Chatterji: Customer the Focus at Smart Grid National Town Hall

Friday, 22 July 2020

For the second year in a row, “The Customer” featured prominently at the National Town Meeting on Demand Response and Smart Grid. Pepco Holdings’ CEO Joe Rigby kicked off the conference with informal remarks emphasizing his company’s current focus on the customer, and on communicating effectively. He also noted that utilities traditionally aren’t very good at talking to their customers.
What’s so hard to explain? Commercial and Industrial enterprises seem to get it: Bob Valair of Staples noted in one session that, back in 2001, halving lighting levels in CA stores during peak demand cut 15-20 kW per store. Over 119 stores, the savings were meaningful, and by telling customers that the move would help prevent local brownouts, the company got some positive PR. The GSA (the Federal Government’s landlord) made about $130,000 by meeting a 1 MW reduction commitment during peak demand events across 10 of its buildings last year.

But residential customers don’t have millions of dollars in electricity bills to offset, nor do they typically need good press. So what themes might resonate with them?

A highly unscientific poll of conference attendees suggested that the best message to consumers is about lowering electricity costs (62%), while  providing “new information and choices on electricity use” came second (23%). But communicating those two messages is inherently tricky. Here’s why:

Not everyone will save money, and any savings might be small. With increased rates during peak times, customers who continue to concentrate usage during these times will pay more than they do now. Others who shift usage away from peak will save, but no one knows how much. It could be pretty small, relative to the effort of modifying behavior. Instead of a cost savings, customers could feel that they will have another thing to worry about, if they don’t want their electricity bills to rise.

“Smart appliances” might help. These connected devices would keep track of the cost of electricity at different times throughout the day, and only perform demanding tasks when  kW are relatively cheap. But will consumers feel empowered to make choices when their washing machines have a mind of their own?

Unfortunately for utilities, the benefits of the Smart Grid are complicated (even if they are meaningful), having to do with deaveraging. Right now residential customers pay an average rate, which gets inflated by surges in demand at peak times. Individual households aren’t able to impact this average rate, since their contribution to peak demand is negligible. Smart meters promise to track customers’ usage in 15 minute intervals, allowing utilities to recognize and reward good behavior, and empowering consumers to take responsibility for the decisions that they make. This economics explanation is no doubt hard to communicate - especially to those who are happy shirking that responsibility today.

Bikram Chatterji is a veteran strategy consultant, with years of experience advising senior executives in the financial services sector about customer strategies and product design. He recently left his role as a Principal with Novantas LLC to pursue opportunities in energy, with a focus on cleantech and conservation. He holds a BS from Yale University with concentrations in Biology and English.

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