Optimizing Service Offerings to Create New Revenue Streams

Abstract

Utilities of all nature face the challenge of escalating costs. Electricity, phone, media, natural gas, water and telephone are all products that consumers buy continuously. Only two decades ago, most utilities had a captive customer base. The consumer did not have a choice. Thus, utilities were able to pass their operating, capital and source costs onto their customers without fear of losing their business. This paper is a discussion of the paradigm shift that is fairly common among water and wastewater utilities, the causes and drivers of this shift, and solutions that have evolved due to this shift. An overview of South Central Connecticut Regional Water Authority (SCCRWA) and its specific challenges and solutions are provided. Using this information, our aim is to stimulate further discussion and a broader willingness among utilities to consider new revenue streams when factors make it difficult to pass these costs onto its customers. The Paradigm ShiftThrough the natural competitive cycle and new government regulations, competition has emerged among utilities that once were monopolies. Now many consumers have choices. This is particularly true in phone communications, TV programming and delivery, and to some extent, electricity service. Monopolies are still prevalent for water, sewer, natural gas and electricity distribution. Perhaps from business experiences with the rise of competition among some utility types, new strategies for revenue generation have arisen for all utilities, even those who remain a monopoly with their local market.Pressures to identify new strategies for some utilities are competition driven. Offering better services, more services, improved continuity, better customer service, and discounts for product bundling are a result of this competition. Generally, customers benefit from competitive pressures. And with this, customers' expectations of what products and services their utilities provide, is now broader than ever. This presents opportunities for all utilities to examine new products and services revenue streams.Competition is not the only driver to find new revenue sources. The information age makes it easy for customers to be aware of the kinds of services and charges customers served by other utilities pay. For instance, one of the author knows, through a 2013 Boston Globe article and a web site maintained by an engineer firm listing water rates in New England, that his water utility rates are the highest rates in all of Massachusetts. So, with this internet-age information, consumers are able to pressure their utility to come up with better ways to control rates.Utility rates increase for many reasons. The cost of the source of the product such as the power plant, the water wholesaler, the regional wastewater district, and the gas production wells, often increase. While natural gas is heralded as declining markedly, when observed over several decades, it too has seen a marked increase.