Strategic Communications - A tool towards better customer engagement and loss reduction

The high risks in the complex, unpredictable and highly political process of water sector reforms are unavoidable given the "essential goods" perception of water. However, what the utility operators need to understand is that investing time and money in "strategic communications" early in the engagement of water reforms and that it leads to a much smoother operations and success of the project. A World Bank report (2006) suggests that an understanding of public perceptions leads to better adoption of strategic communications help in improving the efficiency of the public utility.

The key challenges arising due to lack of strategic communications can be listed as:

1. Social conflict due to lack of information or misinformation or a communications vacuum that creates uncertainty
2. Power struggles leading to project delays 
3. Consumer Opposition due to (justified or unjustified) fears about tariff, service levels and affordability
4. Customer dissatisfaction when hyped expectations are not met, or are not right sized at appropriate time

The idea behind this post is to try and identify areas where communication tools can support reform 

process and mitigate risks. 

The three principles which can be applied to use communications as a strategic tool towards better utility management are discussed here:

1. Principle #1: Know-Your-Customer: Instead of making assumptions about what the customers want or how they would react, it is advisable to undertake a Communication-Based-Assessment (CBA) to gauge the support for utility reforms within the stakeholders. (See pManifold's unique COPS Case Study). The CBA uses a mixture of conventional and unconventional data collection methodologies (including socio-economic parameters, Willingness-To-Pay, opinion polls, etc.) and establish baselines for stakeholders' perceptions, interests and priorities.
2. Principle #2: Creating Awareness about the Need for Utility Reform: Once the CBA has captured the perspectives of customers and stakeholders, the Utility Management may determine what about the reforms need to be communicated, through which messenger to communicate the same and how to garner political support with other political groups and agencies. The Utility Operator should:
• create awareness regarding the "state of the utility" in terms of challenges and opportunities for reforms and what it means to the customers
• communicate the effects/challenges that lie ahead, if reforms are not implemented. At the same time, if not communicated correctly, the Utility might risk being looked upon as non-transparent
• make the stakeholders understand their rights and responsibilities in the reforms process
3. Principle #3: Building Support and System for Change: Once the reforms are enacted, the communications does not stop there. The Utility should continuously use communications as a tool to build a culture of transparency and openness

The Utility, to leverage the strength of strategic communications as a tool, should make use of the following best practices:

1. The communications strategy should integrally be linked with the organizational strategy & goals and be in line with the utility operations
2. The Operator should take sufficient effort to make the information available and accessible to all the stakeholders. Establishing web portal and maintaining it constantly is critical to promote transparency.
3. Correctly identify the most trusted messengers or champions through early use of CBA
4. The Utility Operator should right size the expectations of customers as well as other stakeholders in order to mitigate the non-financial risks. Only when the beneficiaries believe that the project has met the set expectations, the Utility Operator can claim that the project has realized its full value
5. More often that not, in our typical environment, project delays occur. And when they do occur, the Utility Operator should be taking care to communicate the reasons behind the delay. This creates an environment of openness and credibility.
6. Whatever positive results are achieved by the Operator, the results should be communicated to the customers and other beneficiaries
7. Empowering the media is one of the best methods to spread word about the good work the Utility is carrying out. The media also serves as a tool to educate the consumers.
8. Collaborate with local governmental and non-governmental agencies to drive the Information-Communications-Education (ICE) campaigns to build a positive image for itself
9. Utility should invest in creating and maintaining an in-house professional communications capacity to avoid the inefficiencies in the governmental / state agencies' communications program

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*Source: Communication for Water Sector Reform: Obstacles and Opportunities, (2012), The World Bank

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Key comparison of revised RFPs for MP Distribution Franchisee

Madhya Pradesh has revised its Distribution Franchisee (DF) RFPs for the 3rd time, inviting a third pre-bid conference on 15th October at Bhopal. (See earlier blog post Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids). Some major revisions in new RFPs are as follows:

1. The Distribution Franchisee scope has been revised to city/town level from earlier entire district level. Currently only one most favorable town has been picked in each of three MP zones - Sagar, Gwalior and Ujjain. The other six regions will be followed upon post finalizing DF appointment in first three.
2. In revised RFPs, there are no benchmarking minimum input rates given. The bidders are now free to select their input rates under following constraints:
• The input rates for 15 years should have only increasing trend
• Ratio of specified min. to max. input rates should be atleast 0.7
3. Customer services are given more weightage with mandated capex investment in meeting specified benchmark KPIs - SAIFI, SAIDI, min. customer services centers, consumer indexing and as laid under SOP by state Electricity Regulatory Commission.
4. In addition to detailing DF's Events of defaults, the revised RFPs detailed Distribution Licensee event of default of not being able to supply committed input units.

In our earlier blog Distribution Franchisee Attractiveness - Comparison for Madhya Pradesh's 9 districts, we ranked key DF decision parameters for 9 districts to help bidders with their selection criterion. The chart below lay down similar comparison for the 3 towns as released under revised RFPs. We have also indicated the percentage deviation of these key parameters from the earlier RFPs at district level.

