Customer Futures LCNI presentation VoLL and Avatar
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Transcript of Customer Futures LCNI presentation VoLL and Avatar
1
Customer futures workshopLCNI conference 12 October 2016
Paul BirchamCommercial Strategy and Support Director
2
Agenda
Engineering Recommendation P2/6
Steve CoxEngineering and
Technical Director
Gerard BoydCommercial and
Innovation Manager
Distribution System Operator Strategy
Project
Michael BrainchResearch Director
Value of Lost Load & Avatar Projects
3
The Value of Lost Load project
Tracey KennellyInnovation customer lead, Electricity North West
Michael BrainchResearch Director, Impact Research
4
What is the value of lost load (VoLL)?
Ofgem used ~£16k/MWh for incentives in RIIO ED1
The mechanism used by the electricity industry to attribute a value on the financial and social cost of supply interruptions to customers in £ per kWh
Provides a price signal about the adequate level of supply security in GB
VoLL has existed since 1990 2013 - London Economics ~£17k/MWh
average value (excluding I&C)
VoLL varies considerably for domestic and SME customers
The existing single VoLL is aggregated to provide an overall estimate of the lost value
5
Objectives of the VoLL project
A better understanding of customer impact by segment Allows network services to be tailored to customer need
How each segment is best served eg better communications & resilience
Key output:A model by customer segment showing relative value
Demonstrate how segmented values would help DNOs improve planning models & guide investment strategiesMore targeted decisions, driven by customer need
Guidance on optimum customer strategies
6
Application of a revised VoLL matrix
More targeted investment decisions based on a network’s composite VoLL Customer segmentation using standard industry data
Efficient use of resources driven by customer needs
X 5X 54 X 4
£ VoLL ?
£
X 10X 18X 2
X 27
X 2
7
4 ECP panels of domestic and
SME customers*
20 depth interviews
Statistically robust & representative researchto establish VoLL by key customer segments now and in the future
VoLL overview
Interviews with key stakeholders to guide research
approach
6,000 interviews across GB with domestic and SME customers
Engagement with industry
Revised VoLL model
Recommendation to Ofgem
8
Why we need a reliable measure of VoLL
The Value of Lost Load (VoLL) is a critical component of infrastructure investment decision making
It needs to be:
Accurate – a realistic and robust quantification in £/MWh
Representative – covering a range of values across customer groups
The objective of this study is to establish robust measures of VoLL across the full spectrum of customers
9
VoLL methodology
Extensive qualitative customer research
Literature review to understand the problem &
previous researchConsultation with key
stakeholders with a vested interest in the study
Extensive quantitative customer survey
Revised VoLL matrix
Final report and recommendations to Ofgem
Phase 1 Phase 2 Phase 3
10
The key questions
How do customers measure & value lost load?1
What is the financial impact in £ per MWh?2
How will VoLL change in the future?3Five key questions
How can DNOs mitigate the cost of lost load to customers?5
How does this vary by customer segment?4
11
Perception of reliability
Reliability means constant availabilityPerception characterised by frequency & duration
Uniform VoLL Consumers believe a single VoLL is no longer appropriateWant more granular matrix, reflecting needs of specific groups
Financial & social impacts
SMEs place greater emphasis on financial impact of lost load Domestic customers more concerned with non-financial impact
Mitigating the impact
Achievable with: Better information and improved channels of communication
Expectations of reliability
Rural & worst-served have lower expectations but greater tolerance & resilience than urban customers
How customers measure & value lost load? What they told us:
Opinions on investment
Rural & worst served - Expect more investment in worst networks for parity in service - but don't want bills to increaseUrban & SMEs wont pay more to improve reliability for others
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Service attributes appraised by customers
Type of power cut Advance warning Frequency of
power cuts
Duration of the power cut Time of day Day of week
Assistance for customers
vulnerable during the power cut
Proactive information
about the power cut
Quality of information
provided
The one-off payment you pay to avoid this happening/ The one-off amount you receive for this happening
How do customers measure & value lost load?1
13
Advance warning
Frequency of power cuts
Duration of the power cut
Time of day
Day of week
Assistance for customers vulnerable during the power cut
Proactive information about the power cut
Quality of information provided
One-off payment to avoid this happening
Additional support payment
The one-off amount you receive for this happening
Additional amount received with support
High priorities:Cost, duration, frequency & information
Advance warning
Frequency of power cuts
Duration of the power cut
Time of day
Day of week
Assistance for customers vulnerable during the power cut
Proactive information about the power cut
Quality of information provided
The one-off payment you pay to avoid this happening
Additional support payment
The one-off amount you receive for this happening
Additional amount received with supportIm
port
ance
Low
High
14
How do customers measure VoLL
1 2-3 4-6 7-14 15DomesticLinear (Domestic)SME
Up to 3 mins
Up to 1 hour
Up to 4 hours
Up to 8 hours
Up to 12 hours
12 to 24
hours
Two to three days
Duration of the power cut Frequency of power cuts
15
£2,000 £13,500
Willingness to pay £/MWh
£3,700 £35,700
Willingness to accept £/MWh
As expected WTA estimates are much larger than the comparable WTP estimates
What is the financial impact in £ per MWh?
