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.

Developing a Customer Value Transformation Road Map

Historically, utility customers have had limited interactions with their electric or gas utilities, except to start or stop service, report outages, and pay bills or resolve billing questions. This situation is changing as the result of factors that include rising energy prices, increasing concerns about the environment and trends toward more customer interaction and control among other service providers – such as cell phone companies. Over the next five to 10 years, we expect utility customers to continue seeking improvements in three key areas:

  • Increased communication with their utility company, through a greater variety of media;
  • Improved understanding of and control over their own energy use; and
  • More accurate and timely information on outage events and service restoration.

Moreover, as the generations that have grown up with cell phones, the Internet, MP3 players and other digital devices move into adulthood, they will expect utilities to keep pace with their own technological sophistication. These new customers will assume that they can customize the nature of their communications with both friends and businesses. Utilities that can provide these capabilities will unlock new sources of revenue and be better able to retain customers when faced with competition.

The intelligent utility network (IUN) will be a key enabler of these new customer capabilities and services. But not all customers will want all of the new capabilities, so utilities need to understand and carefully analyze the value of each among various customer segments. This will require utilities to prepare sound business cases and prioritize their plans for meeting future customer needs.

One of the first initiatives that utilities launching an IUN program should undertake is the development of a “customer value transformation road map.” The road map approach allows utilities to establish the types of capabilities and services that customers will want, to identify and define the gaps in current processes and systems that must be overcome to meet these needs, and to develop plans to close those gaps.

TRANSFORMATION ROAD MAP DEVELOPMENT APPROACH

Our approach for developing the customer value transformation road map includes four tasks, as depicted in Figure 1.

Task 1: Customer Requirements

The primary challenge facing utilities in defining customer requirements is the need to anticipate their desires and preferences at least five to 10 years into the future. Developing this predictive vision can be difficult for managers because they’re often “locked into” their current views of customers, and their expectations are based largely on historical experience. To overcome this, utilities can learn from other industries that are already traveling this path.

The telecommunications providers, as one example, have made substantial progress in meeting evolving customer needs over the last decade. While more changes lie ahead for telecommunications, the industry has significantly enhanced the customer experience, created differentiated capabilities for various customer segments and succeeded in developing many of these capabilities into profit-generating services. This progress can serve as both an inspiration and a guide as utilities start down a similar path.

The first step in defining future customer requirements is to segment the customer base into the various customer groups that are likely to have different needs. Although these segments will likely vary for each utility, we believe that the following seven major customer segments serve as a useful starting point for this work:

  • Residential – tech savvy. These are customers who want many different electronic communication pathways but don’t necessarily want to develop a detailed understanding of the trends and patterns in their energy usage.
  • Residential – low tech. These customers prefer traditional, less high tech ways of communicating, but may want to perform analysis of their usage.
  • Residential – low income. These are customers who want to understand what’s driving their energy expenditures and how to reduce their bills; many of these customers are also tech savvy.
  • Special needs. These customers, often elderly, may live on fixed incomes and are accustomed to careful planning, and want no surprises in their interactions with providers of utility services. They frequently need help from others to manage their daily activities.
  • Small business. These commercial customers are typically very cost-conscious and highly adaptable and seek creative but relatively simple solutions to their energy management challenges.
  • Large commercial. These are customers who are cost-conscious and capable of investing substantial time and money in order to analyze and reduce their energy use in sophisticated ways.
  • Industrial. These very large customers are sophisticated, cost-conscious and increasingly focused on environmental issues.

The next step in defining future customer requirements is to understand the points in the utility value chain at which customers will interact with their utility. Based on recent trends for both utilities and other industries, the following “touch point” areas are a good starting point:

  • Reliability and restoration;
  • Billing;
  • Customer service;
  • Energy information and control; and
  • Environment.

Not all of these requirements will be important to all customer segments. It is essential to establish the most important requirements for each segment and each touch point. Figure 2 provides one example of a preliminary assessment of the relative importance of selected customer requirements for the reliability and restoration category, across the seven specified customer segments. Each customer need is assigned a high (H), medium (M) or low (L) rank.

Once this preliminary assessment is completed, utilities should consider conducting several workshops with participants from various functional departments. The goal of these workshops is to obtain feedback, to evaluate even more thoroughly the importance of each potential requirement and to begin to secure internal acceptance of the customer requirements that are determined to be worth pursuing. Departments that should participate in such workshops include those focused on regulatory requirements, billing, corporate communications, demand-side management, customer operations, complaint resolution and outage management.

