The Utilities industry faced tough conditions before COVID with new entrants into the market. Now, Utilities are threatened financially, both because of stock market declines as well as changes to demand patterns with many around the world sheltered at home.
From 3 March 2020 to 12 April 2020, each of the “Big Six” in the UK registered a drop in their market capitalisation ranging from 18% to 55%. At the same time, within a week after Italy’s lockdown began the country saw an 18% to 21% reduction in both peak demand and energy consumption on a year-over-year basis, according to data from EPRI.
Reduced demand due to business shut downs and the market’s contraction could also lead to an increase in payment defaults and will make near-term survival the biggest agenda item in coming weeks. In absence of knowledge of what the new normal will look like postviral era, it will be difficult to peer through the fog of uncertainty and think through positioning once things return to normal.
No one can fully predict what the post-virus reality will look like, but data and analytics can help utilities to understand customer behavior/needs and utilize those insights to change operating strategy quickly to minimize the impacts during these times. We do know how things have changed over the past few weeks.
- Customers are likely to be available throughout the day.
- Daily consumption patterns are almost mirroring weekend consumption patterns.
- Consumptions is higher than usual and while the Pay-as-you-go customers are aware of this, the Credit base are not prepared for a bill shock.
- Marketing and customer engagement strategies can be updated to identify the best “next action” (help/info) required by the customer.
- Analytics can help segment the population quickly to determine clusters of similar requirement and prioritize action.
- Identify the profile/segment of customers where we see such in day consumption patterns change post lockdown by utilizing the Smart meter reads.
- Customer needs to be engaged with up-to-date information about consumption changes. Analytics can help shape contact strategy as well as content of the communications.
- While the customer will want to connect, we need to determine how are people wanting to reach us and why. Now this has always been the exam question but it gets more complex as the resources are limited and reaction time shortened.
- Customers who are still dependent on the calling channel will get slower response.
- Digital/Self-Serve adoption will increase but is the system ready to absorb the influx and do we have the readiness for all types of customers.
- Customer journeys will change and the reaction time will be shortened. The big strategy question coming is: should utilities revisit their CEX initiatives and focus more on digital journey maps for customer journeys.
- Preempt the contacts by proactively reaching out to the customers with information they may need. “The Best Next Action” engine needs to work in reverse.
- Fine tune Digital/Self-serve channel strategies to adjust to new sign ups and high volumes.
- Customer Experience strategies need reevaluated.
- Billing system thresholds are going to get breached and need updated to avoid more system exceptions and billing failure.
- More bills will likely be estimated reads due to lockdown periods.
- Potentially larger group of customer to fall into the vicious cycle of estimation, bill shock, Cancellation, reassessment and Debt.
- Data can be analyzed to determine the new threshold changes required to adapt.
- Prompt strategy will need to be re-calibrated and changed to encourage more customers to submit reads through app/web.
- Read utilization from both Smart and Customer-own read channels needs to be increased. Analytics can set up data filters to determine accuracy and avoid exception generation.
Economic Impact on Customers
- Current tariff plans might inadvertently push the customers into debt.
- Customers struggling economically will want payment holidays but not all Utilities suppliers are prepared for this and want cash flow to continue.
- Debt is increasing and aging with new customers coming in the debt trap and old ones not paying up.
- Estimation methodology needs to change and be adjusted to the situation where customers who have historically consumed less now will have artificial debt piled up upon reassessment.
- Design tariff plans to leverage consumption pattern changes and provide more energy savings to customers.
- Identify customers mostly likely to be vulnerable economically in the short term and evaluate payment recovery options even if it means in small installments and breaks.
- Proactively connect with customers to understand their payment options both in case of existing debt and the ones with a probability of going into debt.
- The market landscape will change.
- Cash-flow problems are not new to this sector but have severely been aggravated with COVID.
- We will see more M&A considering small suppliers without healthy financials won’t be able to survive.
- Data Analytics will be key to decipher the market change and will clear out a lot of doubts pertaining to what is the right or wrong way to maintain a healthy cash flow.
- Smaller players who generally don’t hedge for energy buying will need help on how to buy energy strategically in the short term.
- Cost avoidance will be key, and data can identify areas of focus.
- Opportunities will emerge to quickly pick on marketshare, including M&A.
“ Identify customers mostly likely to be vulnerable economically in the short term and evaluate payment recovery options even if it means in small installments and breaks.”
Reacting to the immediate situation due to COVID19 is necessary to survive, but the right insights are needed to know where and how to prioritise efforts. Data Analytics can empower companies to react more precisely by understanding the customer needs accurately. Determining the right action which will not only be cost effective but will establish a bond with the customer and might lead into an everlasting relationship.