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August 14, 2013

Utilities Business Is No More Business As Usual

Posted by Ashiss K Dash (View Profile | View All Posts) at 12:36 PM

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I predict that in the next 10 years we will see more profound transformation of the energy industry than what the last century has seen since the days of Thomas Edison.

What is already happening is that consumers are no longer willing to pay their utility bills without a good idea where their dollars go. Energy isn't cheap, and consumers are cost-conscious in this economy. They want their utilities to be more transparent and to communicate with them not unlike the way giant retailers do. Are utilities becoming more aware of how they brand and market themselves? Yes. It's already happening.

Plus, these venerable companies are increasingly looking at themselves as service providers that must be responsive to their customers' demands, especially as those demands involve value. It's a sea change, all right. For the better part of a century, utilities were solely commodity providers. They sent their meter readers out and collected bills. Now companies like FPL, SCE and PG&E are engaging consumers extensively with social media tools. The trend seems to be catching on

Indeed, these aren't your father's utilities. Utilities risk disintermediation by giant companies like Wal-Mart that have the wherewithal to produce their own power. They're also under increased pressure from regulators to meet requirements for conservation, clean and sustainable energy sources, and increased reliability in light of storms and cyber threats. No doubt about it: Their future returns are at risk. That's why savvy utilities are transforming themselves into energy solutions providers.

Utilities need to ask themselves if they're optimizing their assets and business portfolios to compete well into the future. A traditional electric utility business portfolio would include generation, transmission, and distribution assets along with customer care. The portfolio of the future could be a combination of any or all of these elements, but from a fresh perspective. If they don't choose to diversify their portfolios, they will essentially become asset managers of aging infrastructures. If they stop meeting the demand of their market and instead simply manage their legacy assets, then, beyond a certain point, they won't be able to sustain themselves financially.

In the current situation, data and analytics will play a key role in shaping the future of utilities. With more advanced analytics, utilities can detect patterns they previously took for granted. We're showing them the benefits of investing heavily in analytics. On the front end, new ways of using analytics impact consumers directly. Smart meters and sophisticated thermostats allow consumers at home to better understand their energy usage and where they can conserve. Mobility is enhancing the pervasiveness of this information and ease of access to the data when consumers want it.

Thanks to Big Data, we use analytics across business and operational processes to gain insights that help utilities understand how they can optimize and even reconfigure themselves to remain competitive. For instance, utilities are becoming better at looking for statistical outliers. Utilities know that household consumption is very stable. An average house of 2,000 square feet will consume a certain amount of electricity each month. Their new data and analytics, for instance, might indicate that a certain area of town has more swimming pools and therefore a concentration of energy-hungry pool pumps.

Patterns emerge out of any data collection, especially when it comes to the energy needs of modern families and companies. Did you know that owning an electric car nearly doubles the electricity consumption of the average American household? Electric cars can provide a good opportunity for utilities to analyze modern consumption patterns. (It's ironic that consumers who are concerned about the harmful effects of fossil fuels buy electric cars, only to tax the ageing utility infrastructure.) The fact that an electric car doubles the electricity consumption of a typical household is something of which utilities are becoming keenly aware. They're building additional lines and meeting that demand. Plus, electric cars pose a potentially huge opportunity for utilities to get into the refueling business.

A warning to utilities that pine for the good old days of regulated monopolies: Innovate now or risk fading off into the sunset. Infosys is helping forward-looking utilities focus their resources on continuous innovation. Maybe a utility will concentrate some of its focus on powering a new generation of electric cars. Or maybe they'll come to see that customer management is their best way forward. By pinpointing demographics, utilities can get their second wind and develop more efficient processes. Those are the kinds of energy solutions that will keep them competitive in the decades to come.

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