For utility companies that usually have concrete contingency plans in place to offset the impact of natural disasters, the COVID-19 outbreak poses an altogether different challenge. And nowhere more so than in the U.S., which is currently one of the most affected countries across the globe.
According to the latest update by the John Hopkins University’s Center for Systems Science and Engineering (CSSE), dated September 7, at over 6 million, the U.S. has the world’s highest number of confirmed infections, and at nearly 190,000, the highest number of deaths per country.
The fall out for utility companies was felt almost immediately and on multiple fronts when stay-home and shelter-in-place directives were issued across North America throughout March. Even the most adaptable business continuity plans will have been thoroughly tested with the unknown variables that the pandemic threw up. Let’s take a look at some of the challenges and repercussions for utility companies.
Drop in demand
Grid operators around the country almost immediately began reporting demand declines and shifts in load shapes as commercial and industrial businesses scaled back and sent workers home. The drop in demand was also compounded by reduced sales volumes as major sporting events and concerts were canceled, as recommended by federal and local governments.
Unfortunately for most utility companies, the upsurge in domestic demand has not been enough to compensate for the loss in demand and revenue from the commercial and industrial sectors. In fact, according to the U.S. Energy Information Administration’s Short-Term Energy Outlook, released on May 12, the U.S. sales of electricity in the residential sector was expected to be down 1.3% due to lower demand caused by a mild winter and early summer weather.
Increasing customer debt
With one in three families in the U.S. struggling to pay their utility bills in “normal times”, even more households have fallen behind on payments due to their sudden loss of income. According to the latest Commerce Department data, at the week ending August 8, there were still 27 million Americans receiving unemployment benefits. And of course, the end of the $600 in extra weekly unemployment benefits in July hit many people very hard.
In most U.S. states, moratoriums are now winding down. Within a few months there will only be five or six states that have a moratorium on shut-offs. Whilst some moratoriums protected customers from accruing late fees, others allowed the fees to pile up, meaning customers are going to be hit with higher-than-expected bills once they have to resume payments.
Based on data from Massachusetts1, it’s estimated that as many as 10% of U.S. households are so far behind on their bills that they are at risk of termination when moratoriums end. A report by Carbon Switch estimates that around 34.5 million people could lose their utility shutoff protections in 14 states within the next month. Utilities will need to find ways to recover this lost revenue.
Additional loss in revenue
The economic impact of COVID on utility companies extends beyond the drop in demand and customer debt – companies have also been significantly impacted by measures put in place to stop the spread of the virus. Shelter-at-home orders restricted access to homes unless there was an immediate risk to health and safety. This meant door-to-door sales, audits, services, installations, and retrofits were off the cards, causing a significant decline in additional revenue streams.
Water conservation targets
For some utilities, there are also water conservation targets to consider. California is committed to achieving a 20% reduction in urban per capita water use by December 31, 2020. The problem is, according to a new study from water-monitoring company Phyn, with shelter-at-home orders and guidelines to wash more regularly, water usage was up 21% daily, with the average U.S. home using nearly 729 additional gallons of water in April than it did in February.
A final kick in the teeth for many utility companies is the fact that like all other organizations, they’ve been forced to operate with skeletal staffing across contact centers, finance, and supply chain functions. For some organizations, up to 40 percent2 of employees were off sick, quarantined or had to stay home to care for children or sick family members. Longer wait times when customers call will inevitably lead to increased customer dissatisfaction.
According to evidence3, calls to utility call centers went down during the pandemic. Some utility companies are using this to defend their decisions to resume shutoffs, saying that as long as customers know their power won’t be cut, they stop trying to make payments and aren’t contacting providers about working out payment plans.
The social and economic impacts of the pandemic still remain to be seen, but one thing is clear, the utility sector must think strategically about how to adapt their services and recover their debt over the short, medium, and long-term.
Adapting to the new normal
As global markets recover, utility companies will require a competitive edge to survive. An essential course of action will be to help out-of-work and cash-strapped customers reduce their water and energy consumption, and therefore their bills. A proven approach to achieving this important goal is to empower customers to take control of their consumption with personalized home reports.
Advizzo’s SaaS platform uses behavioral science and data science to deliver personalized home usage reports, direct to customers. The reports are designed to trigger sustainable behavioral changes – reducing consumption, and maximizing water and energy savings.
Using segmentation techniques, our bespoke programs can enable utility companies to target specific demographics, such as those most adversely affected by COVID. By changing consumer habits we have helped utilities to support their consumers and save on average 3% on energy and water consumption. That translates to significant cost savings for customers, positively affecting their ability to pay their bills, and lessening the likelihood of them defaulting on payments.
Of course, there’s also the added advantage that engaging with customers and being seen to take a proactive approach to assist them with decreasing their consumption will increase customer satisfaction and generate positive PR. What’s more, our solutions will promote and encourage customers to utilize digital offerings such as online payment services, thereby reducing costs and overheads. With many utilities emerging with weaker financial metrics and being forced to cut spending to cover their liquidity needs, in the medium and long-term, a customer engagement solution offers a very viable answer.
Learn more about how our solutions work here or talk to us to find out more. You can also discover how our customer engagement solutions have helped water and energy suppliers in our case study section.