One way of making the workshop process more “real” and therefore more effective is to develop customer use scenarios that incorporate each potential requirement. For example, the following billing scenarios could be used to illustrate potential customer requirements and to facilitate more effective evaluation of what will be needed for billing:

  • Billing Scenario 1. I want my gas and electric bills to be unified so that I don’t have to spend extra time making multiple payments. Also, I want the choice of paying my bill electronically, by mail or in person, based on what’s convenient for me, not what’s convenient for my utility.
  • Billing Scenario 2. My parents, who are now retired, receive fixed pension checks, and I want their utility to set up a payment plan for them that results in equal payments over the year, rather than high payments in the summer and low payments in the winter. My parents also want the ability to see a summarized version of their bill in large print, so that they can easily read and understand their energy use and costs.
  • Billing Scenario 3. My kids are on their computer nearly all of the time, and the remainder of the time they seem to be playing their video games. Also, they rarely turn off lights, and all of these things are increasing my energy bills. I want my utility to help me set up a balance limit so that if our energy usage reaches a set level, I’m automatically notified and I have the option of taking some corrective actions. I also expect my meter readings to be accurate rather than simply rough estimates, because I want to understand exactly how much energy I am consuming and what it’s costing me.

In addition to assessing the value of each requirement to customers, it is also important to rank these requirements based on other factors, such as their impacts on the utility. Financial costs and benefits, for example, clearly need to be estimated and considered when evaluating a requirement, regardless of how important the requirement will be to customers. To draw all of these assessments together, it is useful to assign weights to each assessment area – for example, a weight of 35 percent for customer importance, 30 percent for utility costs/benefits and 35 percent for the value that regulators will perceive. Once an appropriate weighting scheme is applied, the utility can rank the requirements and develop a list of those with the highest priority.

Task 2: Gaps

To assess gaps in current capabilities that could prevent a utility from meeting important and valuable customer requirements, the utility should next identify the business processes, organizations and technologies that will “deliver” those requirements. This requires a careful analysis of current and planned process, organizational and technology capabilities, which can be challenging because other initiatives will be affecting these areas even as customer requirements evolve. Moreover, many utilities do not have accurate, detailed documentation of current processes and systems. Therefore, a series of workshops and interviews with functional and technology leaders and staff is necessary. The results of these workshops should be supplemented by analysis of planned systems and process transformations, in order to assess current gaps and to determine whether those gaps will be closed – based on plans that are already in place. If such gaps remain, new projects and capital investments may be required to close
them and to meet expected customer requirements.

During the gap assessment process, it’s critical that the customer value team work closely with other IUN teams to ensure that the customer value gap analysis is coordinated with the broader gap analysis for the IUN program. Important areas to coordinate include automated meter information, demand-side management, outage management and asset management.

Task 3: Business Case Support

While conducting the first two tasks, the assessment team should be able to develop a deep understanding of the costs required to meet the important customer requirements as well as the financial benefits. Because it’s typical to develop consolidated business cases for the IUN, the customer value team should work with the overall IUN business case team to support business case development by bringing this information into the process.

Task 4: Transformation Road Map

This final task builds on an understanding of both the customer requirements and the gaps in current operations to create the customer value transformation road map. The initiatives in the road map will typically be defined across the following primary areas:

  • Process;
  • Technology;
  • Performance metrics;
  • Organization and training; and
  • Project management.

For each of these areas, the road map will establish the timing and sequence of initiatives to close the gaps, based on:

  • The utility’s strategic priorities and capacity for change;
  • Linkages to the utility’s overall IUN transformation plans; and
  • Technology dependencies and links to other work areas.
  • Figure 3 provides a summary of the initiatives from a typical customer value transformation road map. The detail behind this summary provides a path to transforming the customer-related operations to meet expected customer requirements over the next five to 10 years.

    CONCLUSION

    Our “customer value transformation road map” approach provides utilities with a structured process for identifying, assessing and prioritizing future customer requirements. Utilities that are successful in developing such a road map will be better prepared to build customer needs into their overall IUN transformation plans. These companies will in turn increase the likelihood that their IUN transformation will improve customer satisfaction, reduce customer care costs and lead to new sources of revenue.

Cutting-Edge Communication: Streamlining Customer Contact With Automated Messaging

Improving cash flow, reducing costs, freeing up agents, experiencing an immediate return on investment: These are what it’s all about, right? Since 1992, TeleVox has been at the forefront of customer communication, offering best-of-breed communication technology. More than 14,000 clients rely on TeleVox each and every day to efficiently and effectively contact their customers. Why? Because the subscription-based HouseCalls automated messaging system has proven to meet all their objectives for only pennies per call.

