Talk is cheap, but meaningful dialogue is valuable. For utilities, speaking
to each segment of the market in its own language can be satisfying and profitable.
Don’t make the mistake of talking to each segment in the same way. Tailor your
conversation and you’ll see an up-tick in customer satisfaction and your bottom
line. And remember to speak to a largely underserved segment of the market —
small businesses. There’s something in it for them and something in it for you.

Events in California and elsewhere have illustrated the need to broaden your
strategic approach. It is wise to hedge your portfolio so that your business
model does not become too narrow. You know that the current volatility of the
market can rapidly undo any gains you may have made. What worked yesterday may
not work today or tomorrow. Holding onto current gains by holding onto current
customers is a good strategy. And utilities can do a better job of pleasing
current customers. Not convinced? Look to the most recent American Customer
Satisfaction Index, a poll conducted by the University of Michigan Business
School. Satisfaction ratings for utilities for the first quarter of 2001 are
at a seven-year low. Coming in at a dismal 68.4 percent for the first quarter
of this year, utilities ratings are down 3.1 percent from last year and 9.4
percent from 1994, the first year the poll was taken.

Focusing on your small business customers pays off. Utilities traditionally
concentrate on residential and large industrial accounts for a number of reasons:
regulatory and political pressures, sheer numbers of accounts, and impact on
the system. They were the biggest slices of the pie. But, commercial customers
spend over $70 billion per year on energy, and nearly 70 percent of that —
or about $50 billion per year — is spent by small businesses. Overlooking
this segment of the market is a mistake.

Small and mid-sized commercial accounts can play a pivotal strategic role because
their electric load is often coincident with your peak. Reducing peak demand
can be an effective way to hedge against price volatility in your supply mix.
With peak MWh costing 20 to 100 times more than average MWh, achieving peak
reduction can pay big dividends. Small and mid-sized businesses create about
155 GW peak demand nationally. A very achievable 5-percent peak reduction across
this customer group — about 7.7 GW — would save costs to utilities
ranging from about $9 million per hour at the high wholesale rates experienced
in parts of New York state to $23 million per hour at the highest western wholesale
power rates.

Furthermore, your local small and mid-sized business customers are loyal; they
are far less likely to defect than large, multi-regional indust rials. Finally,
remember that every giant customer you serve today was once small. Concentrate
on increasing your standing with this segment of your customers and continue
to serve the residential segments with value-added programs to balance the impact
of the big industrials. You can do this by using tried and true customer relationship
management tools.

Renewed Emphasis on Customer Service

Customer relationship management is more than just a catchphrase when applied
to small businesses. It is the process by which you predict, assess, and meet
your customers’ needs. Far more than providing energy to your customers, CRM
is your key to giving them power. Empowering your customers may mean offering
incentives, and providing reliable billing and easy payment options. It may
also mean educating them with cost-saving tips and information on the telephone
and the Web. These jobs are as important to your business as supplying energy.

Case Study: Silicon Valley Power and
Mondo Burrito

Background

Silicon Valley Power (SVP) is the municipal utility for the city of
Santa Clara, California, home of some of America’s largest corporations
and — like all communities — thousands of small businesses.
A number of small companies in the Santa Clara region have implemented
load-reducing, energy-saving, business-building projects under the OPUSsm
program that SVP outsources through Aspen Systems Corporation.

Mondo Burrito Upgrades Facilities

Food service establishments are among the most sensitive to any changes
in refrigeration and lighting. It is particularly difficult to get the
independent restaurant owner to see the advantage to investing in upgraded
utilities. Owners want to focus on presentation, quality, service, delivery,
and maintenance without disruption to the bottom line — customers.

Frequently restaurants are housed in older structures, often built to
outdated standards. Capital, when available, is more likely devoted to
cooking productivity and services enhancement than energy efficiency.
The maitre d’ lives on the ambiance of the interior, and shudders at changes
in either lighting or HVAC systems. The chefs can’t abide anyone touching
the food preparation equipment, and the insurance broker is nervous about
any changes to refrigeration, freezers, and food preparation facilities.

SVP found a way to work with local Santa Clara restaurants to upgrade
energy efficiency without interfering in a proprietor’s tending to his
core business, and both SVP and Mondo Burrito met with success.

Steven Dutra, owner of the popular Mondo Burrito restaurant, was skeptical
when his Silicon Valley Power energy audit recommended he save on his
monthly energy bill by changing the light bulbs. “When SVP told me that
moving from incandescent bulbs to compact fluorescents would produce a
notable difference in my monthly bill, I couldn’t believe anything that
simple would be enough,” said Dutra. “I’d increased my building size by
10 percent and sales were skyrocketing-I was skeptical that the bill could
go down. But then SVP introduced a double rebate program, which allowed
me to buy the new bulbs for the same price as the old ones. I had nothing
to lose.” Dutra purchased 60 compact fluorescent bulbs, which normally
retail for $9 each. The SVP double rebate reduced that to just about what
he was paying for incandescent bulbs.