DF attractiveness Matrix (Source: pManifold)

Some key changes that comes out clearly with the new revised RFPs are as follows:

1. Avg. 98% reduction in geographical area
2. Avg. 61% reduction in overall population, number of electricity consumers and also Electricity sales (lac kWh units)
3. Avg. 51% reduction in connected load
4. Avg. 1549% increase in electricity consumer density (clearly reveals urban/rural conflict)
5. Avg 18% and 22% increase in LT and HT consumption respectively (kWh/consumer/month)
6. Avg. 5% improvement in collection efficiency
7. Avg. 77% and 63% reduction in number of DTCs and transformer failure rate respectively
8. Distribution losses on avg. increases by only 2% while ATC losses on avg. reduce by 1%. If the numbers shared in RFPs are correct, this implies that rural areas contribution to the overall distribution and ATC losses is similar to that of urban areas. 

It is clear that the preferred order for established bidders from DF attractiveness will be Gwalior, followed by Ujjain and then Sagar. However for new entrants, Sagar could be a good choice to innovate a low capex and hence lower risk DF model.

pManifold takes pride in able to influence the revised RFP design and bringing more customer focus in on-going reforms attempted in power utilities. This success is also shared with MP Govt., their transaction advisors and also some bidders. With our continued work in the same, we hope to drive the importance and connection of customer monitoring with business financial performance in private and public utilities and help them develop an increased ROI based power Distribution model.

Independent all 3 towns customer intelligence reports 'EUCOPS - Electric Utility Customer Opinion, Preferences and Satisfaction' are available for purchase with pManifold. Sample report could be viewed online. We hope that the bidder community make use of this local customer intelligence to guide it's technical due-diligence better. (See detailed steps)

For more details contact Rahul Bagdia @ 95610-94490.

Post by Rahul Bagdia @ pManifold

Key Comparative findings from Customer Satisfaction Survey of Shajapur, Ujjain & Dewas districts of MP

A comparative view of top level findings is shown here, developed using the location specific reports of Shajapur, Ujjain & Dewas available here along with 6 other districts in Madhya Pradesh (MP).

See our earlier blog:

• Comparative findings in Gwalior, Datia & Bhind
• Comparative findings in Sagar, Satna & Narsinghpur

The analysis shows that in the above 3 districts, a substantial percentage of dissatisfaction in

Customers is coming due to 2 factors, namely 'Communication' & 'Price'.

The overall Satisfaction score on being computed

(on scale of 0-100 with 100 being all respondents 'very satisfied'):

	Communication	Price
Shajapur	33.68	30.76
Ujjain	27.09	32.77
Dewas	24.50	20.90

The main reasons for higher dissatisfaction across the 3 districts as indicated by the customers are due to following:

• Less 'Awareness' from Utility regarding the attributes 'Energy Efficiency' & 'Consumer Rights'
• Less communication for 'Advance notice about disruption'
• 'Power Tariff & its variations' is High

Comparative findings from Customer Satisfaction Survey of Sagar, Satna & Narsinghpur districts of MP

This is a comparative view of top level findings developed using the location specific reports of Sagar, Satna & Narsinghpur available here along with 6 other districts in Madhya Pradesh (MP).

See our earlier blog:

• Comparative findings in Gwalior, Datia & Bhind
• Comparative findings in Shajapur, Ujjain & Dewas

Power Quality & Reliability (PQ&R) and Customer Service (CS) are the 2 factors which needs immediate improvements in all the three districts.

The overall Satisfaction Score is as follows (on scale of 0-100 with 100 being all respondents 'very satisfied'):

	PQ&R	CS
Sagar	27.02	21.39
Satna	30.56	27.56
Narsinghpur	29.30	29.31

The primary reasons for high dissatisfaction across the 3 districts as indicated by the customers are due to following:

• Frequent interruptions in 'Voltage Stability',
• 'Breakdown Restoration Time' is long,
• Recurrent 'Unplanned Outages'

Leveraging Customer Perspective for a stronger Onsite, Local Due-Diligence in Pre-Bid phase

Consumer centricity has returned or finding its way into most of the businesses in emerging economy like India. Consumer 'needs' and 'willingness to pay' for good quality products and services is driving a whole new era of competition. It first started in luxury industry with high economy class consumers, where there was established 'willingness to pay' for better services and then slowly start penetrating into other sectors and also lower economic classes and raising their 'aspirations'. These phenomenon is creating a whole new market and driving innovations from bottom-to-top. The aviation, telecom (mobile and internet) and various other industries has seen this Consumer cycle. India's Power Distribution sector has begin its journey of enabling 'diversity' and adding more 'choices' to its electricity customers. Like other sectors, the cycle first began with high volume or developed consumers through 'top-down' innovation like 'Open Access' and now we have started hearing of 'bottom-up' innovation like 'Pre-paid metering', 'Net-metering' and 'Distributed Generation based Distributed Franchisee (DGBDF)'.