There’s no denying the positive impact of clear, dependable communication between a utility and its customers. Over the years, however, this has presented an increasingly difficult challenge. Utilities are being asked to communicate with growing customer bases with fewer resources. To help reverse this trend, automated messaging technologies, such as TeleVox’s HouseCalls, have emerged to play an important role in customer contact. As other messaging providers have battled rigid pricing structures, limited calling capacity and functionality challenges, HouseCalls has consistently performed as a cost-effective solution that meets the needs of each individual client.

COLLECTIONS

Nowhere are the benefits of automated messaging technology more apparent than in collections. HouseCalls delivers payment reminders personalized with names, dates, amounts due and other information. Messages also employ multiple levels of right-party verification to protect the customer. Once the message is delivered, the customer can take advantage of response options to speak with a live agent or transfer to an automated third-party credit card acceptance company. When matched with a third-party collector, HouseCalls automates the entire collections process without manual intervention from the utility.

Utilities can determine their own strategy when integrating automated messaging into the collections process. The messages sent to customers can vary in tone and content based on internal credit ratings and scores. Many TeleVox clients use HouseCalls to contact large volumes of newly delinquent accounts (30 to 60 days), hoping to resolve them before they age further. This frees agents to focus on more difficult accounts.

The immediate ROI of automated messaging in collections has made it a widely embraced practice among the nation’s leading utilities for reducing Accounts Receivable. Some utilities have estimated as much as $200 in return for every dollar spent. The technology’s flexibility facilitates quicker, less expensive collections efforts. It also decreases expensive mailings, costly disconnects and truck rolls that become necessary as delinquencies progress.

MARKETING CAMPAIGNS

From billing to usage issues, the range of programs utilities offer to customers has become increasingly broad. Automated calls have experienced phenomenal response rates from customers eager to take advantage of new offerings.

Common marketing campaigns include:

  • Budget billing
  • Low-income housing assistance
  • Meter replacement
  • Demand conservation

Why do automated calls produce greater results than direct-mail pieces, bill stuffers or Emails? One factor is audience attention. Since HouseCalls outbound messages can be recorded using 100 percent human voices and feature the Caller ID number of the utility, customers are more likely to listen to the telephone message than read an extra piece of mail. During the message, many utilities give customers the opportunity to transfer to live agents to learn more about the particular program, enroll during the call or be directed to a website for more information.

Calls cost pennies to deliver, far less than the soaring printing and postage costs associated with mailed media. Whether employed as a stand-alone marketing strategy or combined with direct mail, automated messaging proves to be a cost-effective promotional tool.

OUTAGE AND RESTORATION NOTIFICATIONS

In the utility industry, the old saying holds true: Expect the unexpected. A little preparation goes a long way toward instilling customer confidence, and this certainly applies to service outages. It’s inevitable that at some point customers are going to experience unavoidable interruptions in their service.

When that happens, leading utilities can proactively communicate with customers and keep them informed of the progress being made to restore service in the area. Automated messaging is ideal for such situations, covering large service territories (able to reach as many as 300,000 customers per hour) while maintaining a high capability of customer interaction. Messages can be created and delivered in as little as five minutes.

During outages, customers will often receive messages from their utilities reassuring them that technicians are working to restore service. Providing important contact numbers and information can also be helpful to customers during this period.

As restoration efforts progress, utilities can deliver messages to each customer to determine if service has been restored. Automated messages allow for immediate customer feedback and significantly reduce inbound traffic to the utility’s call center.

In some situations, utilities contact their customer base before a planned outage. This approach is especially appreciated when working with critical-care customers.

HOUSECALLS BENEFITS

Since HouseCalls is a subscription-based ASP (Application Service Provider) solution hosted by TeleVox, there are no hardware purchases or capital investments for the utility. Rather than requiring large expenditures for on-site equipment, utilities are charged on a per-call basis for completed calls – with no cost for undeliverables.

NEXT STEPS

To begin harnessing the power of HouseCalls for your customer communication, you are encouraged to contact a TeleVox representative at 1-800-644-4266 or info@televox.com. You may also visit TeleVox online at www.televox.com.

Con Edison

Consolidated Edison Co. of New York (Con Edison) is a regulated utility serving 3.2 million electric customers in New York City and Westchester County. The company recognized that it could realize significant cost savings if more customers would adopt electronic billing, where bills are delivered electronically without a paper version. Eliminating the printing, postage, labor and equipment costs associated with paper billing can result in significant cost savings.

