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Data Warehousing in a Deregulated Industry

Published
  • January 01 1998, 1:00am EST

Once upon a time, utility companies "had it made." Customers in their service area had no choice but to use their local utility for all of their energy needs. If prices went up, the costs were simply passed on to the customer. It wasn't as if they could go elsewhere to satisfy their energy needs.

We're at the start of an immense change where utility companies are concerned. In the past, they were monopolies, and customers did not have choices. In the near future of a deregulated marketplace, customers will have as much choice as in other industries, and they will no longer be geographically limited.

As utilities decentralize and restructure themselves into separate and openly competitive distribution, transmission, generation and energy service companies, customers will have the option to look beyond their local utility to satisfy their individual energy needs. Access to this free and unrestricted marketplace will allow customers to shop and purchase energy and non-energy products from a vast array of providers and bundle them in one package, tailored to their specific needs. The utility companies that are able to meet this requirement will have a distinct competitive advantage.

In a deregulated, or free market environment, utility companies must do something they've never done before--they must truly understand their customer and the cost of the different services they provide. They must provide excellent customer service, competitive pricing and offer value added services (as well as new products and services) to their customers. Improvements in customer service can be achieved that are subtle, often not measurable, but very important to the customer. These subtle improvements are what often lead to differential advantage and competitive success.

Indeed, the rules that govern utilities are changing fast. Deregulation will open up energy markets and force utilities into a pit of fierce competition. And the reality is, not everyone will win. Utilities that do not adapt will not survive in the future. Other, new players, with a better handle on the customer and technology, will "skim the cream" (those commercial and industrial customers that consume the larger, more stable load of energy). Ultimately, the non-adapting utility will be relegated to maintaining just the wires and small-time residential customers.

Because the shift in the utilities industry will be so dramatic, utility companies must build new systems designed and architected from the beginning for extremely rapid and easy change--architected with the future in mind. No one knows what utilities will need one year from now...two years from now. The future for utility companies is now!

In order to accomplish their goals, the utility must somehow gather the years of historical data they have collected, which is probably dispersed throughout the organization, and turn this into insight. Utility companies need information about customer trends and customer needs to move their business into the future. A data warehouse is the answer. An enterprise-wide data warehouse may be the single most important tool that utilities can have to face the new millennium. The data warehouse, often in conjunction with an innovative and flexible customer information system, is designed to support today's need of doing business and tomorrow's requirement of responding to the competitive forces of a deregulated marketplace. Data warehouses provide the ability to quickly make sense of the great deal of information that is routinely captured, but rarely used in today's environment. True customer segmentation is just beginning with the capabilities data warehouses introduce. And, as competition increases, utilities will also need an avenue to understand the implications of potential "promotional activities" they might engage in.

A data warehousing initiative can help a utility gain competitive advantage in a deregulated market, as well as a better understanding of their customer. Today, a customer to a utility is an individual meter. As they make more sense of their true "human" customer, utilities need the ability to understand the customer needs, not just provide them with an adequate billing system. For example, the historical "meter data" on the utility's customers, information on customer contacts, and their products and services can be analyzed to allow for a better understanding of their existing customers, direction on gaining new ones and optimizing the business returns. Data warehousing tools are designed to capture and store overwhelming quantities of data in such a way that they can be searched and understood to provide insight and knowledge. The true value of a data warehouse will really come when the data speaks for itself and suggests things that the deregulated utility should be looking for. For example, if a person owns 10 restaurants, the utilities need to understand how much more important that particular customer is compared to an average residential customer. This type of person may also be more interested in energy related services such as energy audits.

Utility executives should be able to view the data warehouse as a means to a business solution. They will better be able to retain their current customers, target new ones through demographic trends, determine usage and buying patterns by examining historical information and improve business strategies in the face of competition.

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