customer premises. This is not only helpful with determining whether customers have service, but also understanding their entertainment preferences. These companies now better understand what entertainment you watch and when you watch it. Ultimately, they have a lot of information at their disposal to be able to better market to you. Telecom companies, however, weren’t traditionally in the entertainment industry, so better marketing to consumers required a new group of employees from outside telecom.
  • Customer service: Customer service has changed in many ways with the digitization of the telecom and cable industry. With a smarter grid, the utility industry often focuses on benefits that it will bring to the customer representatives in terms of access to more information, but there are other benefits to consider as well. An interesting twist in the telecom and cable industry is that as the network gets more complex, a customer service agent’s job gets somewhat simpler. Essentially, customer service representatives have to recall fewer technical details about the network than they did before. It is not as important that they understand how the networks function because they have better visibility into the premise and have more intelligent systems to walk them through trouble-shooting problems.
  • Capital and strategic planning: Digitization has changed the planning time horizon and knowledge requirements for telecom and cable executives. They must factor in the dizzying technology advancements in the industry; think about the rapid movement from 2G to 3G to 4G networks and beyond. The five-year plan now has to be the three-year plan. From a planning standpoint, they also need to better understand the networks in order to figure out how to best utilize and benefit from services that are enabled by those networks.
  • Designing and maintaining IT systems: Aside from learning how to design and maintain new technologies and systems, the technology personnel in telecom and the cable industry have learned some important lessons as they digitize the networks. The first is to more carefully consider the usefulness of new technologies. If a new technology comes along, it doesn’t mean that it has to be used. If a new technology does make sense to use, technology personnel need to consider the human aspects involved with making that change, including change management and making sure the technology is ready when people actually begin using it.

Involving Customers

Not only will the intelligent utility impact its own personnel, but it will impact consumers as well. In particular, utilities will have to help consumers to understand the value of changes and get them to participate in intelligent initiatives.

As I am sure many of you have realized from conversations with friends and family, many people do not understand smart grid benefits or even how the grid really works. Although more people are starting to realize the value, a key challenge is how to get consumers to grasp these concepts and support a smarter grid and more intelligent utility. Utilities have to figure out how to make these things real for people – and are finding many ways to do that. As one utility executive pointed out, “A technology center served to convince our community stakeholders and our PUC that this appears to be a worthwhile journey. The awareness to the consumer was a tremendous value. They were able to start thinking of the value of what we’re trying to build rather than what we’re trying to build.”

Many intelligent initiatives, from demand response to real-time pricing, focus on the end user and require some level of consumer effort. Consumer participation is key for success, but utilities are finding it challenging to get participation. Solutions range from more automation in controlling household appliances and HVAC systems to competition between neighbors regarding energy consumption, but there is still much work to be done in this area, depending on consumer demographics.

Be A People Person

It is easy to get caught up in the technology hype, but as the examples above demonstrate, it is important to keep people in the equation when looking at smart initiatives. People play a key role in determining their success or failure. By preparing for the people factor and considering them in smart initiatives, utilities can better ensure the adoption and success of new technologies and processes.

Best Practices to Help Billers Drive Consumer Adoption of Paperless E-Bills

Executive Summary

With rising costs that threaten to erode profit margins, billing organizations are constantly looking for ways to decrease expenditures without sacrificing customer satisfaction. Companies that incur significant expenses associated with the delivery of recurring bills are fully aware of the cost savings to be had by offering e-bills (electronic representations of bills) in lieu of the traditional paper bills. This white paper is intended to be thought-provoking and offer ideas and considerations for driving paperless adoption. It will discuss best practices, what to look for in an electronic billing and payment (EBP) provider, and suggestions for creating a business case for e-bills.

Every interaction with your customers is an opportunity to strengthen relationships and maximize business profitability. Billing and payment touch points are ideal interactions because they command consumers’ attention every month. The key is to meet consumers where they choose to view and pay your bill and strategically guide them to low-cost channels, beginning with online payments and ultimately paperless billing.

Many billing organizations have aggressive paper suppression goals as part of an overall cost-savings initiative. A well thought-out strategy with a strong understanding of consumer preferences is necessary to maximize consumer adoption of paperless billing. This white paper will help billing organizations reach their paperless goals by highlighting best practices such as implementing the best EBP user interface and customer experience, utilizing a multi-channel approach, deploying effective marketing tactics and other innovative tactics.