In addition to operational cost savings, further positive results could be gained from driving e-bill adoption, including improved customer relationships and fewer billing-related service calls. According to a Harris Interactive study conducted for CheckFree Research Services, customers who receive e-bills at a biller organization’s website show higher satisfaction levels, with 25 percent of them reporting an improved relationship with their biller as a result of receiving e-bills.

The challenge was how to attract more customers to the low-cost, high-impact online channel for billing activities and shut off their paper bills. To convince customers to change their behavior, Con Edison had to find a way to cost-effectively generate widespread awareness of electronic billing and explain how benefits, such as saving time, reducing clutter and helping the environment, outweigh concerns customers may have about giving up their paper bills.

THE ADVANTAGES OF ELECTRONIC BILLING

Together, Con Edison and CheckFree developed a comprehensive marketing campaign designed to communicate the advantages of electronic billing to as many customers as possible. As a critical first step, Con Edison gained cross-organizational alignment regarding the campaign strategy. Drawing from a longstanding commitment to the environment, the company made a strategic decision to implement an ongoing campaign that conveyed a “Go green with e-bills” message across numerous channels in order to maximize reach within its customer base. Research has shown that when attempting to change consumer behavior, a comprehensive, consistent and widespread marketing campaign is far more effective than “one-off” campaigns utilizing minimal tactics.

In May 2007, Con Edison launched the integrated marketing campaign capitalizing on the wave of consumer awareness on environmental issues. Con Edison promoted paperless billing and electronic payment through a variety of methods and channels, including:

  • Customer Emails;
  • Direct-mail postcards;
  • On-hold messaging;
  • Radio advertising;
  • Invoice messaging;
  • Press releases;
  • Con Edison website messaging;
  • My CheckFree website messaging;
  • Customer newsletters; and
  • Internal employee newsletters.

Each communication featured the company’s environmental incentive – for every customer choosing the paper-saving option of viewing and paying their bills online, Con Edison would donate $1 to a local, nonprofit tree-planting fund to help the environment in New York.

To aid in driving awareness, Con Edison made a deliberate decision to create an extended campaign designed to consistently reinforce the safety, security, simplicity and environmental benefits of electronic billing. Based on the success of the marketing activities seen thus far, Con Edison plans to include the “Go green with e-bills” theme in every consumer communication going forward.

THE RESULTS

Con Edison showed persistence and enthusiasm in pursuing a multichannel marketing campaign, and it was well worth the effort. In the first seven months after the campaign was launched, Con Edison generated impressive results, including the following:

  • More than 42,000 e-bills activated;
  • A 57 percent increase in e-bill activations over the same time period in 2006; and
  • A 19 percent increase in online e-bill payments over the same time period in 2006.

Con Edison also has benefited from the positive press and goodwill it’s created in the community. By providing its customers with a better, more environmentally friendly choice for paying and receiving their utility bills, Con Edison is minimizing costs, maintaining operational control, optimizing growth for its business and turning customer interactions into profitable relationships.

Technology with vision for Today’s Utilities

Around the world, utilities are under pressure. Citizens demand that utilities provide energy and water without undermining environmental quality. Customers seek choice and convenience, and regulators respond with new market structures. Financial stakeholders look for operational efficiency at a time when aging workforces and infrastructures need replacement.

Pressures like these are forcing utilities to re-examine every aspect of the utility business, from supply to consumption. And no utility can handle those changes alone.

Oracle has positioned itself to become utilities’ software partner of choice in the quest to respond positively and completely to these pressures. To do so, Oracle brings together a worldwide team of utility experts, software applications that address mission-critical utility needs, a rock-solid suite of corporate operational software and world-leading middleware and technology.

The result: Flexible, innovative solutions that increase efficiency, improve stakeholder satisfaction and future-proof the organization.

Oracle has reshaped the utilities IT marketplace. During the past year, by acquiring two world leaders in utility-specific applications – SPL WorldGroup and Lodestar – Oracle has created Oracle Utilities, a new brand that establishes a unique portfolio of proven software, integrating industry-specific applications with the capabilities of Oracle Applications, Oracle Fusion Middleware and Oracle Database.

Oracle Utilities offers the world’s most complete suite of end-to-end information technology solutions for the gas, water and electric utilities that communities around the world depend on. 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
    • Load Analysis
    • Load Profiling and Settlement
    • Portfolio Management
    • Quotations Management
    • Business Intelligence

These solutions are available stand-alone, or as an integrated suite.

