Red River Rivalry: What Oklahoma Gas & Electric can Teach Texas Utilities

800px-Red_River_Shootout_2006Fall is in the air, the State Fair of Texas is in full swing, and the annual meeting of the University of Texas (UT) and the University of Oklahoma (OU) will occur at Dallas' Cotton Bowl this weekend. One of the greatest football rivalries in the Big 12, UT and OU have been battling it out since 1900. Even the governors of both states frequently place bets on the game, like the losing governor having to present a side of beef to the winning governor.

And, while Sooners and Longhorns may not easily take advice from each other, Texas utilities should take a few lessons from Oklahoma Gas & Electric (OG&E). OG&E is Oklahoma's regulated utility serving over 800,000 customers in Oklahoma and western Arkansas.

Here in Texas, we are proud of many things from our "don't fence me in" ethos and wide-open landscapes to our self-reliance and abundant natural resources. Not too many states have the type of pride that Texas possesses (kitschy or otherwise). That pride extends to our innovative energy utilities as well, like Green Mountain Energy, Austin Energy, and CPS Energy in San Antonio, all of which are helping lead the state into the new energy sphere.

But OG&E has won trophies! Well, ok, awards, like a customer satisfaction accolade from J.D. Power and Associates and the Energy Assistance Award from The Edison Electric Institute, as well as being named the “highest ranked” smart grid project from the US Department of Energy. Their innovative demand response (DR) program SmartHours – a voluntary, cost-effective tool that relies on people and technology to reduce energy needs at peak times, diminishing the need for polluting power plants – allows for improved customer satisfaction, reduced energy use and air pollution, and profitability. And to keep Texas (the number one wind leader in the US) on its toes, OG&E was also one of the first utilities to offer wind power to their customers in 2003. Today, they have about 170 megawatts (MW) of wind power online and, in 2007, announced this number could increase to roughly 770 MW in the future.

In looking at OG&E's award-winning DR program, SmartHours, Texas utilities can learn how to overcome obstacles and achieve successful energy management and reductions programs.

Goals:

OG&E was deliberate in its roll-out of a successful, cost-effective DR program. From sustainability goals to continued customer satisfaction, the utility laid out a solid path. Specifically, the program aimed to delay construction of incremental fossil-fueled power plants by primarily using DR to reduce nearly 300 MW of energy demand (or enough to power roughly 300,000 homes) and represent 20 percent customer participation.

Principles:

Once these goals were established, OG&E developed a set of guiding principles that bridged these goals to customers. It is this portion of OG&E’s organizational makeup that, perhaps, provides the most useful insights for electricity providers in Texas:

  • DR results are obtained through customer empowerment
  • All customer participation is voluntary
  • OG&E promised not to directly control customer equipment or appliances
  • Customers are provided time-variant pricing and have the choice to balance between cost and comfort
  • Pricing (rates) must reflect true costs, minimizing subsidies within and across customer rate classes
  • Enabling technologies like smart thermostats are provided to customers at no cost
  • Customers are encouraged to remain in the program with a no-lose proposition for the first year

These values are centered on the customer. OG&E empowers homeowners and businesses with technology and information, so they can take control over their energy use and make better decisions. When supplied with modern technology (like smart thermostats and appliances) and combined with time-variant pricing, OG&E found that customers use less electricity – regardless of age and income. This debunks the myth that older and/or low-income populations would not respond and incorporate these technologies into their lives. In fact, people in these demographic groups have the most to gain through energy management because their electricity bills are a larger proportion of their expenses.

It’s also important to highlight how OG&E managed to do all of this in a state that has very similar cultural and political norms as Texas, posing unique challenges for utilities. One particular area that can resonate in Texas, as it did in Oklahoma, is the promise OG&E made to its customers not to directly control their equipment or appliances. Emerging energy technologies bring new attention to the need to protect customers’ privacy. People need to feel their data will be protected. For some, the "big brother" fear factor is a chief concern, and continuous credit card security breaches at big box retailers and recent reports of NSA overreach have not helped quell these worries.

Ultimately, the set-it-and-forget-it aspects of innovative energy technologies allow for a middle man, or in this case machine, to control the thermostat or appliances – not the utility. This provides a neutral ground to assuage privacy-related concerns. Furthermore, in Texas, state law makes it clear people own their own data. This opens the door for customers to have leverage over their valuable and desirable data, in the case utilities and third parties are interested in providing compensation for it.

With all of these goals and principles in places, what does OG&E’s success look like?

Results:

OG&E’s cutting-edge DR program was successful on multiple fronts, from customer satisfaction to reduced pollution. Peak energy demand was reduced by as much as 33 percent, 99 percent of enrolled customers saved money, and OG&E was able to eliminate incremental fossil fuel-fired generation!

Improved customer service was measured both quantitatively and qualitatively, with a 16 percent faster time-to-call resolution and 50 percent fewer complaints to regulators. This not only helped strengthen OG&E’s brand, but also helped the utility enroll 91,000 customers in SmartHours to-date, all of whom saved, on average, over $100 on their electricity bills.

What can we here in Texas take away from our pals to the north?

  • Technology and savings create sustainability: new, efficient technologies facilitate savings, which is the primary driver for customers
  • Automation is key: set-it-and-forget-it
  • Time-variant pricing (with a significant differential between on-peak and off-peak prices), plus daily communication, creates awareness and focus
  • Choice matters: customers value having a choice when it comes to opting in or out

Empowering customers to manage their own electricity, rather than encouraging consumption of kilowatts to make a profit, is the value proposition that can propel OG&E through the rocky transition to the new energy landscape. Other utilities should take note. Over the next year, EDF will be diving deeper into these issues.

So, while coeds from Austin and Norman converge on the grounds of Fair Park – readying for battle with Fletchers corn dogs and fried Cokes and cheering for their respective teams – Texas could stand to benefit from setting the rivalry aside and learning from Oklahoma’s successes in the utility sector. The fact that OG&E has succeeded in a state that, like Texas, may seem hostile to the clean energy revolution, gives us hope this is the path forward for our communities.

But, as a native Texan who was born with state-pride bravado, I'd still like to see Texas utilities wrestle some of those wins from OG&E. Game on!

Photo taken by Elaine Mesker-Garcia of Flickr

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  • About the author

    Project Manager
    Marita is a project manager for EDF’s US Climate and Energy Program, working on issues in Texas such as smart grid development, renewables, demand response, and policy involving the Public Utilities Commission (PUC) and the Electric Reliability Council of Texas (ERCOT).

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    Confluence of SJR, Old, and Middle rivers

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