Launching Customer CHOICEsm Is Smooth Sailing For Columbia Gas of Ohio
Cooperation Among Utility, Regulators, Consumer Advocates Key to Successful Launch of Columbia Gas of Ohio Residential Transportation Program
By Steve Jablonski, director of external affairs for Columbia Gas of Ohio
April 1, 1997, wasn't your typical April Fools' Day in Toledo, Ohio. Far from it. The city made history that day, and it was no joke. April 1 marked the introduction of Columbia Gas of Ohio's Customer CHOICEsm program in the greater Toledo area. The residential/small commercial natural gas transportation program kicked off with the largest initial participation, in terms of both customers and marketers, of any in the United States.
Local residents, bombarded by media coverage of the new program and sales pitches from nearly a dozen natural gas marketers for weeks before Customer CHOICEsm officially started, had accepted with relish the novel challenge of purchasing their natural gas from a source other than the local utility and finding the gas supply deal that was just right for them. About 14,000 had signed up in time for the April 1 launch.
Little did they know that the program which brought the revolutionary concept of natural gas unbundling at the residential level to their community represented the culmination of almost two years of effort by Columbia, the successful resolution of some of the biggest administrative and communications challenges in the company's history, and an unprecedented level of cooperation among the utility, state regulators, consumer advocates and other stakeholders.
No Easy Task
Columbia began designing the Customer CHOICEsm program in 1995, working with the Public Utilities Commission of Ohio (PUCO), the Ohio Consumers' Counsel (OCC), gas marketers, the city of Toledo and representatives of the company's residential, commercial and industrial customers. The group, called the Collaborative, faced a bewildering array of seemingly unanswerable questions. Among the decisions to be made were how to create a program that would be attractive to marketers and customers alike yet not too complicated to administer, how to ensure marketer reliability and performance, where to launch the program and how to educate customers about a subject that's definitely not top of the mind for most people. Not to mention a myriad of technical details including capacity assignment issues, billing and tax questions and stranded cost concerns.
"There's no doubt we had a full plate," said Columbia Gas of Ohio President and CEO Robert C. Skaggs Jr.
"Everyone involved in the process, particularly the PUCO and the OCC, brought ideas and concerns to the table," Skaggs noted. "One of the most significant challenges was taking all of those things into account as we began to design the program."
There are no quick and easy answers to the more than 30 fundamental questions and issues identified by the regulators, marketers and customer groups working with Columbia, Skaggs said.
Craig A. Glazer, chairman of the PUCO, was pleased that the diverse groups were uniformly dedicated to developing a sound program.
"The PUCO, as well as Columbia and the other parties, was vitally concerned that the program developed for Columbia Gas would be an outstanding model for the rest of the country," said Glazer. "The group worked together admirably to reach solutions that would work for Ohio."
The program took shape, piece by piece, during dozens of meetings over the next year and a half. At the sometimes-stormy sessions, questions were posed and possible answers discussed, solutions to potential problems were explored, policies were debated and compromises reached.
By mid-1996 the framework for the Customer CHOICEsm program had been fashioned. The PUCO approved the program on January 9, 1997, paving the way for the April 1 launch that presented such a significant new opportunity for Columbia's 170,000 residential and small commercial customers in the Toledo area.
The give-and-take which helped create the Customer CHOICEsm program was satisfying for Ohio Consumers' Counsel Robert S. Tongren.
"Through collaboration we can achieve remarkable results," said Tongren. "The participation of the parties representing various interests helped us develop a program that works for customers as well as suppliers."
Keep It Simple
Once Customer CHOICEsm received the final blessing of the PUCO, Columbia assembled a task force of more than 40 employees from nearly every internal discipline to work out the details of implementation. The company's approach to administering the program was to keep things as simple as possible, a task easier said than done.
"We wanted to make Customer CHOICEsm as easy as we could for the marketers as well as the customers," said Tiffany Allenbach, gas management services representative for Columbia. "We wanted to give everybody all the options and tools they'd need to do things right."
Several challenges quickly emerged, according to Allenbach. Such as how much information the marketers would need from Columbia in order to administer their programs. The company committed to providing them with daily billing reports and monthly reports on consumption and aggregation. Agreement was reached on what information Columbia would share with the marketers to allow them to respond to customer questions and assess the success of their programs.
In order to ensure marketer performance, a mandatory credit review was implemented, along with a requirement that marketers agree to a code of conduct.
One of the most significant early challenges was the use of the electronic bulletin board (EBB) set up as a method for the marketers to submit customer account information.
"Few of the marketers had used our EBBs, so they had to learn the system" Allenbach said. "As we went along, the EBB evolved into something more complex than just a customer account database. We found it was the best way to process other information such as consumption, tax information and usage and billing reports."