  • Oracle’s ERP, database and infrastructure software:
    • Oracle E-Business Suite and other ERP applications
    • TimesTen and Sleepycat 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, specialized contacts and sales:
    • Most comprehensive solution for Sales, Service and Marketing
    • Complete out-of-the box solution that’s easy to tailor to your needs
    • Results such as percentage increase in sales pipeline, user adoption, opportunity-to-win ratios and doubled revenue growth

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:

  • Advance customer care with:
    • Real-time 360-degree views of customer information
    • Tools to help customers save time and money
    • Ability to 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
  • Address the “Green Agenda”:
    • Help reduce pollution
    • Increase efficiency

STRATEGIC TECHNOLOGY FOR THE EMERGING UTILITY

Today’s utility is beset by urgent issues – environmental concerns, rising costs, aging workforces, changing markets, regulatory demands and rising stakeholder expectations.

Oracle Utilities can help meet these challenges by providing the leading mission-critical utilities suite in the marketplace today. Oracle integrates industry-specific customer care and billing, network management, work and asset management, mobile workforce management and meter data management applications with the capabilities of Oracle’s industry-leading enterprise applications, business intelligence tools, middleware and database technologies. We enable customers to adapt more nimbly to market deregulation, help them meet ever-evolving customer demands, enhance operational excellence and deliver on commitments to environmental conservation.

Oracle Utilities’ flexible, standards-based applications and architecture help utilities innovate. They lead toward coherent technology solutions. Oracle helps utilities keep pace with change without losing focus on the energy, water and waste services fundamental to local and global human and economic welfare.

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.

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 future-proof your utility.

CONTACT US

For more information, call +1.800.275.4775 to speak to an Oracle representative, or visit oracle.com/industries/utilities.

Copyright © 2008, Oracle. All rights reserved. Published in the U.S.A. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

Pepco Holdings, Inc.

The United States and the world are facing two preeminent energy challenges: the rising cost of energy and the impact of increasing energy use on the environment. As a regulated public utility and one of the largest energy delivery companies in the Mid-Atlantic region, Pepco Holdings Inc. (PHI) recognized that it was uniquely positioned to play a leadership role in helping meet both of these challenges.

PHI calls the plan it developed to meet these challenges the Blueprint for the Future (Blueprint). The plan builds on work already begun through PHI’s Utility of the Future initiative, as well as other programs. The Blueprint focuses on implementing advanced technologies and energy efficiency programs to improve service to its customers and enable them to manage their energy use and costs. By providing tools for nearly 2 million customers across three states and the district of Columbia to better control their electricity use, PHI believes it can make a major contribution to meeting the nation’s energy and environmental challenges, and at the same time help customers keep their electric and natural gas bills as low as possible.

The PHI Blueprint is designed to give customers what they want: reasonable and stable energy costs, responsive customer service, power reliability and environmental stewardship.

PHI is deploying a number of innovative technologies. Some, such as its automated distribution system, help to improve reliability and workforce productivity. Other systems, including an advanced metering infrastructure (AMI), will enable customers to monitor and control their electricity use, reduce their energy costs and gain access to innovative rate options.

PHI’s Blueprint is both ambitious and complex. Over the next five years PHI will be deploying new technologies, modifying and/or creating numerous information systems, redefining customer and operating work processes, restructuring organizations, and managing relationships with customers and regulators in four jurisdictions. PHI intends to do all of this while continuing to provide safe and reliable energy service to its customers.

To assist in developing and executing this plan, PHI reached out to peer utilities and vendors. One significant “partner” group is the Global Intelligent Utility network Coalition (GIUNC), established by IBM, which currently includes CenterPoint Energy (Texas), Country Energy (new South Wales, Australia) and PHI.

Leveraging these resources and others, PHI managers spent much of 2007 compiling detailed plans for realizing the Blueprint. Several aspects of these planning efforts are described below.

VISION AND DESIGN

In 2007, multiple initiatives were launched to flesh out the many aspects of the Blueprint. As Figure 1 illustrates, all of the initiatives were related and designed to generate a deployment plan based on a comprehensive review of the business and technical aspects of the project.

At this early stage, PHI does not yet have all the answers. Indeed, prematurely committing to specific technologies or designs for work that will not be completed for five years can raise the risk of obsolescence and lost investment. The deployment plan and system map, discussed in more detail below, are intended to serve as a guide. They will be updated and modified as decision points are reached and new information becomes available.

BUSINESS CASE VALIDATION

One of the first tasks was to review and define in detail the business case analyses for the project components. Both benefit assumptions and implementation costs were tested. Reference information (benchmarks) for this review came from a variety of sources: IBM experience in projects of similar scope and type; PHI materials and analysis; experiences reported by other GIUNC members; and other utilities and other publicly available sources. This information was compiled, and a present value analysis was conducted on discounted cash flow and rate of return, as shown in Figure 2.