Best Practice #1: Choose the Right EBP Solution

It is important to understand customer preferences in order to meet their payment needs while also guiding them from online payment to paperless billing. You want a user-friendly EBP solution that allows you to optimize every customer interaction and supports your paperless billing initiative.

Here are several best practices for creating an effective EBP experience at your site:

Enrollment – It should be very easy for consumers to find where to enroll on your site and the process should be painless. Don’t make it an obstacle. The information needed to enroll should be readily available to the consumer and should be limited to only that which is needed to meet your company’s security standards for validating a consumer’s identity. Minimizing the number of required fields decreases the opportunity for data entry errors that lead to frustration and abandonment from your site. It’s also important to make e-bill enrollment available through offline channels as well. Have your customer service reps offer to enroll customers while on the phone. If you have a location that customers visit in person, enable enrollment in these locations as well. Better yet, consider moving the enrollment process to the time of activation with your company so all new customers will be paperless.

User Interface – Customer experience at your site is paramount. Your EBP application should be customizable to match the look, feel and branding of your website to avoid confusing users with a disjointed process. The user interface (UI), if designed correctly, can play a leading role in creating a positive customer experience and driving e-bill adoption. The most important best practice to help drive paperless adoption is to continually educate consumers on what an e-bill is and the many personal and environmental benefits. The UI should be designed in such a way that e-bill messaging is prominent and eye-catching. In addition to repeatedly defining an e-bill and explaining its benefits throughout your site, include a thumbnail picture of your e-bill to help users make a direct association between the paper bill and the e-bill.

There are other ways your user interface can help drive paperless billing at your website, so make sure your EBP solution is capable of the following:

  • Allows and encourages customers to turn paper bills off and on at their discretion from your website. With a highly visible paper bill status indicator on your website, consumers get the comfort, choice and control they are looking for. This will eliminate calls to your call center requesting to turn paper bills off and on.
  • Offers various ways to answer questions about bill payment and presentment with easy-to-find help text. Make sure the help text appears on the EBP pages so the user doesn’t have to leave the page or interrupt a task to search for help.

EBP Functionality – A rich customer experience can have a significant impact on driving more consumers online. You can facilitate customers’ use of your online channel and ultimately paperless billing by implementing a user-tested application that meets their needs. Based on consumer feedback, you should consider the following best practices:

  • Offer real-time information so users can view their bill summary immediately after enrollment
  • Develop functionality that seamlessly integrates into your current website so customers don’t have to log in separately to view and pay bills
  • Display bill presentment and payment within the website without pop-up windows
  • Provide customers the flexibility to choose their preferred payment method (scheduled, one-time, recurring, Auto Pay) and their preferred funding source (checking account, credit card, debit card)
  • Present e-bill as a mirror image of the paper bill to ensure a smooth transition to your electronic version
  • Enable billing-related notifications via multiple channels like e-mail or text messages
  • Store a sufficient amount of bill history with quick and easy retrieval capabilities

Best Practice #2: Consider a Multi-Channel Approach To Distribute Your e-Bills

New technologies have changed the way consumers choose to pay bills. While more than 51 percent of U.S. online bill payers use biller direct sites, 25 percent prefer the convenience of single bill pay sites1 and that segment is expected to continue growing. Forrester predicts that bank EBP growth rates will be close to twice that of biller sites through 20112 and TowerGroup estimates a bank EBP compounded annual growth rate of 24 percent through 2012.3 Therefore, in order to meet all your consumers at their preferred payment channels, you need to make your e-bills available at bank and financial websites in addition to your biller direct site.

Only 17 percent of U.S. billing organizations have not identified the bank channel as important to their online billing strategy, while the other 83 percent have already begun utilizing the consolidated channel and plan to continue doing so in the future.4 The days of viewing bank websites as your competition are long gone. Complementing your biller direct site with e-bill presentment in the bank channel is the way to meet all your online consumers at their payment point of preference.

You will not lose cross-sell and up-sell opportunities at your site because approximately two thirds of e-bill recipients visit their biller’s website for self-service or last-minute payment activities.1 Instead, you gain the opportunity to increase your paperless adoption rates.

