As a consultant in the utility vertical, I get the opportunity to meet or work with utilities both nationally and internationally. The drastic difference in innovation and customer engagement between a regulated “monopoly” utility and a “competitive” unregulated electric retail provider should not come as a surprise to a lot of people. However, what comes as a surprise to me is the lack of effort that a lot of rate regulated utilities are putting forth to promote innovation and customer engagement.
In my opinion many regulated utilities treat the regulators as their main customers (some utilities actually still refer to their customers as “ratepayers”). It takes a lot of effort to please the regulators and the different advocacy groups that go along with the regulatory framework. That structure is needed to protect the interest of all the different types of customers. The utility assumes (perhaps rightly) that the regulators and the advocacy groups will take care of the customer interests. For the most part, they do, but only after long and extended bureaucratic proceedings that does nothing to promote innovation. More often than not, it just comes down to providing electricity at the lowest perceived possible cost to the customer after the utility gets its guaranteed rate of return.
On the other hand, there are no guarantees in the competitive world. Some may consider it to be the “Wild West” where every electric retailer is for him or herself trying to acquire new customers and retain the ones it has. This customer acquisition desire spurs innovation and creativity. It is pure and simple capitalism at work. You will see retailers bundling electricity with all sorts of other value added products just to differentiate themselves from the guy next door. They come up with different rate plans in order to offer mass customization; they drive the best customer experience hoping to take the conversation away from a price point. They focus on sales; branding and marketing to capture a larger share of the customer’s wallet. They realize that the customer can switch away in a heartbeat…necessity drives innovation.
I realize changing the regulatory structure can take a very long time. However, even the regulated utilities now face competition from solar companies and other companies offering renewable generation services which is slowly taking away the utility’s revenue. Instead of trying to be a quick follower, offering similar programs to their customers and competing with the solar providers, most utilities (not all) react by shifting more of their bill to the fixed cost to the customer, thereby trying to avoid the classic “utility death spiral” that we have all read or heard about.
What if the regulators and the regulated utilities to consider drastically different business models. There are nations and states that are doing this well and in most cases the customer ends up benefiting. Perhaps we should challenge the hundred year old assumption that customers only want “cheap” electricity.