In addition to an “operational benefits” analysis, PHI and the Brattle Group developed value assessments associated with demand response offerings such as critical peak pricing. With demand response, peak consumption can be reduced and capacity cost avoided. This means lower total energy prices for customers and less new capacity additions in the market. As Figure 2 shows, in even the worst-case scenario for demand response savings, operational and customer benefits will offset the cost of PHI’s AMI investment.

The information from these various cases has since been integrated into a single program management tool. Additional capabilities for optimizing results based on value, cost and schedule were developed. Finally, dynamic relationships between variables were modeled and added to the tool, recognizing that assumptions don’t always remain constant as plans are changed. One example of this would be the likely increase in call center cost per meter when deployment accelerates and customer inquiries increase.

HIGH-LEVEL COMMUNICATIONS ARCHITECTURE DESIGN

To define and develop the communications architecture, PHI deployed a structured approach built around IBM’s proprietary optimal comparative communications architecture methodology (OCCAM). This methodology established the communications requirements for AMI, data architecture and other technologies considered in the Blueprint. Next, an evaluation of existing communications infrastructure and capabilities was conducted, which could be leveraged in support of the new technologies. Then, alternative solutions to “close the gap” were reviewed. Finally, all of this information was incorporated in an analytical tool that matched the most appropriate communication technology within a specified geographic area and business need.

SYSTEM MAP AND INFORMATION MODEL

Defining the data framework and the approach to overall data integration elements across the program areas is essential if companies are to effectively and efficiently implement AMI systems and realize their identified benefits.

To help PHI understand what changes are needed to get from their current state to a shared vision of the future, the project team reviewed and documented the “current state” of the systems impacted by their plans. Then, subject matter experts with expertise in meters, billing, outage, system design, work and workforce management, and business data analysis were engaged to expand on the data architecture information, including information on systems, functions and the process flows that tie them all together. Finally, the information gathered was used to develop a shared vision of how PHI processes, functions, systems and data will fit together in the future.

By comparing the design of as-is systems with the to-be architecture of information management and information flows, PHI identified information gaps and developed a set of next steps. One key step establishes an “enterprise architecture” model for development. The first objective would be to establish and enforce governance policies. With these in place, PHI will define, draft and ratify detailed enterprise architecture and enforce priorities, standards, procedures and processes.

PHASE 2 DEPLOYMENT PLAN

Based on the planning conducted over the last half of the year, a high-level project plan for Phase 2 deployment was compiled. The focus was mainly on Blueprint initiatives, while considering dependencies and constraints reported in other transformation initiatives. PHI subject matter experts, project team leads and experience gathered from other utilities were all leveraged to develop the Blueprint deployment plan.

The deployment plan includes multiple types of tasks; processes; and organization, technical and project management office-related activities, and covers a period of five to six years. Initiatives will be deployed in multiple releases, phased across jurisdictions (Delaware, District of Columbia, Maryland, New Jersey) and coordinated between meter installation and communications infrastructure buildout schedules.

The plan incorporates several initiatives, including process design, system development, communications infrastructure and AMI, and various customer initiatives. Because these initiatives are interrelated and complex, some programmatic initiatives are also called for, including change management, benefits realization and program management. From this deployment plan, more detailed project plans and dependencies are being developed to provide PHI with an end-to-end view of implementation.

As part of the planning effort, key risk areas for the Blueprint program were also defined, as shown in Figure 3. Input from interviews and knowledge leveraged from similar projects were included to ensure a comprehensive understanding of program risks and to begin developing mitigation strategies.

CONCLUSION

As PHI moves forward with implementation of its AMI systems, new issues and challenges are certain to arise, and programmatic elements are being established to respond. A program management office has been established and continues to drive more detail into plans while tracking and reporting progress against active elements. AMI process development is providing the details for business requirements, and system architecture discussions are resolving interface issues.

Deployment is still in its early stages, and much work lies ahead. However, with the effort grounded in a clear vision, the journey ahead looks promising.

Business Intelligence: The ‘Better Light Bulb’ for Improved Decision Making

Although some utilities have improved organizational agility by providing high-level executives with real-time visibility into operations, if they’re to be truly effective, these businesses must do more than simply implement CEO-level dashboards. They must provide this kind of visibility to every employee who needs it. To achieve this, utilities need to be able to collect data from many disparate sources and present it in a way that allows people company-wide to access the right information at the right time in the form of easy-to-use and actionable business intelligence (BI).

The following statement from the Gartner EXP CIO report “Creating Enterprise Leverage: The 2007 CIO Agenda,” led by Mark McDonald and Tina Nunno (February 2007).

