Contrary to the traditional paradigm of maximizing revenue by driving energy consumption, more and more energy companies are trying to help their customers consume less through energy efficiency measures. Some of the measures in case of residential customers include better insulation, use of high-efficiency boilers, smart meters and micro-generation. For example, the annual report of a leading energy company in the UK1 states that homes in the UK are responsible for a quarter of UK’s carbon dioxide emissions, and energy efficiency measures have the potential to reduce carbon dioxide emissions in this sector by 20 percent over the next 10 years. When coupled with the fact that the household electricity consumed will become lower carbon, the overall saving for households could amount to 35 percent.
Companies are not taking this path as a philanthropic gesture – a multitude of forces like constant pressure from environmental regulatory bodies to cut carbon dioxide emission, cutthroat competition, increased customer choices and aware / demanding customers are forcing energy providers to go this path.
The investment in lower carbon generation, however, comes at a price on top of rising commodity prices; the bad news is that companies will not have the luxury of charging it to their customers. They will have to find ways to offset this cost through the three broad strategies:
While all of the above play an important role in cost savings, this following section discusses how data analytics on CRM, billing systems and customer information can be leveraged for achieving cost savings.
The starting point of the demand-supply balance is the point of consumption, and the emerging strategy in recent times has been to influence the consumption pattern of the consumer. The ability to influence it necessitates the need to understand the customer engagement life cycle, and that is where energy companies need to bring in two types of specialists – the first one being the products company that sets up the infrastructure to measure and monitor energy consumption while the second one being data integrators and analytics service providers. Their end objective is to identify consumption drivers, derive customer insights and feedback the intelligence to the energy companies to include desired consumption and plan supply for the longer term.
The figure below illustrates a six-stage development road map to set up a process for achieving three interrelated objectives: energy efficiency, customer savings and profitability.
- New user, existing user, lapsed user
- Pay-as-you-go customer or credit customer
- Billing schedule and payment behavior
- Width of product: whether the customer currently uses only one kind of product or uses more than one (electricity, gas, heating oil)
- Width of service: whether the customer currently uses only one kind of service or more than one (boiler maintenance and kitchen appliance maintenance)
-Online account or offline account
- Consumption pattern at different time-periods
- Owns energy efficiency appliances, hybrid electric vehicles at home
Operations and commercial information
- Energy supply schedules and cost of generation / transmission / distribution at various source and destinations
- Pricing information for types of products and services
- Cost of purchase from energy markets
- Cost-to-serve the customer clusters
- Pricing and transactions from billing systems
- Customer demographics history and engagement information from contact centers and CRM systems
- Energy supply - Generation and transmission load schedules from upstream business
- Energy futures and spot volumes transactions from trading desk
- Extract and transform data from multiple sources in a single data repository. Form data structure based on the level of measurement and analysis desired
- Set up a process for data cleaning – for missing and inaccurate information
- By customer life cycle stage
- By account and average transaction value type
- By patterns of consumption at different time-periods
- By demographics
- By cost-to-serve
- By responsiveness to pricing and marketing promotions
- Consumption pattern in a year, consumption pattern within a day, weekdays and weekends
- Responds to a promotional campaigns
- Response to a price increase
- Average number of inquires or complaints to customer contact center
- Responsive to one-time investment for energy efficiency – boiler insulation, solar-panels and others
John is 42 years old and married with two children. He has had both electricity and gas from different suppliers for over 10 years, having switched to get bundled pricing benefits on products and services. He is fairly loyal to his supplier, mainly due to inertia.
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18 January 2022
26 January 2022