The same study states that consumers who pay bills at bank sites have a higher propensity to go paperless. The data shows that in 2007, the percentage of consumers who opted for paperless bills at their bank site is double that of consumers choosing paperless at biller direct sites. When a large national insurance company began delivering its bills electronically to banks and financial institutions in January of 2008, they grew enrollments by 85,000 enrollments in the first three months alone. This is an example of the success to be achieved by distributing e-bills to banks and financial institutions.

With every paper bill turned off, you save on all the expenses of mailing bills: paper, printing, mailing envelopes, return envelopes, handling and postage, but the savings don’t stop there. Many of the large banks and financial institutions aggressively promote the availability of billers’ e-bills. You can benefit from all the e-bill marketing messages directed to your customers at no cost to you.

In addition to cost savings, distributing your e-bills to bank and financial institution websites will improve customer satisfaction and retention. According to CheckFree Consumer Insights data, 27 percent of consumers who receive a biller’s e-bills at their home banking site are more satisfied with that biller and 33 percent are more loyal.1 Unfortunately, the converse may also be true. Consumers who are already paying bills at their home banking site will be dissatisfied with your company if your e-bill is not available where they prefer to view and pay bills.

Distribution of your bills electronically to banks and financial institutions is the perfect complement to your own biller direct site. It is an essential part of any EBP strategy because it is the only way to give consumers the option of paperless billing from their home banking site. By delivering your e-bills to the bank channel, you can satisfy consumers’ needs at their payment point of preference while making headway on your paper adoption goals. It is a win-win for you and your customers.

Best Practice #3: Marketing and Promoting e-Bills

Once you have an easy, user-friendly e-bill program, the next step is to create a marketing campaign to drive awareness and guide customers from their current paper-based bill pay routine to online billing. Craft a clear, concise, actionable message and continually promote it through multiple consumer touch points. The message should include an explanation of what an e-bill is and the many advantages over the traditional paper bill. Emphasize specific consumer benefits (reduces risk of identity fraud, reduces clutter, simplifies bill management, saves time) and the environmental impact (reduces paper, saves trees and conserves energy).

Many companies have seen great success by educating consumers on the positive environmental impact of paperless billing as a way to drive e-bill adoption. According to a survey by CheckFree Consumer Insights, 48 percent of consumers cited, “It’s better for the environment,” as the top reason for choosing paperless billing. Consider a similar approach and direct proceeds to a local charitable organization to give customers an opportunity to make a difference within their own community.

Another marketing approach that has proven successful is offering sweepstakes incentives to enroll in e-bills. Con Edison of New York has used this approach by offering prizes such as MacBook®
computers and ENERGY STAR room air conditioners. Its most recent sweepstakes offered the chance to win an Apple®
iPhone™. The results were great; e-bill adoption increased 48 percent over the same period the prior year.

Whether your message focuses on the environment, convenience or both, use it to promote your e-bill service at every possible consumer touch point in an ongoing campaign. The following are steps you can take quickly and inexpensively:

  • Print a targeted message on consumer bills and return envelopes
  • Announce your campaign through a companysponsored press release
  • Display dynamic e-bill messaging prominently throughout your website
  • Include a thumbnail image of your e-bill to provide a visual reference for consumers
  • Incorporate an e-bill message in your on-hold recording
  • Have your customer service representatives promote e-bills over the phone and in person
  • Present the electronic bill as a mirror image of the paper bill to ensure a smooth transition to your electronic version
  • Dedicate a section to e-bills in your customer newsletter
  • Create a specific e-bill communication delivered via e-mail
  • Supplement your own consumer education efforts with tools such as PayItGreen.org and eBILLPLACE.com

Make every effort to find an internal executive champion for your marketing ideas and remember that the most successful campaigns are those that are comprehensive, ubiquitous and ongoing.