Success in 2007 requires making the enterprise different to attract and retain customers. In response, many CIOs are looking for new sources of enterprise leverage, including technical excellence, agility, information and innovation.

This statement holds true. But converting data into useful information for employees in different levels and roles creates a new challenge. Technological advances that produce exponentially increasing volumes of data, coupled with historical data silos, have made it extremely difficult for utilities professionals to access, process and analyze data in a way that allows them to make effective decisions. What’s needed: BI technology tools that are not only available to the C-level executive or the accounting department, but to everyone – civil and electrical engineers, technicians, planners, customer service representatives, safety officers and others.

BI solutions also need to handle data in a way that mirrors the way people work. Such solutions should be capable of supporting the full spectrum of use – from individuals’ personal content to information created by team members for use by the team and formal IT-created structured and controlled content for use enterprise-wide.

The good news is that BI has become more accessible, easier to use and more affordable so that people throughout the enterprise – not just accountants or senior executives – can gain insight into the business and make better informed decisions.

RIGHT-TIME PERFORMANCE MANAGEMENT

“The Gartner Magic Quadrant for Business Intelligence Platforms, 2008,” by James Richardson, Kurt Schlegel, Bill Hostmann and Neil McMurchy (February 2008), has this to say about the value of BI:

CIOs are coming under increasing pressure to invest in technologies that drive business transformation and strategic change. BI can deliver on this promise if deployed successfully, because it could improve decision making and operational efficiency, which in turn drive the top line and the bottom line.

Greg Todd, Accenture Information Management Services global lead for resources at Accenture, advises that monthly, or even weekly, reports just aren’t enough for utilities to remain agile. Says Todd, “The utilities industry is dynamic. Everything from plant status and market demand to generation capacity and asset condition needs near real-time performance management to provide the insight for people enterprise-wide to make the right decisions in a timely fashion – not days or weeks after the event.”

By having access to near real-time performance monitoring across the enterprise, utilities executives, managers, engineers and front-line operations personnel can rapidly analyze information and make decisions to improve performance. This in turn allows them more agility to respond to today’s regulatory, competitive and economic imperatives.

For example, Edipower, one of Italy’s leading energy providers, has implemented an infrastructure that will grow as its business grows and support the BI technology it needs to guarantee power plant availability as market conditions and regulations dictate. According to Massimo Pernigotti, CIO of Edison, consolidating the family of companies’ technology platforms and centralizing its data network allowed the utility to fully integrate its financial and production data analyses. Says Pernigotti, “Using the new application, staff can prepare scorecards and business intelligence summaries that plant managers can then access from portable devices, ensuring near real-time performance management.”

To achieve this level of performance management, utilities professionals need easy access to both structured and unstructured data from multiple sources, as illustrated in Figure 1. This data can be “owned” by many different departments and span multiple locations. It can come from operational control systems, meter data systems, customer information systems, financial systems and human resources and enterprise resource planning (ERP) systems, to name a few sources. New and more widely available BI tools allow engineers and others to quickly view near real-time information and use it to create key performance indicators (KPIs) that can be used to monitor and manage the operational health of an organization.

KPIs commonly include things like effective forced outage factors (EFOFs), average customer downtime, average customer call resolution time, fuel cost per megawatt hour (MWh), heat rates, capacity utilization, profit margin, total sales and many other critical indicators. Traditionally, this data would be reported in dozens of documents that took days or weeks to compile while problems continued to progress. Using BI, however, these KPIs can be calculated in minutes.

With context-sensitive BI, safety professionals have the visibility to monitor safety incidents and environmental impacts. In addition, engineers can analyze an asset’s performance and energy consumption – and solve problems before they become critical.

One of the largest U.S.-based electric power companies recently completed a corporate acquisition and divestiture. As part of its reorganization, the company sought a way to reduce capital expenditures for producing power as well as an effective way to capture and transfer knowledge in light of an aging workforce. By adopting a new BI platform and monitoring a comprehensive set of custom KPIs in near real time, the company was able to give employees access to its generation performance metrics, which in turn led to improved generation demand-and-surplus forecasts. As a result, the company was able to better utilize its existing power plants and reduce capital expenditures for building new ones.

BI tools are also merging with collaboration tools to provide right-time information about business performance that employees at every organizational level can access and which can be shared across corporate boundaries and continents. This will truly change the way people work. Indeed, the right solution combines BI and collaboration, which not only improves business insight, but also enables staff to work together in real time to make sound decisions more quickly and easily and to proactively solve problems.