The unexpected bonus was in the wattage — while he normally used
60W bulbs, he found that 15W fluorescents generated the same amount of
light. “Another thing I didn’t know was that fluorescents last more than
four times longer than incandescents (NOTE: Fluorescents typically last
7 to 10 times as long as incandescents do),” Dutra added. “Even without
the rebates, the cost is actually the same due to the difference in lifespan,
and I don’t have to change them as often. The fact that the fluorescents
use 75 percent less power, combined with our other conservation measures,
caused my monthly bill to go down 20 percent a month at a time when my
sales and square footage were climbing. I was skeptical, but now I’m a
believer!”

While these are key customer service obligations, your main focus remains the
very real challenge of keeping the power on and moving it down the line to end-users.
That’s why so many companies look to the experts to handle portions of their
customer care. By outsourcing call center operations, billing, shipping and
receiving, and other functions, utilities can provide better service to their
customers. Seamless integration of these services can be achieved by partnering
with vendors that have raised customer service to an art form.

It is worthwhile to outsource customer service functions when you find a company
that can deliver in a way that works for you. Outsourcing to consultants who
have defined best practices in key areas of customer care makes sense for utilities
because they can help you focus more attention on your core energy production
and distribution businesses. Standout small business CRM providers offer you
cost effective, profitable options for increasing the effectiveness of your
small business interaction. Investigate vendors that can help you sharpen your
focus on these customers. It can pay off for you and for them.

Energy Service Solutions for Small Business

Let’s get back to that underserved customer, the small business. It will pay
to stimulate that portion of your business. But how do you go about doing that?
It may not be as difficult as you think. Strike up a conversation and spend
a little time with business owners, both in your service area and elsewhere.

Impress upon them that you value them as customers. Recognize that they, like
the big guys, might be able to go elsewhere. While deregulation has slowed in
some regions, it is not going to vanish. Under restructuring in the United Kingdom,
Scottish Power lost 25 percent of the customers in its franchise area. Today,
small businesses may not have as much political clout as large industrials,
but they will soon have choices in service providers. It pays to lock in their
loyalty now. Moreover, if your business model includes unregulated affiliates,
the business-friendly status will pay off in off-franchise market capture. Again,
while Scottish Power reported customer loss in the franchise territory, it gained
a million customers off-franchise, in part by offering energy service solutions
for business.

Show your small business customers how to get the best value for their energy
dollar. Counsel them on how they can lower bills by increasing their energy
efficiency. Help them find and implement efficiency solutions that are easy,
cost effective, and good fits for their business.

The standard for customer service has been significantly elevated. Giving small
businesses a break can have a direct effect on your bottom line. If you introduce
programs that reduce their total utility costs, be sure you choose programs
that help you with demand reduction. Customer service programs exist that do
both very effectively.

Energy Efficiency and the
Small Business — Problems

Courting the small business customer is more than a mannerly thing to do. It
can help you realize your load reduction goals. If you help reduce their usage
at peak hours, you will be taking steps in the right direction to reduce demand
and reduce your headaches. You can’t count on the fact that you might be able
to pass price spikes and other costs associated with peak power production or
acquisition on to customers, large or small. You need another solution. Helping
them increase efficiency and reduce load will help you in the long run.

And remember, load reduction is not generally a concern for small businesses.
Half of the small business customers in the United States are billed on an energy
basis only. They don’t see load reduction as their job at all. And it really
isn’t their job. It’s yours. But here’s where your newly revived relationship
with your small business customer begins to work for you. You create service
offerings that will encourage them to use less energy at peak times, and you
don’t have to lift a finger. Turning them on to load-reducing, energy-efficient
programs is easier than turning on a switch.

Can It Be That Easy?

Do such easy solutions really exist? Can you develop a symbiotic relationship
with your existing small business customers without breaking a sweat? The traditional
wisdom has been that they are a very hard segment to reach due to transaction
costs, low bills, and modest savings potential. For example, ESCOs largely ignore
them. Aspen believes, however, they can be served effectively and profitably.
There are turnkey solutions in the market to which your small business customers
will gravitate because they are easy, affordable, and effective. We know that
in order for any solutions to be attractive to your small business customers,
they can’t jeopardize cash flow. Therefore, favorable financing options should
be included. And — most importantly — implementing these solutions
cannot interfere with regular business.

Case Study: Silicon Valley Power and
Goble Properties

Goble Properties Adds Value and
Saves on Costs

Property management firms have long shied away from adopting energy
efficiency incentives because of competing views of such investments by
property owners, management agents, and tenants. Management agents focus
first on rental values and second on high occupancy. When the utility
bill is included in rents, tenants are unaware of the energy cost consequences
of using energy inefficient appliances, or keeping lights on unnecessarily.

Goble Properties manages 50,000 square feet of space in seven buildings
in Santa Clara. Tenant companies range in scope from computers to an environmental
testing lab. Goble Properties Manager Robin Jewell noted, “We knew our
tenants could benefit from improvements in HVAC and lighting in our buildings,
and that their productivity would increase as a result. We guessed that,
in the long haul, we would see our utility costs drop if we upgraded.
What we didn’t know — how could we undertake an upgrade without costing
us an arm-and-a-leg?”

