Utility Product Lifecycles – They do exist.

September 18, 2020
Blog
California Renewable Energy

Product life cycle management is defined as follows: “In industry, product lifecycle management (PLM) is the process of managing the entire lifecycle of a product from inception, through engineering design and manufacture, to service and disposal of manufactured products”.  In the utility industry, the predominant products are rates, or tariffs.

For utilities, product lifecycle management includes:

  • Determining the revenue target, typically through a cost to serve model,
  • Designing rates to achieve the target revenue, and possibly influencing customer behavior, Gaining approval for the rates,
  • Performing customer rate education and marketing,
  • Operationalizing the rates to allow customers to purchase (enroll) in the rate and receive bills
  • Evaluating the performance of the rate.

Before the era of smart meters, DERs and EVs, the utility product life cycle process was largely nonexistent.  With policy goals to reduce peak load, promote EVs, and enable DER adoption, utilities are leveraging their smart meter investments to create new products on a  much more frequent basis.

In today’s utility it is common to have program managers developing new rate products to meet these policy and business goals.  The parameters of the products vary widely, but many include time-of-use rates, critical peak pricing, special EV rates, and incentives for enlisting in community solar.

“In 2018, 89 utilities—or nearly half of all major U.S. electric utilities—tried to change electricity rates by filing rate cases with state regulatory commissions; this number was the largest number since 1983.” – eia.gov

An Enterprise Rating Engine is a critical tool used by leading utilities to manage the product life cycle process.  It sits separate from the CIS, but is integrated and calibrated for accuracy.  The Enterprise Rating Engine calculates bills on multiple rate plans for the entire utility’s customer population within a short amount of time – millions of bills in hours.  This is commonly known as a whole population rate analysis.

During the rate design step, whole population rate analysis can be used to assess how a potential new rate structure impacts every individual utility customer bill using 12-month historic customer load profiles.  Customer classes, such as low-to-medium income for example, can be analyzed to ensure that no single customer class is adversely affected.

For rate marketing, the whole population rate analysis can identify the best rate plan for each individual customer.  The utility can then use the results for rate marketing and education, notifying each customer of their best rate plan and potentially defaulting them to the new best rate.

When the new rate plan is live, the enterprise rate engine can provide high-speed bill simulation for the utility and the customer via the call center and my account online.  As customers’ electricity patterns change, their ‘best rate’ plan can change.  The Smart Energy Consumer Collaborative recently released a case study on SCE’s TOU rate transition in which SCE provides an online Rate Plan Comparison Tool allowing customers to view how their last 12 months of consumption would be priced on four different rate plans.

New rate programs can have significant effects on customer satisfaction and can affect the utility’s overall revenue, success is critical.  JD Powers says, “that any rate changes are likely to impact customer satisfaction in one way or another”.  Using an enterprise rating engine with high speed bill simulation helps ensure a new rate program has a positive effect on customer satisfaction.