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Published byElfreda Wilkinson Modified over 8 years ago
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An Energy Product Breakthrough! Bob Hughes Manager, Product Marketing Georgia Power Company FlatBill for the Energy Industry
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Residential and Small Commercial Customer Concerns Some customers want to know exactly how much they will be paying for utilities – No Surprises! They want a totally flat bill with no possible bump or additional, after-the-fact charge when costs are higher than had been expected as found with Budget Billing Many customers dislike their bills for energy subject to the weather They are better able to manage their energy bills if the bills are spread equally over the year rather than spiking in certain months
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FlatBill: A Classic Win-Win Product on the Verge of Market Prominence FlatBill is an exciting and remarkable pricing innovation! Customer is offered a Flat price for an entire billing period regardless of underlying costs and usage changes Conceived through market research directed at mass markets Will capture a large market share AND Provides a healthy return to the provider!
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Program Design Target Customers Residential/small commercial At least one year history Good credit but may be ideal for bad credit
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Electric Utilities Commission Approval Status Map Permanent FlatBill Tariff Pilot FlatBill Tariff Without FlatBill
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Electric Utilities Offering Flat Bill Permanently approved tariffs Georgia Power Duke Power Progress Energy (NC, SC) Gulf Power Company Indianapolis Power & Light Pilots Jacksonville Electric Authority Oklahoma Gas & Electric Alabama Power Company Pending approval or roll-out Savannah Electric East Kentucky Power Cooperative Public Service of Indiana Electric Power Board of Chattanooga
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Why Should Utilities Offer FlatBill? Marketing and financial product catalyst Customer satisfaction High retention Open access Customer Satisfaction Customer Choice 95% of those surveyed said Flat Bill met/exceeded expectations 71% of those surveyed said they are very “likely” to renew; 1% “unlikely”; actual renewals > 90%
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Why Offer Flat Bill? Customer Satisfaction Results Favorable public reaction (Ex. In Georgia received favorable press in local newspaper, AP Press, Local Radio/TV, Paul Harvey newscast) Reduction to deferred payments 10%+ market penetration rate for residential customers Enrollment rates vary based on customer segment and profile
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Why Should Utilities Offer Flat Bill? Earnings + $1.3m EBIT per every 25,000 Pricing product portfolio fit Penetration 7-15% for residential; 5% for commercial Growth Primarily off peak
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Why Should Utilities Offer Flat Bill? Addresses some regulatory concern Creates bill simplicity by bundling components Complaints due to unexpectedly high bills Flat billing products approved by regulators in at least 10 states Catalyst for product innovations in the mass market
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What to Expect from FlatBill? Healthy growth mostly off-peak High customer satisfaction and renewal Reduced deferral payments and bad debt Good penetration rates with attractive premiums Strong interest from budget pay customers Manageable risks Natural hedge
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Flat Bill Data Management Actual Usage OFFERS Analysis & Design* Weather Pricing Parameters Customer Care and Marketing CUSTOMERS Accounting and Risk Mgmt Agents Pricing Department Historical Usage Billing System and Data Bases Tracking Software Inputs/Outputs Systems Offer Software Reports *Christensen Associations **Direct Options * * * *
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Flat Bill Issues Accounting Above or below Regulatory approval/Conservation Volatility of Fuel Cost Program Resource Needs Target Marketing Renewals Segmentation Tracking software Reporting
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FlatBill Issues Pilot or permanent initial rollout Financial impacts Product design –Bill algorithm and software Risk coverage and premium –Tariff design Eligibility Pro-rate Force majeure Early termination Meter route changes Budget billing History and credit
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FlatBill Separating Fact from Fiction!!
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The Georgia Power FlatBill™ Experience Pilot programs: residential, small commercial 500 customers – 2000-01 10,000 customers – 2001-02 Permanent program – 2002- present 130,000 customers approx. in population of 1.3 million Renewal rates: very high Issues: Measurement of response Treatment of rapid-growth customers Pricing strategy (segmentation needed?)
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Unfounded Risk Perceptions System Capacity Will Suffer Customers Won’t Buy It Unmanageable Risk Regulators Won’t Approve It
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System Capacity Doesn’t Suffer There is an increase in energy and demand consumption Occurred during off-peak times Program accurately measures participant’s change in behavior Change in demand is quantified and factored into following year’s pricing Efficiency rewarded with a lower offer Program materials encourage energy efficiency
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Customers Buy It Customers value predictability and are willing to pay a premium to get it Appeals to identifiable customer segments Can be modified to extend reach into incremental segments Results have exceeded clients’ expectations
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The Risk Reality Program not designed to “win” every year Earn a given return over multiple years Product not for every customer GPC exceeded goals in 2001, 2002 and 2003 and 2004 Need remains for a Budget Billing (EPP) product
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Regulators Do Approve Shift risk away from customers to utility Reduces customer complaints to commission Gives customer the opportunity to say, “No” At least seven states have granted approval
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Offer Development KISS – Keep It Simple & Sweet Focus on customer benefits Vary Terms & Conditions of offer to meet needs of the market segment Facilitate customer understanding Provide meaningful comparisons Make it easy to say “Yes”
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Market Segmentation Various target audiences Customer segments are “offer sensitive” Product supports various offers and pricing/payment options Propensity model assists in segmentation
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Creative Materials Tested a range of formats and messages #10 Personalized Mailing Follow-up “Deadline” Mailer Enrollment Confirmation Package Avoid jargon, caveats and “commission” language Allow customer to make informed decision
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25 Bill Volatility Extreme Weather Bad Credit Seasonal Effects Developer Packages Conservation Package Multi-year Apartment Packages “Green” Package Prepay w/Discount Prepay “Phone card” Limits Plus Banded Flat Bill Standard Flat Bill Flat Bill Family
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