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Competitive Market Applications

Each competitive state has developed a different set of rules to foster competition in electric and natural gas markets. One difficulty that exists in every competitive market is the lack of customer information , especially as relates to customer profitability. MAISY products and services provide retail energy providers with customer information including profitability assessments and other tools required to develop profit maximizing marketing strategies.

This page describes these MAISY products and services.

MAISY competitive market resources are briefly described below. To review these same topics in somewhat more detail for Texas electric market applications see the Texas competitive market example .

Customer Profitability Assessments - Background

Separate tariffs for transmission and distribution, profile-based settlement procedures, cost of service issues and limitations of customer information made available to retailers make evaluation of customer profitability so difficult that many energy retailers focus only on market share, rather than targeting the most profitable market segments.

Without detailed customer profitability analysis, retail energy providers, at best, break even with a mix of profitable and unprofitable customers. As some retail energy providers become more experienced and efficient at identifying and acquiring profitable customers, retail energy providers who pursue untargeted acquisition campaigns or less effective targeted campaigns will acquire a larger share of unprofitable customers leading to a continuing decline in profits earned on commodity sales.

Developing a comprehensive customer profitability analysis capability is an essential first step in developing corporate strategies to increase retail energy providers profits. MAISY-based profitability analysis identifies individual customer profit contributions for:

• Current customers

• Targeted customers

• Customers and market segments not yet targeted

This information is critical in profit-building activities such as new product development, strategic pricing, customer profit scoring, market segmentation and target marketing and DG technology/economic analysis.

Jackson Associates provides clients with customer profitability analysis capabilities in several ways including:

• MAISY utility customer information resources

• MAISY profit analysis products

• Consulting support service including application of MAISY utility customer information resources and profit analysis products

Each of the topics below briefly describes some MAISY utility customer information resources and profit analysis products which can be applied in Texas and other competitive markets to boost retail energy providers profitability. Click on header or text links to see additional information on each topic

Electricity and Natural Gas Use Tables - Electricity and Natural Gas Use Tables provide the easiest to use, most direct source of information on commercial, industrial and residential customers for each state and for utility service areas within states. Electricity and Natural Gas Use Tables provide basic energy use information including information required to segment the market and target profitable customers. Tables are available for commercial, industrial and residential customers.

Tables are developed to meet individual client information needs and can include annual, monthly, daily and 8760 energy use characteristics for electricity and natural gas for (1) SIC/employment market segments (industrial and commercial ) and (2) income/demographic and dwelling unit residential segments. Both volumetric (kWh and Therms) and hourly load data can be included.

Customer Profit Scoring - Financial services companies have been leaders in developing the application of profit scoring models to identify their most profitable customers. Since variation in costs is even greater among utility customers it is not surprising that profit scoring is becoming a priority for competitive retail energy providers. Jackson Associates profit scoring models have been used to score more than five million individual customers in competitive electricity markets. Profit scoring models estimate profit for customers prior to their acquisition. Profit scoring provides the greatest single advantage available to retail energy providers for improving profits.

A summary description of profit scoring models is provided in the description of MAISY Service Area Databases while the Market Insight article "Pennsylvania Profitability Analysis Identifies Individual High-Value Electric Utility Customers With 83-96% Accuracy" describes customer profitability and profit scoring in more detail.

Utility Service Area Databases provide critical market information on customers within each electric utility and natural gas service area. Service Area Databases include the same extensive firmographic and psychographic information on individual customers provided in the MAISY State-Level Databases (e.g., business type, number of employees, income, demographics, equipment and building structure detail, energy use including hourly load profiles) and also include electric and natural gas bills and measures of cost of service and profit for each customer record.

Service Area Databases can be used to immediately calculate service area headroom, to size and profile individual markets and ,and market segments, to assess revenue and profit potentials, analyze cost-of-service issues and evaluate competitive threats, opportunities and strategies. Databases are available for all electric and natural gas utility service areas including investor-owned utilities, municipal utilities, public utility districts, and co-op areas.

New Product Development - New product development requires detailed information on customer characteristics equipment, operating and building characteristics as well as information on customer behavioral characteristics and preferences. Electric Utility Service Area Databases provide this customer information.

Customer Intelligence/Competitive Strategy Development - Developing profitability information on competitive market customers and developing a comprehensive customer profitability strategy is challenging, to say the least. Existing customer information provides limited insights on customer profitability. Jackson Associates works with clients integrating all available customer data resources to develop comprehensive inhouse customer intelligence systems.

Revenue and Cost Management - Jackson Associates works with clients to develop comprehensive customer profitability strategies. JA Revenue and Cost Management Systems immediately reduce costs and increase revenue by focusing on individual customer cost of service, demand response programs and other options with a quantitative revenue maximizing and cost minimizing process.