16
£2,000 £2,000
Willingness to pay £/MWh
£3,700 £12,000
Willingness to accept £/MWh
VoLL 2016
The one-off payment expected by customers to accept the base case is significantly higher in the LE study, a reflection of the frequency of interruptions in that study being set at once every 12 years
London Economics
2013
What is the financial impact in £ per MWh for domestic customers?
VoLL 2016
London Economics
2013
17
Imagining a future LCT context
Future? Future?
Future? Future?
£2,000 £13,500
Willingness to pay £/MWh
£3,700 £35,700
Willingness to accept £/MWh
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£3,500WTA
£2,000WTP
FUTURE SCENARIOS Electric Vehicles
Slightly higher
Slightly higher
Electric Heat Pumps
Slightly lower
Slightly higher
PV No difference
No difference
EHP future scenario
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WTP WTAAll domestic £3,700£2,000
Domestic LCT users x4-
Domestic PV users x2-
Domestic - high usage x1.5x1.2
Imagined future LCT users --
Current LCT users have a higher WTA than imagined users
Current behaviour
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Understanding VoLL by segment
Low VoLL High VoLL
VoLL has significantly different values across the various segments of the customer base; for example, rural customers compared to urban
Older Younger
Less affluent More affluent
Urban Rural
Not Vulnerable Vulnerable
21
WTPAll Domestic (n=669) £1,956Impact of power cut - Low (n=239) 127High usage (n=54) 123Dissatisfied (n=100) 121Medically Dependant (n=60) 119Want to improve worse served (n=157) 113Want to improve reliability (n=67) 110Want to keep reliability (n=198) 104Medium usage (n=336) 100Power cuts (n=358) 100Low usage (n=277) 97Satisfied (n=536) 96No power cuts (n=283) 95Want to keep bills constant (n=247) 88Impact of power cut - Medium (n=81) 79Impact of power cut - High (n=60) 58
WTAAll Domestic (n=669) £3,709Impact of power cut - Low (n=239) 245Want to improve supply (n=67) 181Low usage (n=277) 143Want to keep reliability (n=198) 136High usage (n=54) 131Want to improve worse served (n=157) 117No power cuts (n=283) 116Satisfied (n=536) 100Medically Dependant (n=60) 97Dissatisfied (n=100) 90Power cuts (n=358) 88Medium usage (n=336) 76Want to keep bills constant (n=247) 69Impact of power cut - Medium (n=81) 52Impact of power cut - High (n=60) 21
Customer impacted most by power cuts have the lowest WTP/WTAHigh energy users have the highest
WTA & WTP value index (domestic)
22
Relative importance of service
Phone call(s) made directly to your mobile or landline x 3Accurate information about when the power is expected to be restored x 3Short message service (SMS) sent to your mobile phone x 3Automated text-to-speech message x 3A justified reason for the power cut x 3A Welfare Pack to help you cope with the power cut x 3Confirmation that your electricity is back on x 3Sending a mobile catering van to provide hot food and drinks x 2Advice on what to do during a power cut x 2Public address/tannoy system x 2Sending a mobile unit that allows you to charge mobile phones/ tablet devices x 2Nominated friend, family member or colleague who can be sent updates instead of, or in addition to us contacting you x 2Home visits to offer help and advice at any stage x 2Social media (Twitter, Facebook etc.) x 1
Mitigating VOLL - most important support element Providing information by phone
23
WTA & WTP value index (domestic)
WTPAll Domestic (n=669) 10018 – 29 (n=126) 115Vulnerable (n=379) 106AB (n=165) 106Off-gas (n=126) 106Rural (n=68) 105C2 (n=123) 10430 – 44 (n=138) 104Female (n=119) 103Urban (n=138) 101Male (n=98) 9845 – 59 (n=175) 97C1 (n=209) 96DE (n=170) 9660+ (n=230) 94Fuel poverty (n=39) 93
WTAAll Domestic (n=669) 100Fuel poverty (n=39) 195AB (n=165) 17018 – 29 (n=126) 13830 – 44 (n=138) 126Rural (n=68) 126Vulnerable (n=379) 118Female (n=119) 108C2 (n=123) 100Male (n=98) 9560+ (n=230) 94C1 (n=209) 8845 – 59 (n=175) 81Urban (n=138) 81Off-gas (n=126) 81DE (n=170) 80
Customers in fuel poverty have lowest propensity to pay more for additional support and the greatest expectation of compensation
24
Recap the survey method & key findings
Visit our stand and see a short video
25
Early indications
The VoLL methodology is robust
The VoLL model quantifies variations across segments
VoLL is not linear
Some segments support a strong VoLL, hence potentially higher investment
Early adopters of LCT are indicative of a future VoLL
Enhanced support and information is valued highly
We are confident of producing a reliable segmentation model
26
Next steps
Refine survey instrument
Winter survey
December 2016 -
February 2017
Publish interim
analysis from model by
October 2017
Lessons learned from
the pilot survey
(including peer review)