With these collaboration capabilities increasingly built into today’s BI solutions, firms can create virtual teams that interact using audio and video over large geographical distances. When coupled with real-time monitoring and alerting, this virtual collaboration enables employees – and companies – to make more informed decisions and subsequently become more agile.

Andre Blumberg, group information technology manager for Hong Kong’s CLP Group, believes that user friendliness and user empowerment are key success factors for BI adoption. Says Blumberg, “Enabling users to create reports and perform slice-and-dice analysis in a familiar Windows user interface is important to successfully leveraging BI capabilities.”

As more utilities implement KPI dashboards and scorecards as performance management tools, they open the door for next-generation technologies that feature dynamic mashups and equipment animations, and create a 24×7 collaborative environment to help managers, engineers and operations personnel detect and analyze problems faster and more effectively in a familiar and secure environment. The environment will be common across roles and cost much less than other solutions with similar capabilities. All this allows utilities operations personnel to “see the needle in the haystack” and make quicker and better decisions that drive operational efficiency and improve the bottom line. Collaboration enables personnel to engage in key issues in a timely fashion via this new desktop environment. In addition, utilities can gain preemptive knowledge of operational problems and act before the problems become critical.

BETTER DECISIONS IMPROVE BUSINESS INSIGHT

Everyone in the organization can benefit from understanding what drives a utility, the key metrics for success and how the company is performing against those metrics (see Figure 2). By definition, BI encompasses everyone, so logically everyone should be able to use it.

According to Rick Nicholson, vice president of research for Energy Insights, an IDC company, the nature of BI recently changed dramatically. For many years, BI was a reporting solution and capability used primarily by a small number of business analysts. “Today, BI solutions have become more accessible, easier to use and more affordable, and they’re being deployed to managers, supervisors, line-of-business staff and external stakeholders,” says Nicholson. “We expect the use of business intelligence in the utility industry to continue to increase due to factors such as new report and compliance requirements, changes in trading markets, new customer programs such as energy efficiency and demand response, and intelligent grid initiatives.”

Accenture’s Todd believes that traditional BI focuses on analyzing the past, whereas real-time BI today can provide an immediate chance to affect the future. Says Todd, “Smart users of BI today take the growing volume of corporate operational data and the constant fl ow of raw information and turn it into usable and business-relevant insight – in near real time – and even seek to manage future events using analytics.” (See Figure 2.)

Most importantly, today’s BI gives utility information workers a way of understanding what’s going on in the business that’s both practical and actionable. Dr. J. Patrick Kennedy, the founder and CEO of performance management vendor OSIsoft, says that the transaction-level detail provided from enterprise software often offers a good long-term history, but it does not answer many of the important operations questions. Further, this type of software typically represents a “pull” rather than a “push” technology.

Says Kennedy, “People think in terms of context, trends, interactions, risk and reward – to answer these questions effectively requires actionable information to help them make the right decisions. Integrating systems enables these decisions by providing users with a dynamic BI application within a familiar platform.”

WHAT GOOD BI SYSTEMS LOOK LIKE

Here are some critical characteristics to look for in an enterprise-class BI solution:

  • The BI solution should integrate with the existing IT infrastructure and not require major infrastructure changes or replacement of legacy software applications.
  • The technology should mirror day-today business processes already in place (rather than expect users to adapt to it).
  • The application should be easy to use without extensive IT support.
  • The BI solution should connect seamlessly to multiple data sources rather than require workers to toggle in and out of a broad range of proprietary applications.
  • An effective BI solution will provide the ability to forecast, plan, budget and create scorecards and consolidated financial reports in a single, integrated product.
  • The BI solution should support navigation directly from each KPI to the underlying data supporting that KPI.
  • Analysis and reporting capabilities should be flexible and allow for everything from collecting complex data from unique sources to heavy-duty analytics and enterprise-wide production reporting.
  • The BI solution should support security by role, location and more. If access to certain data needs to be restricted, access management should be automated.

The true measure of BI success is that users actually use it. For this to happen, BI must be easy to learn and use. It should provide the right information in the right amount of detail to the right people. And it must present this information in easily customized scorecards, dashboards and wikis, and be available to anyone. If utilities can achieve this, they’ll be able to make better decisions much more quickly.

SEEING THE LIGHT

BI is about empowering people to make decisions based on relevant and current information so that they can focus on the right problems and pay attention to the right customers. By using BI to monitor performance and analyze both financial and operational data, organizations can perform real-time collaboration and make truly transformational decisions. Given the dynamic nature of the utilities industry, BI is a critical tool for making organizations more flexible and agile – and for enabling them to easily anticipate and manage change.