Best Practice #4: Utilize Innovative Tactics

In spite of all your communication efforts, some consumers may still not be comfortable with the idea of giving up their paper bill because it serves as a physical reminder of a due payment or for recordkeeping purposes. There are many who still don’t understand what an e-bill is or how it works. To combat the education and awareness barriers, take the opportunity to think and act outside the box. Here are three examples of successful innovative tactics:

1. Give Consumers Control of E-Bills at Bank Websites
In 2008, 45 percent of e-bill viewers said that the ability to turn on their paper bill at anytime would make them more willing to suppress their paper versions.1 The idea of going paperless becomes more attractive when the consumer is given choice and control. Earlier in this paper, it was recommended to choose an EBP solution that enables customers to turn their paper bills on and off from your biller direct site. Now, consider going one step further and create the same sense of control for your customers at consolidated sites by enabling an e-bill trial period. (This is only possible if you are already delivering your e-bills to bank and financial institution websites.) A trial period gives consumers two options: 1) Sign up for paperless e-bills or 2) Enter an e-bill trial period to become familiar with e-bills while the paper bill remains. Verizon Communications implemented this tactic and saw a 10 percent increase in e-bill activations, and almost 50 percent of customers presented with the trial
period opted to suppress their paper bill either immediately or at some point during the 90-day trial period.

2. Utilize Your Front Line to Help Drive E-Bill Adoption
Generally, a biller’s goal is to drive customers online for billing and payment activities rather than having them call customer service representatives (CSRs). However each phone call is extremely important because it is often the only human contact customers have with your company. Try a novel approach and include CSRs in your plan to drive e-bill adoption. Start by determining what motivates them – whether it’s an in-office party, a catered lunch or the chance to win a prize. Then communicate to your front line employees that you need their help educating consumers on the benefits of e-bills to drive paperless adoption. Set an e-bill activation goal and commit to a reward if the goal is reached.

Indianapolis Power & Light (IPL) created an e-bill adoption campaign for its customer service team and had positive results. An aggressive yet attainable e-bill activation goal was set and an in-office party was promised as the reward if the goal was met. The CSRs were given e-bill talking points and online enrollment instructions, and they were encouraged to promote e-bills as much as possible. They were not given a script. Instead, they were given the authority to use their own judgment when speaking with callers. After six weeks, IPL surpassed the goal and increased e-bill activations by 35 percent during the campaign. “Don’t underestimate your front line team,”
said Bill Bisson, Customer Service Manager at IPL when asked about his innovative approach to promoting e-bills.

The success of IPL’s campaign was driven by the fact that all employees, up through the top executives, understand the value of e-bills. IPL’s Executive Management Team was instrumental in driving awareness and support from the entire organization by reinforcing the importance of the e-bill adoption initiative. Bill Bisson says the success of his CSR campaign demonstrates that, “It’s important to have support from the top down.”

3. Consider Defaulting the Bill Setting to “Paperless”
During Enrollment

According to Forrester, there is a segment of consumers who have not adopted e-bills yet because they “just haven’t gotten around to it yet.”5 While this is a more aggressive tactic, consider this change to the account set-up process: When a consumer is asked to choose paper bills or e-bills, default the selection to e-bills. This does not restrict someone from selecting paper bills, but those who are more open to e-bills may be likely to accept the default. A large utility company in the Midwest reaped a 20 percent increase in the number of people going paperless with this approach.

Choose the Right EBP Provider to Meet Your Needs

When choosing an EBP provider, it is important to work with a company that will be a business partner rather than just a vendor. Besides finding a trusted, established organization with a proven track record and a strong history of reliability, here is a list of what to look for when you begin your evaluation:

  • Goal Alignment Yields Success: Choose a provider whose top priorities are aligned with yours – overcoming barriers to e-bills and driving paperless adoption.
  • Research is the Key: Make sure your EBP provider conducts and/or commissions ongoing research and usability testing to understand consumer behavior to make product and user interface improvements.
  • Innovation, Innovation, Innovation: You want a vendor who invests in the future of EBP, stays in the forefront of technology and can be quick to market with proven innovative solutions designed to drive paperless adoption.
  • One Size Does Not Fit All: You want a partner who will listen to you and provide a tailored solution to help you achieve your EBP goals while keeping the company’s goals in mind. The paper suppression strategy should be different for companies charged with cost reduction versus those focused on improving customer satisfaction or somewhere in between.
  • Largest, Widest Reach: Choose an EBP provider who has solutions for multiple channels so you can work with one company for all your EBP needs – a superior EBP solution at your biller direct site, the capability to deliver your e-bills to as many banks as possible, as well as the ability to support walk-in and phone payments.
  • It’s All About You: Work with a vendor who realizes that you have goals other than paper suppression and has solutions that can help. For example, if you have the desire to cross-sell and up-sell to consumers on your website, choose a vendor who can utilize billing information to create targeted, customized messaging within your EBP application.
  • Account Management: Having a dedicated account management team providing operational support will ensure a quality experience for your customers. They will also keep you informed on industry trends and new products.
  • Marketing Know-How: You want an EBP partner who offers marketing support and collaboration in developing campaigns designed to drive adoption. From experience, they should be able to tell you the best way to motivate your customers, what messages resonate best with different segments, and what incentives, if any, would be effective in changing consumer behaviors.

