The sun shines above the Rancho Seco solar farm — and decommissioned nuclear power plant — in Herald, California, southeast of Sacramento. (Courtesy photo)
Utility companies have priorities, and the customer comes first at Sacramento Municipal Utility District, or SMUD. The nonprofit power company is on the forward edge of power-grid technology, successfully integrating distributed renewable-energy resources into its energy mix. And the customer plays a large part in its success.
SMUD serves a mix of urban sprawl and farmland in California’s Central Valley — 1,449 square kilometers of it ― around the state capital, Sacramento. So agility and flexibility in serving different customer needs is paramount.
“Customer expectations are changing rapidly, as are industry trends toward cleaner energy resources such as community solar, rooftop solar and storage,” SMUD chief Arlen Orchard wrote in a recent annual report.
SMUD is halfway through its five-year strategic plan, laying the groundwork for a seamless shift to a different business model by 2020. It will rely on new technologies, data, analytics and customer engagement to navigate the transition while providing safe, reliable service in an economically and environmentally responsible way.
What are the challenges — and the solutions?
Besides retooling a decades-old monopoly mindset, a big challenge is flat or declining electricity sales during the adjustment phase, which limits investment in infrastructure upgrades and new technology. Distributed energy from renewable sources delivers much cheaper electricity as technology costs drop. More people generating their own power on their rooftops also has an impact on revenue.
SMUD meets this challenge with cost-saving improvements like efficiencies in grid operations and is developing new revenue streams.
New money-making ventures may include offering customers energy-management services, tailored software and new technology. SMUD is also looking into collaboration with third-party service providers to develop new offerings for customers.
SolarShares, a program SMUD offers to expand solar to all, including people who can’t install solar panels, allows customers to earn the same renewable-energy credits as those who have rooftop solar. For a competitive monthly fee they can share in renewable energy generated at local and regional solar farms — without the expense of installing their own solar panels.
Rachel Huang, SMUD’s distributed-energy strategy director, says studies have been made to determine what customers want and need, so SMUD can meet those needs with goods and services.
Sun and wind energy aren’t exactly free
Even though sun and wind are free, turning those resources into electricity costs money in ways customers may not realize. “With increased penetration of renewables you have other considerations, such as balancing the load, maintaining reliability, and voltage management,” Huang says. “Being able to match the generation curve with the demand curve is the challenge of the utilities.”
Reliability means SMUD keeps the lights on. ”Customers are getting value from the distributed generation they might have on their homes, but they still need the backup from the utility,” Huang says.
So to retain customer loyalty, SMUD wants to diversify from selling just one product — electricity — to supplying an array of products and services to specific groups, or customer “segments.” By doing its homework — detailed data analysis — the company is developing products that meet the needs of business and residential, urban and rural customers.
SMUD has embraced the fundamental and inevitable change from an energy monopoly to a competitive market. “Simply providing good customer service won’t be enough in a future where customers have choice,” the SMUD strategic plan states. “Ignoring or fighting this paradigm shift means we ignore the voice of our customers and bet against technology innovation ― not a strategy for long-term success.”
By: Lea Terhune