September 22, 1997

UTILITIES: Power To The People Utilities are using IT to help them provide top-notch customer service By Richard Adhikari lectric and gas utilities are learning what many other businesses have known all along: In an unregulated market, the customer is king. Customers expecting the freedom to buy electricity at the best prices from any supplier are demanding more and better services from their utilities. That includes better rates, as well as help cutting their electricity bills. For utilities facing deregulation, the ability to offer topflight customer service is becoming a matter of survival. To provide it, they're turning to information technology, especially the World Wide Web. David McCrae is typical of electric utilities' New Age customers. As manager of engineering at steel bar manufacturer Slater Steels Corp. in Fort Wayne, Ind., McCrae has watched his company spend $4 million a year on electricity from American Electric Power Co. in Columbus, Ohio. McCrae hit the roof when he checked out his utility's rates on Energyworld, a Web site run by independent knowledge broker Peak Network Communications LLP in Denver. Why was he upset? Because American Electric's charges range anywhere from 0.3 cents per kilowatt-hour to 84 cents. "That's about a 30,000% spread," McCrae says. "We thought the spread would be something like 30%." A New Focus That startling realization led McCrae to renegotiate his company's rates. He hacked Slater Steel's electricity bill down to $3 million a year and now expects to slash costs to a little over $2 million a year once the market is fully deregulated nationwide. "The agreement we're considering was unimaginable two years ago," McCrae says. It's not unimaginable now-and it certainly won't be tomorrow. Negotiating better rates and insisting on partnering with electric utilities will soon become the norm in corporate America, says Susan Thiros, a consulting manager in the IT transformation practice at KPMG Consulting in Chicago. "Industrial customer plant managers will take advantage of off-peak rates and do whatever they can to get a better price," she maintains. But price isn't everything: To succeed in the newly competitive market, utilities also have to focus on the customer, says Kevin Moonan, general manager of IBM's North American utility and energy services unit. "One CEO told me he's constantly selling his employees on new ways of doing business and approaching the market," Moonan says. "They need to recognize users as customers, not as meters." Utilities dealing with retailer Sea rs, Roebuck and Co. in Hoffmann Estates, Ill., have had no choice but to learn the art of partnering. John Mengelson, director of facilities management at Sears, has selected seven utilities across the country that will work with Sears stores, helping them cut their electricity consumption and adapt to new technologies. "There'll be new gadgetry in the industry every week, every month," he says. "We expect our electricity vendors to research all of them and bring to our attention whatever saves on our energy consumption." Northern States Power Co. in Minneapolis is using a client-server setup to partner with customers. The system, built with help from Andersen Consulting in New York, queries meters at customers' sites at hourly or other preselected intervals. It then logs that information in databases. Next, Northern States' staff analyzes the data and provides feedback about consumption patterns to the company's 1.4 million customers in Minnesota, Wisconsin, Michigan, and the Dakotas. "In the deregulate d world, the service we provide to customers will become increasingly important to differentiate us from a competitive standpoint," says CIO Paul Anders Jr. At American Electric, VP of IS Joe Valentine is reengineering company systems to support new efforts to market innovative products and services, including home security, energy management, and automated meter reading. That will require giving the IT staff tools to access and analyze data. It will also require Valentine to bring in applications such as Lotus Notes and E-mail. He has also given about 1,000 company users access to the Internet. Valentine is now looking at intranet and Internet technologies to help bring new products to market faster. And he's piloted several intranet-based applications to improve customer service and boost marketing efforts. Further, American Electric is moving from IBM's Systems Network Architecture networks to TCP/IP networks and has installed an ATM (asynchronous transfer mode) backbone. The goal: to balance the need for legacy systems with the desire to move to faster client-server systems. "Deregulation is giving customers the choice, and we want to make customers want to choose us," Valentine says. Southern Co., an Atlanta holding company that says it's the largest U.S. producer of electricity, is positioning itself as a super-utility by offering hardware and software to other utilities. "The companies that have the best technology and can project that in the form of products and services into the market will have a very strong competitive advantage," says Frank Hyde, general manager of EnerLink Information Systems, a unit of Southern. One product offered by Hyde's group is EnerLink, a PC-software combination that lets customers gather information from billing meters, analyze that information, and audit their own bills. EnerLink also runs a service bureau, Enet, which collects data from the electricity meters of corporate clients and performs bill calculation, budgeting, and other functions for them. Another utility, Pacific Gas & Electric Co., a $10.6 billion electric utility and natural gas services company in San Francisco, is laying the groundwork for improved customer service by moving from mainframes to a client-server environment. PG&E replaced about 40% of its core systems with client-server last year, and the utility has aggressive plans for this year and next. "The IT environment needs to support a different kind of interaction with customers and suppliers," states John Danielsen, former VP of computer and telecommunication services, now retired. That kind of interaction will include hourly meter reading and communicating with suppliers and customers over the Internet. Out of PG&E's 4.5 million residential customers, only about 100,000 have real-time metering. On the other hand, most of its corporate customers already have this system. The company expects more residential customers to opt for real-time metering, increasing the amount of data collected as well as the number of people neede d to analyze it. PG&E also expects more customers to access information about their consumption patterns over the Internet. The new client-server systems will make it easier for staff to access and analyze the data, Danielsen says-and make it easier for the company to add systems incrementally to meet demand. Other utilities are likely to go client-server, too. The move is being driven by efforts to gather and analyze ever more data on customers' consumption patterns, says Bob Welch, a senior VP in the energy practice of consultants CSC Inc. in Waltham, Mass. "The difficulty of understanding customer data is that it requires computing power to be in the hands of people who didn't need it before, or people who didn't exist before, like marketers," he says. "That requires a move toward client-server." And not just client-server. Entergy Corp., an electricity supplier in New Orleans, has developed graphical user interface front ends with PowerBuilder for legacy systems that supply information to c all-center agents and other staff. The goal: to better handle customers' questions and problems. Entergy has also developed data warehouses for marketing and customer service staff. "We're trying to become more nimble and give them more information about customers," says Henry Fiallo, Entergy's VP of IS. Entergy has also installed voice-response units so that customers can do business round-the-clock. Customers dial in to get direct access to, say, billing information or payment schedules. In another IT development, Entergy staffers have been equipped with Netscape Navigator Web browsers for access to applications. Fiallo plans to give customers Web-based access to Entergy's systems later. Another utility, New Century Energies Inc. in Denver, also plans to give customers access to information about their energy accounts over the Internet. New Century has outsourced its IT operations to IBM. Says Donald Borgschulte, New Century's managing director of IT: "We consider IBM to be the delivery arm of our IT organization." Shocking? Not in the electricity business. View the Utilities Chart in PDF format Back to the IW500 Menu Send Us Your Feedback Top of the Page

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