The to-be leaders in the Power Distribution space will soon have to learn this change that is sweeping the country and include the end-consumers into the designing and co-creation of solutions and soon also accept equally the urban and rural consumer mix to drive bottom-top innovation. The new saga is to forgo or overcome references like BPL, APL, agri (or rural), tariff subsidies and free power, but start innovating scalable ventures to meet the needs and challenge. Grameen Micro Financing model first innovated at Bangladesh is now widely accepted and MFI is a very big and fast growing industry with strong developing linkages to the main streamline capital industry through various derivatives.

Remember this all begins with a 3 letter word - KYC i.e. 'Know Your Customer'. Its an important phase after you are done with Market Analysis through KYM i.e. 'Know Your Markets'. KYC should be a pre-cursor for high confidence KYI i.e. 'Know Your Investments'.

Our recent discussions with prospective bidders for Distribution Franchisee tenders in 9 districts of Madhya Pradesh (MP) was full of encouragement for our recently conducted 'Customer Satisfaction study for Electric Utilities' in those regions.

• Most companies easily perceived our work's importance to operating  Distribution Franchisee post the bid win for regular (internal & external) benchmarking of Customer Satisfaction to evaluate and better prioritize their system investments and efforts.
• Almost all experienced companies in running Distribution extended the applicability of our Customer Satisfaction research also to the pre-bidding phase. They found it will add an important perspective to their already on-ground technical due-diligence and help them validate their assumptions on Capex and Opex plans for bidding. 

Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids

Madhya Pradesh (MP) Energy Dept. has taken a bold step with decision to private franchise 9 MP district’s Power Distribution simultaneously. This is unique as there is less than 9 total operational Input based Power Distribution Franchisees (DF) pan India at the district level scale while the model is still emerging. The associated officials and transaction advisory have incorporated good learning in current RFPs for the 9 districts from previous awarded Distribution Franchisee RFPs (across India) and emerging Distribution Franchisee implementation scale-up issues. There is appreciable effort from Energy Dept GoMP to engage various stakeholders to raise a strong and standardized Distribution Franchisee model.

A second revision in RFPs was made post first pre-bid conference after consulting with participating prospective bidders (See first pre-bid conference minutes). A second pre-bid conference was organized in Bhopal on 25th August jointly for all 9 districts. The meeting was chaired by Hon. Energy Secretary GoMP, Mr. Mohd. Suleman and was attended by overwhelming 20+ prospective bidding companies. pManifold participated in this pre-bid conference based upon their relevant work in the Distribution Franchisee space and having collected valuable customer satisfaction data on local electric utilities performance in the 9 MP districts.

Some key points of discussion raised by Licensee (the utility) for opinion from participating prospective bidders were:

1. If and how utility not only avoid financial losses as established in baseline, but also make profits in a truely win-win Distribution Franchisee model in long term?
2. How could utility protect its and its end-consumer's interests better while in Distribution Franchisee long term contractual arrangement? In specific what could be better contract and company structuring - whether utility should sign contract with SPV (Special Purpose Vehicle) or the Parent company?
3. If and how 'urban' and 'rural' Power Distribution Franchisees could be clubbed together? In specific with current all 9 MP districts having high rural characteristics, how bidders look upon viability of a combined Distribution Franchisee model at entire district level?

It was encouraging to see the utility's Top Management and participating prospective bidders recognizing 'Customer Satisfaction' as the most important performance objective for Distribution Franchisee. In light of this, there was discussion to add some mandated customer services in the RFP and DFA in addition to current 100% Electronic Metering, Billing and Payment as part of Capex roll-out plan. 

Why Customer's Satisfaction & Preferences are important for Electricity Utilities?

The Forum of Regulators Report on Standardization of the Distribution Franchisee model (September 2010) mentions that the objectives of appointing a distribution franchisee, inter alia,

are:

i. To minimise Aggregate Distribution and Commercial losses

ii. To bring improvement in Metering, Billing and Revenue Collection

iii. To minimise Current Assets on account of arrears

iv. To enhance customer satisfaction level by improving quality of service

Placing focus on the fourth point, we find that while much information is shared in the Distribution Franchisee RFPs, they hardly provide any information on the current customer satisfaction levels nor the customer's perspective of the network infrastructure, current quality of services etc. This is a stark thing to miss considering all CERC, CEA, State ERCs and State Discom's mandate Improving Customer Satisfaction as one of the 4 objectives of a Power Distribution Franchisee. The reason probably for the miss is that the areas being offered for franchisee are any way loss making and hence customer dissatisfaction is well understood.

However, while all utilities, licensees and potential or current distribution franchisee operators try to improve quality of service; could efforts to understand the customer's perception and expectations from the utility help the utility make more quality decisions to improve the services and have a happy, paying customer?

The answer probably is a big "Yes". Measuring customer satisfaction - using a structured methodology that relates the customer responses with consumer demographics and key factors/attributes affecting business performance - is probably the only way of independently & periodically benchmarking effectiveness of utilities operating in same or different zones. No doubt a number of such mechanisms have evolved and established themselves in the western countries where multiple state / private companies operate in the same locality.

But how really could measuring customer satisfaction or proactively identifying customer preferences help? We believe, they could in the following key ways,