Tips for Building a Business Case for EBP

Once you have decided on the right EBP solution and provider for your business, the next step is to create a compelling business case to justify your recommendation and gain executive support. Achieving approval and funding for cost-saving initiatives can be more challenging than for revenue-generating projects, so here are some best practices to consider when developing your business case:

Include All Impacted Departments – According to TowerGroup, 100 percent of billers surveyed included a cost/benefit analysis from multiple departments.4 The benefits of including other departments in this process are two fold: not only will you receive additional data to support your business case, but you will gain internal cross-functional support early on. Both will help you when looking for executive approval of your project. This exercise will also help minimize implementation delays by keeping all impacted parties informed.

Develop a Comprehensive ROI Model – Make sure to capture all the possible savings from e-bills and paperless billing. Start with the due diligence of determining the costs associated with your current print and mail process to help accurately calculate the saving per activated e-bill. Next, forecast the e-bill adoption rate for your biller direct site. This can be challenging, so the best approach is to use industry averages. Your EBP provider should be able to supply these percentages.

If you plan to distribute your e-bills to banks and financial institutions, you need to forecast the e-bill adoption rate for this channel and include the savings into the ROI model. Your EBP provider should be able to help you predict the number of e-bill activations you can expect by determining the number of payments you currently receive from banks and applying an industry adoption average. Don’t forget to include the savings from fewer claims as a result of more accurate account information from e-bills.

Other items to be included in your ROI calculation are:

  • Increasing Postage Rates – Now that the USPS has the ability to raise postage rates every year, include an increase of at least one cent to your cost per bill each year.
  • Marketing Expenses – Include some reduced marketing expenses if your EBP provider offers marketing consultation and creative assets for your use.
  • Privacy and Security Expenses – With an outsourced EBP solution, you can reduce expenses associated with regulatory compliance.

Incorporate Soft Returns – While soft returns may not fit into the ROI model because they are difficult to quantify, they should not be omitted from the business case.

  • Research shows that consumers are more satisfied and loyal when they receive e-bills, regardless of the channel.1&7
  • You can be a leader in “green” environmental activities. Forty-three percent of consumers are more likely to do business with an environmentally friendly company.8
  • As you drive more consumers to your site for bill viewing, you will increase online marketing opportunities.
  • Research shows that 58 percent of customer calls are billing and payment related. With new self-service features from an EBP solution, you can anticipate a decrease in billing related calls. This can allow for repurposing of FTEs.9

Provide Examples – Support your business case with real life examples from other billers in your industry who have implemented an EBP strategy and describe their success. This will validate the numbers in your business case. Hopefully, your EBP provider can share case studies to exemplify the potential results.

What to Avoid – The savings per e-bill will be the bulk of your cost savings so it is important to be as accurate and realistic as possible. Be conservative and don’t over estimate adoption rates. Work with your provider to get an accurate project plan to tell you the number of IT resources and hours this project will require. You might be surprised at how minimal the requirements are. And lastly, don’t forget to include initial and on-going training costs for your front-line employees. Your customer service representatives can prove to be very valuable in helping to promote e-bills to your consumers if they are properly educated.

Conclusion

Is paper suppression a priority within your organization? Has your company already implemented some or all of the best practices mentioned in this paper? If not, begin thinking about what you can do in the short term with minimal expense (bill messaging, on-hold messaging, newsletter messaging, etc.). Then determine the company’s budget and IT resources available to pursue some of the higher-impact recommendations. If you are ready to begin researching options that are best for your organization, you can find more information at www.checkfree.com/billersolutions. Or, if you are interested in learning how other billing organizations in your industry have grown their e-bill adoption rates, you can find case studies at www.checkfree.com/resourceroom.