SVP offered a double-rebate incentive, prompting Goble to agree to retrofit
its existing T12 fluorescent tube lighting to the energy saving T8 type.
By upgrading its lighting, Goble achieved long-term energy reductions,
without negatively impacting its tenants, the quality of life, or the
quality of light. In this same time period, SVP had tripled rebates to
motivate Santa Clara companies to upgrade their air-conditioning. Goble
opted-in here as well, replacing five rooftop HVAC units totaling 23 tons
of cooling with new units that featured twice the efficiency of the old
equipment.

Goble completed its air-conditioning and lighting upgrades in just over
3 months, from inception of its OPUS agreement to final installation.
Goble’s net cost for the upgrades was about $32,000, which was financed
internally. Goble now saves nearly $10,000 per year in power costs. “The
changes have saved us money without costing us business,” Jewell noted.

Investing in the Community

Santa Clara-area contractors implemented Goble’s HVAC and lighting upgrade
installations. Their net gain was about $60,000 in new business, with
minimal marketing cost. The OPUS team delivered a qualified sales prospect,
helped close the sale, and then dealt with all the utility paperwork to
ensure best value for the customer. The OPUS team took care of all technical
assistance, contractor interaction, and utility paperwork filing to gain
customer rebates — the customer suffered no interference with its
main business.

Such benefits are replicable in many settings outside Santa Clara. Typically,
in a region where distributors are purchasing wholesale peak energy at
$1,000/MWh, the 30 MWh delivered to a customer like Goble is worth as
much as $30,000/hr to the utility. The added incentives for contractors
and trades allies are enormous.

Making your solution work best requires your entire trade ally team —
from banks to contractors. Energy efficiency projects must be attractive to
lenders who work with small businesses. A small business will reject a project
out-of-hand unless flexible financial options are available; and your local
financial institutions will not touch a project that does not satisfy their
financial criteria.

Contractors have to buy into the value of these programs, too. Traditionally,
contractors shy away from small business projects because they are too —
well, um, small. Even when utility incentives are available, contractors frequently
avoid such projects due to the paperwork burden. If projects are grouped, sales
cycles are shortened, dispute resolution is streamlined, and commissioning is
simplified — and then contractors are more likely to work with them.

Sound like a daunting task? Can you implement customer service solutions that
deliver energy efficiency benefits to your customers without excessive transaction
costs, and without intrusion into their businesses? Can such programs offer
flexible financing options that are attractive to customers and local lenders?
Can these programs be made profitable for your local trade ally community, even
though they focus on the small business sector? And, most importantly, can these
programs make business sense for your utility in this new era? The featured
case studies describe proven, turnkey solutions offered in the market today.
They allow you to sign up for as much or as little of your own staff involvement
as you desire, with suppliers doing the rest. The programs are broadly replicable
and can lead you to success in an underserved market niche.

Driving Down Load While Driving Sales to
Your Customers

Let’s look at another large-scale energy efficiency success story. Consider
New York’s Keep Cool program. This program was responsible for replacing about
40,000 old window air-conditioning units in summer 2001 alone. Through Keep
Cool, residents were urged to turn in inefficient air conditioners, and received
a $75 turn-in bounty if the old unit was replaced by a new ENERGY STAR® rated
air conditioner. The program did more than give relief to sweltering New Yorkers.
By their very nature, air-conditioner efficiency programs give relief to those
who need it most — you, your small business customer, and your residential
customer — a “win” all around. Keep Cool had a significant impact on load
reduction. Under reasonable assumptions, New York saved nearly 7 MWh —
enough power to meet the peak power needs of about 8,500 homes in the state.
By the same token, appliance dealers (small business customers) saw their sales
increase. The turn-in bounty drove a measure of early replacement sales to the
dealers that were in addition to normal replacement sales. Finally — depending
on wholesale prices — utilities may have experienced up to $2 million per
year in cost avoidance from the program.

Programs like OPUS and Keep Cool have been shown to be highly effective. The
key is to find and implement a program for small businesses that offers a complete,
worry-free solution that benefits utilities, small business customers and your
trade allies. For energy companies, the program should increase profits by increasing
customer loyalty and enhancing brand positioning, which helps retain existing
customers and attract new ones. For businesses, the program should be specifically
designed to maximize profits by identifying and implementing optimal energy
use solutions at each facility.

Success stories like those in California and New York are within reach for you.
But these successes would not be possible without outsourcing programs that
provide services such as surveying, reporting, project specifications, vendor
proposal evaluation assistance, project contract negotiation assistance, financing
assistance, and post-installation inspections. Find an outsourcing program that
guarantees these services and you will be looking at a win-win situation for
you and your small business customers. Programs like these are not just talk.
They provide real benefits to you and to your customers. Your small business
customers are waiting to hear from you.