What Does the “Customer of

the Future” Look Like?

Daniel J. Rendler, Southern California Gas Company, CEE Director

September 14, 2016

Nashville, TN

CEE Industry Partners Meeting

2

The Energy Industry is

Facing Rapid Change

3

Utility of the Future

4

Customer of the Future

How will our customers respond to energy and non

energy trends?

• What trends should we be paying attention to?

• What assumptions are we making?

• What questions should we be asking?

5

MCI Data Warehouse

Phoenix, SCB,

SLTS

(residential &

business data)

MCA

Maricopa County

Assessor Office

(residential home

data)

MyAcct

(residential &

business email

data)

Targetbase

(Environmental

Attitude & propensity

models for 18

residential products &

services)

PRIZM

(residential customer

segmentation data)

Energy Efficiency

(residential

participants for

FY09-Present)

Claritas

(residential &

business customer

segmentation data)

FIS

(financial data)

Geoscape

(residential

Hispanic customer

segmentation data)

JD Power

(residential energy

behavior

segmentation)

ExactTarget

(email

management

data)

Internal

source

External

source

Acquiring

Segmentation models & data sources

6

Nie

lsen

• Firmographics for business: customers own/lease, square footage, # employees, etc.

Targ

etb

ase

• Propensity models identify best prospects for products to help target marketing. T

arg

etb

as e

• Environmental attitude score groups customers according to the message they are most likely to value.

Cla

rita

s

• Demographics: age, income, own/rent, # in HH, family composition for residential customers, etc.

PR

IZM

• Geodemo-graphic models reveal life stage, income, age, etc. G

eo

scap

e

• Hispanic identi- fication based on acculturation and language.

Co

un

ty

As

sesso

r

• Home charac-teristics: square footage, # stories, pool, etc.

J.D

. P

ow

er

• Smart Energy Behavioral Segmentation: stage of engagement and techology adoption.

Segmentation tools

7

Not Involved with the Environment

Environmental Advocates

Value Greens Status Quo Disbelievers Spectators

Highly Environmentally Conscious

Deal Seekers

Environmental attitude segments

8

Larger Market Trends

Such as:

Continued drivers toward a low carbon future

More distributed energy resources

More and more products will interconnect

Broader availability and higher quality broadband service

Utility rate designs (energy pricing) will change

Energy consumption will be more visible, manageable

Continued utility obligation to provide grid reliability

9

Implications of…

Connected Technology

Non-energy Benefits

• Water, Health, Emissions, Environment

Changing Business Models

New Technology (products, features, functions)

10

Our Panel

Liz VerSchure, Vice President, Parts, Service Support, and Consumer Comfort, GE Appliances, a Haier Company

Kevin Bright, Managing Director, Customer Efficiency Programs, Duke Energy

Pekka Hakkarainen, Vice President at Lutron Electronics

Jeff Okrucky, Union Gas, Director Distribution Marketing, Union Gas

11

Panel Questions

How will customers of the future be different

than customers today?

How will your industry and its product mix

change to meet future demand?

What added benefits and amenities will

customers have access to that they don’t

have today?

What areas do we need to work on together

to meet future customer demand?

THE CUSTOMER OF THE FUTURE

GE APPLIANCES

• Headquartered in Louisville, KY, at 63-

year-old, 900-acre GE Appliance Park,

our largest manufacturing operation

• $6+ billion in revenues

• Five U.S. manufacturing operations

located in Kentucky, Alabama, Georgia,

South Carolina and Tennessee

• 12K employees

78% EXPECT NEW HOMES TO INCLUDE SMART

HOME TECHNOLOGY WITHIN THE NEXT 5 YEARS1

Product diagnostics and

predictive service

Alerts / Security

Whole-home integration

Voice controls

Product Features

Convenience

Remote access

1 May 2015 Harris Poll®

FRAGMENTED SPACE, NEW ENTRANTS… FUTURE CONSOLIDATION

ENERGY USAGE IN THE HOME

Source: https://www.energystar.gov/index.cfm?c=products.pr_save_energy_at_home

ENERGY DEVELOPMENTS IN APPLIANCE INDUSTRY

Trends Implications

Solar PV growth - Residential and Utility

Limitations on net metering (HI, NV, AZ)

Time of Use Pricing on the horizon (CA, NY)

Pilot Demand Response of

residential loads, energy storage

Integrate APIs with Home Energy

Management Platforms, smart

thermostats

Education

Figure 1: 2015 Energy star water heater promotions; Figure 2: http://www.seia.org/research-resources/solar-industry-data