Footnotes

  1. CheckFree Consumer Insights, Consumer Billing and Payment Trends, February 2008
  2. Forrester, EBPP Forecast: 2006 To 2011, May 2007
  3. TowerGroup, Expedited Online Bill Payments: A New Revenue Stream for Financial Institutions, 2008
  4. TowerGroup, 2008 Biller Survey on EBPP, November 2008
  5. Forrester, Online Bill Pay 2007: Understanding The Mindset Of Holdouts, Fence-Sitters, And Quitters, December 2007
  6. Aite, Biller Direct Technology: A Vendor Overview, August 2008
  7. CheckFree Consumer Insights, Biller Direct Survey Findings, June 2008
  8. Javelin Strategy and Research, The Four E’s of Green Banking, June 2008
  9. PayStream Advisors, Consumer-To-Business Payments, Webinar, August 2006

Tomorrow’s Bill Payment Solutions for Today’s Businesses

Providing consumers with innovative services for more than 150 years, Western Union is an established leader in electronic and cash bill-payment solutions. We introduced our first consumer-to-consumer money transfer service in 1871 and began offering consumer-to-business bill payment services in 1989 with the introduction of the Western Union Quick Collect® service, providing consumers in the United States with convenient walk-in agent network locations where they can pay bills in cash.

In 2008, our comprehensive suite of services has grown to include Speedpay® – an electronic bill payment option that provides businesses with Internet, IVR, desktop, mobile payments, online banking and call center solutions, as well as e-bill presentment with payments and interactive outbound messaging integrated with payment processing.

THE CONSUMER-TO-BUSINESS SEGMENT

Western Union’s electronic and cash bill payment services provide consumers with fast, convenient ways to send one-time or recurring payments to a broad spectrum of industries. At Western Union we have relationships with more than 6,000 businesses and organizations that receive consumer payments, including utilities, auto finance companies, mortgage servicers, financial service providers and government agencies. These relationships form a core component of our consumer-to-business payment service and are one reason we were able to process 404 million consumer-to-business transactions in 2007.

PORTFOLIO OF SERVICES

Our consumer-to-business services give consumers choices in payment type and method, and include the following options:

  • Electronic payments. Consumers and billers use our Speedpay® service in the United States and the United Kingdom to make consumer payments to a variety of billers using credit cards, ATM cards and debit cards, and via ACH withdrawal. Payments are initiated through multiple channels, including biller-hosted websites, westernunion.com, IVR units, Online Banking websites and call centers.
  • Cash payments. Consumers use our Quick Collect® or Prepaid® services to send guaranteed funds to businesses and government agencies using cash (and in select locations, debit cards). Quick Collect is available at nearly 60,000 Western Union agent locations across the United States and Canada, while our Prepaid service can be accessed at more than 40,000 U.S. locations. Consumers can also use our Convenience Pay® service to send payments by cash or check from a smaller number of agent locations primarily to utilities and telecommunication providers.

DISTRIBUTION AND MARKETING CHANNELS

Our electronic payment services are available primarily through an IVR, over the Internet and via Call Center using a desktop application while speaking with a biller’s customer service representative. Through our Quick Pay® service, it is possible to receive payments sent from outside the United States or Canada from over 320,000 agent locations in more than 200 countries and territories around the world. We work in partnership with our billers to market our services to consumers in a number of ways, including direct mail, Email, Internet and point-of-sale advertising.

ONLINE BANKING

In late 2007, Western Union launched its Online Banking initiative, helping to change the way consumers pay their bills. The channel accelerates the speed with which billers receive payment from two to four days to a next-day or same-day delivery, and enables Western Union Payment Services to process bill payments initiated by consumers from their banks’ online banking sites.

Western Union plans to work with the nation’s largest banks to provide your customers with a new class of online banking payment that allows them to make same- and next-day payments that are posted and funded to you faster and are of a higher quality than other online banking payments currently available.

EMAIL BILL PRESENTMENT AND PAYMENT

While the benefits of electronic bill presentment and payment are compelling for both billers and consumers, low consumer adoption rates have prevented billers from fully realizing the cost savings and improved customer service levels these services promote. Western Union® Payment Services aims to change this through its integration with Striata® Email bill presentment and payment (EBPP) solutions.

With this integrated, encrypted Email bill presentment and one-click payment service, consumers no longer need to register to receive their bill electronically, visit a separate website to download the bill and send a payment, or remember multiple user names and passwords. By removing these extra steps from the process, these services become dramatically easier to use for consumers.

