Designing Utility DR Programs to Improve Customer Engagement

Utility customers have little choice in their power providers, particularly in vertically integrated energy markets. Accordingly, utilities acquire their customers less because of winning customer service, service offerings, or more general forces of competition, and more due to an inelastic demand for energy. Despite a relationship often born out of necessity, the utility still has the duty and the interest to provide reliable, affordable energy and excellent customer service to its customer base.

Demand side management (DSM) is often overlooked as a mechanism to strengthen utility relationships with commercial and industrial (C&I) customers. This method often aligns customer preferences for incentives and low energy costs with utilities’ desire to reduce peak demand and power generation costs.

Research Into DSM

Guidehouse Insights and CPower recently published a white paper exploring the mechanisms by which utilities can implement or improve upon existing DSM programs, with particular focus on the nuances of implementing demand response (DR). It highlights critical insights for utilities into the implementation of future customer-focused DR programs, given the rapidly changing and distributed energy grid. Utilities with existing DR programs that are either underperforming or otherwise failing to yield desired results may look to the considerations and case studies to strengthen their existing DR portfolio and meet customer needs.

DSM programs are not only overlooked by utilities, but also by utility C&I customers who seek to lower their electricity costs. Despite proactive action on the part of many C&I customers, there is still a profound absence of knowledge about value creation opportunities through participation in one or more DR programs. The white paper is also geared to C&I customers who would like to learn about different types of DR programs and how to maximize benefits through enrollment.

Changing Customer Needs

Customer expectations for rapid feedback are growing in the age of massive streams of data, artificial intelligence, and on-demand services. Changing customer needs and expectations pose challenges for utilities, which have traditionally struggled to develop strong, positive relationships with their customer base. Utility DR programs provide opportunities to improve C&I customer relationships while benefiting both program participants and the broader energy grid.

By acting with customers’ interests in mind, utilities reap the benefits of their C&I customers' participation in DSM programs. DR helps utilities fulfill their core competency as an energy provider. Through customer participation in these programs, the utility can avoid outages, keep energy costs low, and boost customer satisfaction. Utilities want to be able to more quickly gauge how energy efficiency programs, rate structures, and programs such as DR are being received by customers and how they might make improvements to achieve high satisfaction ratings and Net Promoter Scores.

Challenges Involved

While utility DSM programs serve to benefit both the C&I customer and the utility, implementing a desired program is not without its challenges. By understanding barriers to broader utility perceptions, utilities can proactively work to reduce obstacles in strengthening their relationships with C&I customers. Further, by understanding the utility perspective, C&I customers can better anticipate utility challenges and work to maximize benefits of engaging with their utility.

Utilities implementing DR programs may decide to design, implement, and manage DSM programs in house or use a third-party curtailment service provider. In making this decision, utilities should consider their company’s capabilities including staffing support with program design and knowledge of local regulatory landscapes. Consideration should also be given to the long-term potential for program growth and ability to drive deeper savings, as well as to customer service and engagement capacity.

By involving a third-party provider, utilities can focus on their core generation, transmission, and distribution strengths, while relying on outside DR implementation expertise to deliver a more frictionless program experience.