Customer care and billing in competitive unbundled energy markets

IDC

By Roberta Bigliani and Giai Galliotti
June 2012

(Below is the introduction to the MarketScape analyst report from IDC Energy Insights on customer care and billing for competitive energy markets. In this analyst report, IDC Energy Insights positions LogNet Systems as a Major Player in the market for billing solutions in the utilities sector. To download this analyst report, please click here.)

The introduction of competition in the supply of energy commodities to any category of customers together with the unbundling of the value chain significantly reshaped the energy sector and profoundly impacted how utilities interact with their customers. More recently the implementation of smart metering for residential customers, demand response and customer engagement programs, electric vehicles and other innovations are increasing the functionalities, scalability, and flexibility requested of customer care and billing systems.

Energy retailers in competitive markets are looking for solutions to help them reduce their cost-to-serve, manage multichannel go-to-market, protect their revenue also by choosing the right customers to serve, effectively handle demand management, and more broadly energy efficiency and customer engagement, while at the same time improve customer satisfaction and comply with regulation.

Some of these requirements are also present in non-competitive vertically integrated markets, but the need to target and acquire new customers or the need to predict and reduce customer churn are distinctive elements of competitive markets. Additionally, unbundling has broken the traditional meter-to-cash process: retailers need to receive metering data (enabled or not by smart metering) by an external entity, being the distribution company, the metering company, or a new organization, such as the DCC in the U.K. For energy retailers this macro-process could be redefined as “contract-to-cash.”

IDC Energy Insights believes that customer care and billing applications to best serve unbundled competitive energy markets need to provide the following keys core capabilities:

Support customer targeting and acquisition – In competitive energy markets, retailers need to understand what types of customers to target to maximize company profitability.
Multichannel integrated campaigns need to be smoothly executed and new offerings designed and marketed.

Provide rating and billing flexibility – CC&B systems need to be flexible enough to rapidly accommodate new and more complex pricing arrangements. Retailers need to accelerate the capability to respond to changes and opportunities on the market and be faster in their go-to-market with new bundling of products and services or discount campaigns. They also need to keep track of any new offerings they are marketing; in other terms be able to manage a “product catalogue” to reduce errors and reconciliation.

Provide quick and comprehensive analytics throughout the entire contract-to-cash process – The role and importance of analytics in customer acquisition and management is evident: for instance, with analytics utilities can combine smart meter (when available), bill payment, and demographics data to improve more basic customer service functions, formulate new offerings, and improve marketing communication. Analytics also play a key role in utilities’ revenue protection, for instance helping to prevent fraud and theft, or assessing customer credit risks. Additional distinctive analytics capabilities are related to the speed of the analysis, for instance providing immediate answers to customer or sales representatives while they are interacting with clients, or allowing them to integrate external data to predict customer churn or insolvency. Integration of social influence into customer profiling is a further evolution into customer insights.

Provide converged billing – In order to increase revenues from clients in a very low margin business like electricity retail, suppliers have combined multiple products. Dual fuel (electricity and gas) is the norm, but some suppliers (especially new entrants or operators in more competitive markets) are also including in their offering other products and services, such as telecommunication or Internet services, or post meter services related to energy efficiency. Moreover, energy retailers are preparing themselves for the future, for instance integrating the offering of electric vehicle recharging (at both private and public charging spots).

Be “smart meter ready” – The rollout of smart meters is still far from being completed and even mandated in some countries, but any new implementation of customer care and billing needs to be ready to deal with real meter data and a different logic in billing cycles. CC&B solutions need to prove scalability, especially in enabling time-based billing and even more if utilities need to introduce real-time metering and billing (for prepayment, electric vehicles, etc.).

Enable customer self-service – Utilities need to provide portals allowing customers to have information about their energy usage, compare their usage with their peers, simulate bills for different contract options, and get suggestions on how to better manage their energy usage and costs. However, most importantly, they should enable customers to perform actions online, like enrolling for a different pricing option, signing into a new contract (or cancelling an old one), or scheduling onsite visits. Moving customer contacts to less expensive channels, reducing the number of incoming calls from clients, reducing the cost of handling customer churn, and proactively managing revenue, particularly but not only during the current economic downturn, are a few examples of the key imperatives that utilities are trying to address.

Provide EDI-standard compliant templates for market messages – Standards to transfer data among operators in unbundled competitive markets are different in each country or region. The availability of specific modules integrated with the CC&B core which are compliant with regional or national specifications is an interesting feature to significantly reduce implementation costs.

To download this analyst report, please click here.