The critical differentiator of the Western Union/Striata service is that the entire e-bill is delivered directly into the consumer’s in-box as an encrypted off-line attachment, enabling payment to be sent through the e-bill itself using the Western Union® Speedpay service. While complementary to existing online presentment solutions, this “push” Email billing offering can be more successful at driving adoption.

The Utility of the Future

The utility industry is in transition. Changing customer needs and expectations are redefining how utilities understand, plan and execute superior customer experiences. In addition, new technologies are enabling new ways to interact with customers.

What will the utility of the future look like? How will customers view their increasing dependency on energy in light of rising energy bills and a sense of urgency to conserve? Do utilities need to start thinking about customers differently? Given the shift in consumer attitudes, along with the rapid advancement of new technologies, what will the industry look like in three, five or even 10 years? While we don’t have a crystal ball to provide all of the answers, IBM has invested in research teams and conducted global surveys to shed light on what the future may hold.

MAJOR CHANGES UNDERWAY

Through interviews with more than 1,000 business and public sector leaders worldwide, the IBM Global CEO Study 200 provides new and compelling perspectives on the strategic issues that are facing organizations of all sizes. Our study finds that 3 percent of CEOs see substantial change coming in the next three years. For utilities, the most dramatic change will be a greater level of customer involvement. Across all industries, CEOs will be increasing their investment in today’s more informed and collaboration-focused customers. As younger consumers begin their relationships with utilities, they bring with them expectations of a digital, mobile and collaborative customer service experience. Most age segments – even boomers – will begin demanding these new multichannel experiences at times that are convenient for them. The utility of the future will have a deep collaborative relationship with the customer and offer innovations that make both its customers and its business more successful.

THE UTILITY BUSINESS MODEL OF THE FUTURE

In the past, utility companies had very limited interaction with customers beyond opening new accounts and billing for services. Consumers took a passive view of all utility activity, only raising their voices when their lights went out. The future shows a much more intense level of customer involvement. Successful companies will continuously differentiate themselves by delivering value with revenue-generating services. The utility of the future will understand the types of capabilities and services that customers will want and can identify and carefully define the gaps in current processes and systems that must be filled to meet these needs.

THE CUSTOMER-FOCUSED UTILITY

Getting perspectives from CEOs and other executives represents only one step toward understanding the utility of the future. IBM also wanted to know what utility customers were thinking. IBM surveyed 1,900 consumers from six countries and included residential households along with small commercial customers. Based on the insights from this survey, we anticipate a steady progression toward a Participatory Network, a technology ecosystem comprising a wide variety of intelligent network-connected devices, distributed generation and consumer energy management tools.

Although the precise time frame for reaching this end state is unknown, our research suggests a few major milestones. Within five years, the percentage of the world’s electric utilities that will be generating at least 10 percent of their power from renewable sources will double. In that same time frame, we believe sufficient supplier choice will allow meaningful consumer switching to emerge in most major competitive markets. We also expect utility demand management initiatives to expand dramatically and electric power generation by consumers to make tremendous inroads within 10 years.

The utility industry is fast approaching a tipping point beyond which consumers can, and increasingly will, demand equal footing with their providers. As consumer passivity gives way to active participation, utilities will have significant opportunities to differentiate themselves and help redefine the industry. Those utilities that are fully prepared to share responsibility with their customers and help them meet their specific energy goals will have a significant competitive advantage and lead the way toward the utility of the future.

INNOVATING FOR THE FUTURE

The utility industry’s future lies in a more participatory structure, where consumers can choose to be actively engaged, and information is abundant and free-fl owing. To thrive in this environment, utilities must be prepared to harness real-time usage information, use it to gain insights into a much more complex consumer base and match products and services to each customer group. Advances in sensor, switching and communications technologies are enabling the next-generation utility. The resulting Intelligent Utility Network will provide a new world of grid monitoring and control and increased options for utility customers.

IBM has proven results in delivering Intelligent Utility Network infrastructures that provide superior reliability and end-to-end network data in near real time. We bring to the table the integration skills, leading-edge technology and partner ecosystem required to support every stage of an Intelligent Utility Network initiative.

As a result of extensive engagements around the world, we have gained deep experience and understand the business processes and technical architecture required for an effective Intelligent Utility Network implementation. We bring together the relevant tools, methodologies, resources and people experienced in the Energy and Utilities industry.

