Monday, August 16, 2010

How Much Is This Going to Cost Me? (A Utility’s Dilemma)

Today’s utilities are scrambling to upgrade critical power delivery systems. Whether it’s smart meters or major transmission lines, the current electricity grid needs a face-lift. For customers, the front of mind question as the recession continues to linger is, “how much is this going to cost me this time?” Talk about a communications challenge.

For large-scale electricity transmission projects this challenge is further complicated by cost socialization schemes built on the theory that many benefit from each project constructed. The utility building a given line will often provide power to multiple utilities along its path. Each new line also provides other intrinsic benefits to the entire system that only an engineer could explain. Because of these socialized benefits, the cost is often socialized as well. This is the case for the PJM Interconnection where several new high-voltage electricity transmission lines are now being proposed.

In this month’s Public Utilities Fortnightly the notion of socialization is challenged revealing a growing chorus of people who support eliminating this scheme and asking those most directly benefiting from a project to bear the cost of these lines. Their position – Ohio residents shouldn’t pay the cost of a transmission line in New Jersey.

This internal fight highlights something Potomac Communications Group continues to see as we conduct focus groups about this issue and other utility upgrades. Notably, the cost of power is difficult to explain and even socialized payment methods don’t make customers feel better about rising bills. So what’s a utility to do?

It’s important to focus on the benefits of upgrades and reinforce that old message point of building greater reliability (this continues to be one of the most believable messages after all these years). So, the next time you find yourself lost in the weeds trying to explain the costs of these complex projects, remember that a deep and logical discussion of who pays for the upgrades will never spark warm feelings between customers and their utilities. Just stick to the benefits that will have an immediate positive effect on your customers’ lives and make these messages the core of your campaign.

-- Potomac Communications Group

Monday, August 2, 2010

A surprising challenge: selling Smart Grid

To a salesman, it must sound like a dream product: it will allow greater use of solar and wind energy to save on our carbon emissions, improve the reliability of our electric power system, give consumers more control of their electric power and its cost, help avoid the cost of building expensive new power plants and help utilities communicate with customers during emergencies. Slam dunk, huh?

So it would seem. But as Hawaii found out last week – after similar experiences in California, Texas, Illinois, Indiana, Maryland and other states – making the case for the Smart Grid and Smart Meters has not been so easy. It has run into serious opposition from several public service commissions, many individual consumers, media commentators and strong interest groups like AARP.

Smart Grid is essential to the future of our electric power system, as we all want it to evolve. Without it, energy efficiency advancements and incorporation of renewable energy sources, scattered around geographically, will be impossible achieve at the scale we need. And without it we will need to build far more peak-load power plants, to meet energy demand when it spikes to its highest levels on summer afternoons, which will further drive up the cost of electricity.

But selling this concept has hit a series of obstacles. Some companies ran into problems with regulators and consumers because of their strategy for paying for the Smart Meter investment. But others may have hit potholes because they took it for granted that their customers would embrace the new devices. Their communications emphasized the fancy new technology and all its neat features; what they should have emphasized – what successful companies emphasize – is the personal benefit that individual customers will receive.

How to sell Smart Grid? Michael Howard, the CEO of the Electric Power Research Institute, told the Edison Electric Institute’s annual conference last month that there are three answers: “Communicate, communicate, communicate.” And how best to communicate? Joseph Rigby, CEO of Pepco Holdings, Inc. in Washington, said it has to begin with person-to-person communications, “in meetings like this.”

And it all must begin with the right message - to show customers and regulators that the broad benefits of the Smart Grid, including reliability, faster outage notification and customer control, have a direct impact on individuals who use electric power.

Partly because of federal stimulus funding, more utilities are making plans for roll-outs of Smart Meters in their service areas. Let’s hope that they have learned the lessons from the pioneers who seemed to take regulatory approval and customer support for granted – because it looks so much like a slam dunk.

- Potomac Communications Group