Transcript Georgia Power Company Flat Bill Program

FlatBill for the
Energy Industry
An Energy Product
Breakthrough!
Bob Hughes
Manager, Product Marketing
Georgia Power Company
Residential and Small Commercial Customer
Concerns
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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
FlatBill: A Classic Win-Win Product
on the Verge of Market Prominence
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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!
Program Design
Target Customers
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Residential/small commercial
At least one year history
Good credit but may be ideal for bad credit
Electric Utilities Commission Approval Status Map
Permanent FlatBill Tariff
Pilot FlatBill Tariff
Without FlatBill
Electric Utilities Offering Flat Bill
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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
Why Should Utilities Offer FlatBill?
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Marketing and financial product
catalyst
Customer satisfaction
High retention
Open access
 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%
Why Offer Flat Bill?
Customer Satisfaction Results
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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
Why Should Utilities Offer Flat Bill?
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Earnings
 + $1.3m EBIT per every 25,000
Pricing product portfolio fit
Penetration 7-15% for residential; 5% for
commercial
Growth
 Primarily off peak
Why Should Utilities Offer Flat Bill?
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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
What to Expect from FlatBill?
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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
Flat Bill Data Management
Agents
Pricing
Department
Customer
Care and
Marketing *
CUSTOMERS
Accounting
and
Risk Mgmt
*
Analysis
& Design*
Pricing
Inputs/Outputs Parameters*
Weather
Systems
*Christensen Associations
**Direct Options
Actual
Usage
Historical
Usage
Offer
Software*
Reports
OFFERS
Billing System
and Data Bases
Tracking
*
Software
Flat Bill Issues
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Accounting
 Above or below
Regulatory approval/Conservation
Volatility of Fuel Cost
Program Resource Needs
Target Marketing
Renewals
Segmentation
Tracking software
Reporting
FlatBill Issues
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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
FlatBill
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Separating Fact from Fiction!!
The Georgia Power FlatBill™
Experience
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Pilot programs: residential, small
commercial
 500 customers – 2000-01
 10,000 customers – 2001-02
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Permanent program – 2002- present
 130,000 customers approx. in population of
1.3 million
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Renewal rates: very high
Issues:
 Measurement of response
 Treatment of rapid-growth customers
 Pricing strategy (segmentation needed?)
Unfounded Risk Perceptions
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System Capacity Will Suffer
Customers Won’t Buy It
Unmanageable Risk
Regulators Won’t Approve It
System Capacity Doesn’t Suffer
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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
Customers Buy It
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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
The Risk Reality
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Program not designed to “win” every year
 Earn a given return over multiple years
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Product not for every customer
GPC exceeded goals in 2001, 2002 and 2003
and 2004
Need remains for a Budget Billing (EPP)
product
Regulators Do Approve
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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
Offer Development
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KISS – Keep It Simple & Sweet
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Focus on customer benefits
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Vary Terms & Conditions of offer to meet
needs of the market segment
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Facilitate customer understanding
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Provide meaningful comparisons
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Make it easy to say “Yes”
Market Segmentation
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Various target audiences
 Customer segments are “offer sensitive”
 Product supports various offers and
pricing/payment options
Propensity model assists in segmentation
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
Bad
Credit
Extreme
Weather
Seasonal
Effects
Bill
Volatility
Flat Bill Family
Multi-year
Developer
Packages
Prepay
w/Discount
Apartment
Packages
Conservation
Package
Standard
Flat Bill
“Green”
Package
Prepay
Banded
Flat Bill
“Phone card”
Limits Plus
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