Winter Storm Uri may have blown over, but there’s already another brewing in Texas.
With “Black Swan” weather events set to become more common, state regulators and retailers are expected to make drastic changes to safeguard the grid and regain the faltering confidence of their customers.
Understanding these shifts will be critical for Utilities and energy providers as they plan their next move.
The trouble with trust
The lengthy outages caused by the storm and customer abandonment by some retail suppliers have dented consumer confidence in their Utilities - and it will be difficult to win back.
Right now, customers are not convinced that Utilities can deliver during similar extreme weather events. As a result, they’re likely to question their suppliers, generation sources, contracts, and products to find a stable solution.
In that climate, stability will become a major selling point. We believe that fixed rates and flat bills will become market favorites as customers avoid the possible risk of variable rate agreements.
But savvy customers won’t just settle for a fixed monthly charge. They are likely to assess not only the pricing options available, but also the financial health and infrastructure footprint of their providers. The desire for stability could tip the scales in favor of established players over smaller, nimble retailers – a shift that could see the rise of a handful of dominant suppliers.
Disgruntled customers could also demand a back-up plan. In the short term at least, that could come in the shape of home battery storage and generation solutions. Over time, lingering doubt around grid stability could see the rise of community microgrids.
Whether it’s sooner or later, though, the message is clear: it’s time to change.
A new role for retailers
The customers quest for clarity will also extend to retailers.
In the aftermath of the storm, retailers will be expected to provide objective, clear advice alongside a selection of secure, reliable and cost-effective solutions and services.
One way that retailers could protect their customer base is to provide personalized solutions based on customers’ risk profiles and needs.
From the “blend and extend” approach, which seeks to proactively move customers to lower-cost, lower-risk plans ahead of the summer demand peak, to home services like back-up storage and waterline protection, the new goal will be to create a sense of security and reliability.
Turning customer scepticism into support requires total transparency. Many retailers are likely to rethink their key messages by audience as well as their network of influencers. Others may try and help customers understand the workings of the Texas retail market to rebuild fragile trust - and clarify who is accountable for failures.
Although customers should expect an improved relevant experience from their transmission and distribution service provider (TDSP) and local distribution company (LDC), chances are that retailers will remain the first point of contact, which raises some important strategic questions. Should retailers take a more direct role in communicating with customers during outages? Who will pay for them to step up into that space? And is this really where communication accountabilities should be held?
Regardless of their communications roles, Utilities and retailers need to make sure that their customer-facing support technologies can handle the flood of queries that any failure triggers.
In times of uncertainty customers want answers and guidance: not a busy signal or a spinning wheel on a website, particularly with many still “living at work” and running businesses from home because of COVID-19.
By assessing the levels that cause interactive voice response (IVR) and websites to fail, Utilities and retailers can work out the cost of ensuring stable performance and invest accordingly to keep customers informed.
In addition to these systems, Utilities and retailers need to reconfirm the processes they use to identify and prioritize key sectors, such as hospitals and care facilities, to develop a better load shedding strategy.
Rewriting the rules
Another likely implication of the storm is that regulators will step in to review retail offerings and ensure that the correct consumer safeguards are in place.
Although customers can choose from thousands of plans and offerings, they may not fully understand what they’re buying into. Regulators have a responsibility to protect against false advertising, and could insist on updated product risk disclosure, or mandate entirely new protections.
But this goes beyond the terms and conditions.
To ensure the market is made up of stable participants, regulators could mandate that retailers have adequate physical generation assets in their portfolios to lessen the impact of future defaults. Again, this could have major repercussions for the “nimble” players who have entered the market with a lean physically-hedged portfolio.
At the moment, regulators hold all the cards. How they choose to play them will impact the entire industry. Increased reserve margin, mandatory weatherization, regular inspections, or the introduction of a forward-capacity market all come at a cost, and it is unclear who should foot the bill.
While penalties for ongoing outages could generate some of the funding needed, it’s likely that suppliers will need to tighten their belts even more in coming months.
Winter Storm Uri has taken a terrible toll, but it is also an opportunity to build a better model. If Utilities and regulators can work together to find, and fund, the solutions needed to make sure history does not repeat itself, we could see a system that better serves the people who matter most: the customers.