Renewable Energy

Energy Efficiency

Appliances are a failure based purchase,

intense price pressures, cost management

Falling energy prices make energy efficient

products less appealing to consumers

Energy management through connected

appliances

Diminishing appeal of Utility rebates

Instant Utility discounts at point of

sale to reduce/eliminate the upfront

cost differential

Smart home management

consolidation

CONSUMER TRENDS AND CHALLENGES FOR

APPLIANCES IN THE DIGITAL ENVIRONMENT

• Reduced home ownership….less opportunities to purchase more

efficient appliances

• More single households, single working parents…productivity via

home delivery, subscription services, integrated lifestyle

• Aging at home….Help maintain home independence

• Security

• Home energy management growing trend… integrate with home

• Commissioning and continued connections to enable better

ownership experience

7

• Wi-Fi capability on appliances

while reducing implementation cost

• Integrate with multiple service

providers and software platforms

• Support the shift to the whole-home

• Service diagnostics and preventive

maintenance

THE FUTURE … DELIVERING CONSUMER VALUE

CUSTOMER OF THE FUTURE Kevin Bright Managing Director, Customer Efficiency Programs

DUKE ENERGY OVERVIEW

Charlotte, NC - headquarters

24 million customers

7.4 million sites served

29,000+ employees

95,000 square mile service territory

Piedmont Natural Gas acquisition announced October 2016, expect to close by EOY 2016

Piedmont adds 1 million customers in NC, SC and TN

Regional Headquarters:

Raleigh, NC St Petersburg, FL Cincinnati, OH Plainfield, IN

“the top-rated engineering improvement to the life of earthlings in this century was electrification. Electrification changed the country’s economic development and gave rural populations the same opportunities and amenities as people in the cities.” Neil Armstrong, February 22, 2000

Interacting with the Customer of the Future

CORE BELIEFS Customers will demand a unified experience, similar

to what they experience with other service providers

The analysis and recommendations will be

personalized to their specific home, needs and wants

Interaction will be handled through digital interfaces

(i.e. – smart phone, tablet, computer) and digital assistants

Interfaces with devices will take place in the cloud

Managing issues on the utility system will shift from the

customer modifying behaviors, to the utility

shaping load without customer impact

Case Study: SMART HOME

Kevin Bright MANAGING DIRECTOR, CUSTOMER EFFICIENCY PROGRAMS Duke Energy 139 East Fourth Street Cincinnati, OH 45202

Tel (513) 287-3861 kevin.bright@duke-energy.com www.duke-energy.com

THANK YOU!

The Customer of the Future Panel Discussion

Pekka Hakkarainen, VP Government & Industry Relations

CEE Industry Partners Meeting, Nashville TN, 14 September 2016

Over 50 Years in Light Control

Today

• 15,000 products

• Energy-saving solutions for residential and

commercial applications

• Light, shade, temperature and small

appliance control for a single room or

throughout a whole home or building

• Convenient control from keypads, wireless

controls, tablets and mobile devices

• Manufacturing location, sales offices and

experience centers in 40 locations globally

1961

• Introduced the first electronic dimmer

Lighting, window shade and temperature

controls save energy

Changes in the Lighting Industry

60W 10W

Smart

Lighting

Human Centric Lighting

Changes in the Lighting Industry

LightingEurope roadmap 2025

Customers Expect “High Quality” in Lighting

? X Light output

Color

Dimmability

Cost

Energy??

More Customers Expect More Convenience

Customers Expect Interoperability

History of the American Railroad Gauge

4 ft 8½ in

1880

1890

Memorial Day weekend 1886

4 ft 8½ in

5 ft

Making Choices is More Difficult Today

Future of Lamp Industry Is Not So Rosy

What about the customers?

• customers expect high quality lighting

• customers expect more convenience

• customers expect greater interoperability

• customers will face more difficult and

complex choices

• customers may be confused by structural

changes in the lighting industry

Jeff Okrucky Director, Distribution Marketing

Union Gas Ltd

CEE Industry Partners Meeting

The Customer of the Future Panel Discussion

Union Gas |

Union Gas

• Major Canadian natural gas storage, transmission and distribution company based in Ontario

• Over 100 years of experience and safe service to customers

• Assets of $7.2 billion, ~1.4 million customers, ~2,300 employees

• Dawn Storage facility – largest underground storage facility in Canada

• Dawn Hub, one of the top-5 physically traded hubs in North America

• One of Canada's Top 100 Employers 2011-2016

• A Spectra Energy (NYSE: SE) company

Retail Customers 1.4 million

2015 Pipeline Throughput 1.2 Tcf

Distribution Pipe 64,800 km / 40,270 mi

Storage Capacity 160 Bcf

Transmission Pipe 4,811 km / 2,988 mi

2

Union Gas |

Millennials: “leading indicators” of large-scale changes in consumer behaviour

-

2,000

4,000

6,000

8,000

10,000

12,000

2016 2020 2025 2030 2035 2040 2045 2050

(Th

ou

sa

nd

s)