Final survey report
including lessons
learned by January 2018
Summer survey
July 2017 to August 2017
5
RESULTS
6
RESULTS
4321
27
We need you help
Help us capture the views of customers to ensure VoLL reflects all key customer
segments across GB
Share the VoLL methodology with
stakeholders for comment, before customer survey in
December 2016
We would value your input into the evaluation, findings, proposed application of the
revised matrix and its implications
Intermediary Validate recommendationsValidate approach
28
Introducing Project Avatar
LCNI 12 October 2016
29
Avatar – the problem
The customer service landscape is changingPolitical, economic, social, demographic and technological factors are accelerating a
shift in customers’ needs and expectations
DNOs need to understand and predict customers’ current and future needs to improve the service provided
Continuous investment is required in the right technologies and techniques to best meet the needs of different customers
30
Avatar – project objectives
Understand customers future needs
How will these vary by segment
How will we meet the specific needs of each of these segments
A blueprint for implementing bespoke customer service solutions
31
Looking back is the best way of imagining the changes that could occur in the future
. Oasis and Blur were at the height of their popularity * Wonderwall released in October 1995 * The Spice Girls were less than a year away
John Major was prime minister of the UK (1990 to 1997)
Only one per cent of the UK population had Internet access in 1995 – unthinkable 21 years on.
The Motorola StarTAC was the first ever flip mobile phone and among the first mobile to gain widespread consumer adoption with
approximately 60 million sold in 1996
Our Commercial Strategy and Support Director, Paul was no more than a mere lad
32
The questions we will answer
What are current and future customer service needs?
Which range of innovative solutions will best meetcustomers increased servicing expectations?
How should these solutions be tailored for use by DNOs?
What is the optimal strategy for customer communication that will leverage higher levels for customer satisfaction?
Customer service in the future
33
Exploratory literature
review
Expert thinking
Exploratory research
Meeting customer
needs
Pilot study Quantifying customer
needs
Customer and stakeholder engagement
2 3 65
A comprehensive understanding of the future of customer service
1 4
34
Challenge
Evolution of personal assistants
Getting customers to imagine future scenarios & technological advances
1985 2015 2035
35
What solutions already exist?
Avatars, chat-bots, and virtual assistants are likely to become more prominent. Available 24/7 for simple query resolution
Drawing on best practice for current (and future) customer service from other industry sectors
Initial research has identified some key trends expected to impact customer service
Contact channels will continue to expand in number, allowing customers to mix and match communication platforms to
meet their own needs.
Consultation with technical experts
36
Avatar will disseminate important new learning
• Quantifying how needs and expectations are
likely to change in 2020 and beyond
Understanding how customer service needs
vary by different customer segments and
touch-points
Informing optimal communication with
customers and methods of disseminating
information
37
Refining solutions based on customer feedback
Combine customer feedback and input
from frontline customer service
employees
Engaging with technical experts to
produce bespoke service solutions
Assessing customer appeal and acceptability of solutions (by customer group)
Creation of bespoke customer service solutions
38
Objective
Identify the optimal technologies & techniques to best meet the needs of different customers now and in the future
A blueprint for bespoke customer service solutions to assist DNOs in planning customer investment strategy
39
Next steps
Expert thinking and employee engagement
Co-creation workshop by September
2017
Engaged customer panel
Depth interviews by
June 2018
Extensive customer
survey by June 2019
Customer engagement plan
Data privacy statement
Methodology statement by June
2017
Customer service
blueprint delivered by
December 2019
Pilot survey
Lessons learned by December
2018
6
RESULTS
31
Customer Engagement Plan
2 4 5
40
&QUESTIONSDISCUSSION
41
For more information
Please contact us if you have any questions or would like to arrange a one-to-one briefing about our innovation projects
www.enwl.co.uk/thefuture
0800 195 4141
@ElecNW_News
linkedin.com/company/electricity-north-west
facebook.com/ElectricityNorthWest
youtube.com/ElectricityNorthWest
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