WHY IBM?

IBM delivers innovation that matters for our clients. As a global enterprise, we value innovation that matters for our company and for the world. IBM’s corporate citizenship reflects both our brand and our values by addressing some of society’s most complex problems with game-changing business and technology innovation.

WHY WE ARE UNIQUELY QUALIFIED

The following represent just some of the reasons IBM is uniquely qualified to serve the utility industry:

We Know the Energy and Utilities Business

We help clients define their core competitive advantages. And we do this better than anyone else because we bring deep industry and functional expertise, global experience, high-powered research and a unique understanding of how utilities succeed when they fully leverage technology to their advantage. We bring the following unmatched assets:

  • 70,000 business and industry consultants;
  • On-demand innovation services;
  • Component business modeling;
  • Business Transformation Outsourcing
  • Center for Business Optimization; and
  • Institute for Business Value.

We Know Integration and Transformation

IBM can help energy and utility clients realize the full value of innovation by integrating technology into the fabric of their business, creating the competitive advantage that’s right for them. We offer:

  • Business Performance Transformation Services;
  • Engineering and Technology Services;
  • Application Innovation Services;
  • Custom Logic Capability; and
  • Leadership in Open Standards.

We Know Technology

We are the technology leader. Even more importantly, we know how to deploy all of our technology products and services to deliver the flexible IT infrastructure required to transform businesses and take advantage of every dimension of innovation. We can deploy:

  • 170,000 technology experts;
  • On-demand portfolio/capabilities;
  • Service-oriented architectures and Web services;
  • Modular, scalable and secure computing environments based on open standards;
  • Linux solutions;
  • Middle-ware industry solutions; and
  • Infrastructure management

IBM and the environment

IBM is committed to environmental leadership in all of its business activities, from its operations to the design of its products and use of its technology.

Bill Pay and Presentment Solutions for Utility Companies

Recognizing that not all customers view and pay bills in the same way, Check- Free helps you deliver a complete range of billing and payment options – from the traditional methods of receiving and paying bills by mail, in person and over the phone to complete paperless online billing and payment using either a bank or your website. CheckFree offers solutions that help you meet market demands.

Whether you need to improve a single solution or your entire offering, CheckFree can offer experience and expertise in the following payment channels:

  • By Mail. Some people still choose to receive paper bills and write checks. CheckFree can help turn these paper checks into ACH electronic debits, speeding payment collections.
  • In Person. Give your customers in-person payment convenience and choice to use cash, checks, money orders or merchant-issued certificates.
  • By Phone. Enable your customers to pay a bill anywhere they have access to a phone, all day, every day. With the recent acquisition of CheckFree by Fiserv, you can look for Fiserv’s industry-leading BillMatrix platform to be integrated into our suite of offerings.
  • Online. Deliver bill paying ease and convenience through CheckFree’s full range of electronic billing and payment (EBP) solutions at your site and beyond your site.
  • Emergency Payments. Offer a fee-based option for last-minute online payments and eliminate expenses due to delinquent payments.
  • Electronic Remittance. Provide quicker access to payment funds while reducing the cost of processing paper checks.

CUSTOMER INTERACTION OPTIMIZATION

CheckFree solutions enable you to optimize each customer interaction by offering multiple payment channel options that focus on security, reliability, functionality and convenience. Each interaction with the consumer represents an ideal opportunity to enhance the customer experience and build loyal customers.

Our Customer Interaction Optimization solutions make interactions a win/win for both you and your customers. You deliver the payment channels they seek while maintaining the ability to guide them to the most profitable channel for your organization. The ultimate business objective is to steer customers to the lower cost-to-serve billing and payment option: the online channel.

CheckFree understands your company’s strategic need to direct consumers to the optimal online channel to enhance revenue growth through reductions in operating costs. By investing in substantial consumer behavior, segmentation and marketing research, CheckFree can assist with creating marketing campaigns focused on promoting your online channel. Every bill received, payment made or visit to your website can be utilized to strategically drive adoption of online bill pay, e-bills and paper shut-off.

For more than 25 years, CheckFree has been a leading provider of electronic billing and payment services. We process more than one billion electronic payments each year. With CheckFree’s Customer Interaction Optimization solutions, you can enhance your payment offerings while improving your bottom line.