Population Projections by Generation, Canada*

Pre-Boomers Before 1946

Boomers 1946-1964

Gen X 1965-1980

Millennials 1981-1997

What makes Millennials different?

most ethnically and racially diverse generation

more than 70% of Millennials over 25 have a degree or diploma

embrace multiple modes of self-expression

consume content across multiple devices pretty much all day long

lower incomes and rates of home ownership

DIVERSE

EDUCATED

EXPRESSIVE

CONNECTED

STARTING OUT

*Source: Statistics Canada, medium projection 2014 **Source: Pew Research Centre, based on US Census Bureau projections released in 2014

-

20

40

60

80

2016 2020 2025 2030 2035 2040 2045 2050

Millennials

1981-1997

Boomers

1946-1964

Gen X

1965-1980

Pre-Boomers Before 1946

Population Projections by Generation, USA**

(Mill

ion

s)

3

Union Gas |

5.6 5.2

4.1 4.5

2.8

5.5

(Mill

ion

s)

Impact of Millennials delayed for utilities

Younger Millennials are still in school, and older Millennials have delayed marriage, starting families, and lived longer with their parents. As a result, Boomers will continue to dominate the customer base of many utilities for a decade.

10 Year Projections of Households, Canada*

Boomers

Gen X

Millennials

The “Grey Tsunami” is not over yet!

• Millennials have higher enthusiasm for the concept of green buildings and upgrades, but Boomers have a longer history with HVAC systems and utility bills!

• Boomers interested in new technology and energy efficiency to reduce maintenance and keep living costs low.

• Many still aspiring to live in “dream home” and will not sacrifice features despite downsizing.

2015 2025

*Source: Statistics Canada, medium projection 2014 4

Union Gas |

Customers will increasingly turn

to renting . . . and when they do

buy homes, they’ll remain in

them for fewer years.

Strategies to shorten payback periods and address “split incentives” in rental properties will be a must.

1

Customers will expect things to

work and will have little tolerance

when they don’t.

Products and services will need to meet the high expectations of tech-savvy Millennials. While they aren’t experiencing problems in higher numbers than the Boomers, they’re twice as likely to contact their utility if they have an issue.

2

Customer of the Future: 6 Predictions

5

Union Gas |

Demand for environmental

responsibility will increase… but

will customers be willing to pay

for it?

Union Gas’ research indicates younger generations are more concerned about the environment and more supportive of carbon reduction programs, such as Cap and Trade. But support falls quickly as the personal cost impact increases.

3

Non-energy benefits (NEBs)

will be a bigger part of the

equation.

Both for marketing and evaluation of cost effectiveness, recognizing the full array of NEBs will broaden opportunities to engage customers. Segment targeted messaging will become paramount.

4 6

Union Gas |

The rise of distributed technologies

will transform energy consumers

into energy “prosumers”. 5

Smart home and smart consumers

will drive increased integration

across fuels.

Increased cross-fuel integration will require cross-fuel collaboration. To what extent will the utility business model change?

6

Smart devices and information availability will lead to smarter consumers. More consumers will own/control their energy supply and use, challenging the traditional role of the monopoly utility.

7

Union Gas |

The Concept of Smart Energy

8

Energy integration will drive increased cross-fuel collaboration

INDUSTRIAL POWER

GENERATION RENEWABLE

NATURAL GAS TRANSPORTATION RESIDENTIAL COMMERCIAL/ INSTITUTIONAL

Natural gas underground storage

Carbon capture

Carbon capture

District energy

mCHP/ Gas heat

pump

CHP/ Gas heat

pump

Factories Renewable

power (hydro,

wind, solar)

Electricity

Biogas and biomass

Power to gas (Hydrogen) Electric

cars CNG and LNG

vehicles

Retail & office buildings, hospitals,

schools and airports

Urban residential

Suburban residential

Solar

Union Gas |

How do these predictions affect development of technologies?

• Natural gas will remain a key component of the energy system; R&D and commercialization investments need to reflect balanced energy solutions

• Big winners in major energy using equipment will employ technology that:

– Can enable or accommodate use of the right fuel, for the right use, at the right time

– Is “connected” with user-friendly interfaces (do not require extensive user education)

– Is mobile friendly

– Provides automation with choice (for example choose to fully automate or to trigger request along with cost/comfort consequences of decision)

• Building envelop remains a major opportunity for existing building stock

• Longer term potential for the economics of carbon to become more important than the economics of energy efficiency

9