The marketers were offered options on customer billing. They could do their own billing for customers' gas supply or have Columbia do all the billing.
"We had to be sure we understood all the potential billing scenarios for the different marketers," said Allenbach. "The option a marketer chose would have an impact on the way we'd process consumption and aggregation information, as well as the billing."
Then there were the taxes. Specifically, state and local sales taxes which, by Ohio law, had to be billed on gas purchased through the marketers.
"Besides having to deal with the mechanics of billing the taxes, we found that some marketers hadn't taken into consideration whether their rates were before tax or after tax," Allenbach noted. "We had to be prepared to bill both."
The efforts of the Columbia employees involved in administering the Customer CHOICEsm program on a day-to-day basis were further complicated by the fact that some of the marketers had never done business in Ohio or with Columbia before, while others had never dealt with residential customers.
Diligent planning and cooperation among all parties helped get the program off to a smooth start, with no major administrative problems. Columbia's task force met weekly to review the implementation process.
"Lots of things that could have gone wrong didn't," noted Allenbach. "For the most part, we've developed a good relationship with the marketers—they realize we're all in this together."
That perspective is shared by Cathy O'Brien, director of customer relations for Keyspan Energy Services, Inc., one of the marketers participating in Customer CHOICEsm.
"The thought process that went into the program was good, reducing paperwork and making the mechanics efficient," said O'Brien. "It was thought out very well by all parties on all sides. It's a good program and the savings for customers can be more than nominal."
Location, Location, Location
One of the initial and most critical questions faced by Columbia was where to introduce the CHOICE® program. The Collaborative had agreed it should be rolled out in a limited area for a year and then evaluated before being offered in the remainder of Columbia's Ohio service territory. As a result, the location for the initial rollout had to have a large enough population to make the program attractive to marketers and provide a realistic test market. Yet it had to be small enough to allow for quick adjustment of operational or administrative procedures, if that proved necessary.
"The greater Toledo area had all the elements we needed for a good test," said John W. Partridge Jr., Columbia's senior vice president of public affairs and communication. "The customer base was the right size, and the market was concentrated enough that we wouldn't have to worry about our communication and education efforts spilling over into other areas of the state. We have a customer call-in center there, which was necessary from a customer service standpoint."
One other factor made Toledo an attractive location for the Customer CHOICEsm introduction, according to Partridge.
"The Toledo area has always been extremely sensitive to utility costs, particularly on the electric side," he noted. "We felt that, given the city's historic focus on utilities, it would be valuable to see how the customers responded once they were presented with the ability to make a choice about who supplies their natural gas."
Toledo city officials were quick to recognize the potential the program held for their community, and, working through the Collaborative, sought the opportunity to serve as its initial market.
Betty Shultz, who chairs Toledo city council's public utilities committee, said the time was right.
"We realized some time ago that we needed to be more involved in helping shape utility programs and policies whenever we could," said Shultz. "So we took a very proactive role in the discussions leading to the creation of the Customer CHOICEsm program."
The process paid some unexpected dividends, according to Shultz, who acknowledged that relations between the city and local utilities have often been rocky in the past.
"As we worked on the program, we were able to build a new level of communication, understanding and partnership with Columbia Gas," she said. "That's something I hope we can do with other utilities."
Passing the Word
Columbia utilized one of the largest customer education campaigns in its history to get the word out about Customer CHOICEsm. In addition to bill inserts and a brochure explaining the program, Columbia mobilized at the grass roots level to make sure customers in the Toledo area heard about the program and understood its potential benefits and how it was supposed to work.
A close partnership was forged among Columbia, the PUCO and OCC to develop the campaign and supporting materials. As part of that effort, Columbia provided training for the PUCO and OCC consumer services and telephone hotline staff, to ensure consistency in the messages all parties were sending regarding the program and how it operated.
An advertising campaign using radio, newspapers and billboards kicked off in January and was supplemented by some 100 town meetings and presentations to local government bodies and senior citizen groups. The meetings were conducted by members of Columbia's local management team, sometimes in partnership with Toledo city officials.
Columbia had a very specific goal in mind with its customer education campaign, according to Partridge.
"Our job was to educate customers about the concept of residential natural gas transportation," he said. "We wanted to make them aware of the concept and the benefits they could expect. Our intent was to pave the way for the marketers."
In February, individual marketers launched their communication and marketing programs. The PUCO, OCC and city of Toledo conducted their own public education campaigns aimed at helping customers sort through the variety of marketer offers.
The PUCO, for example, produced a comparison chart of all the rates and terms being offered by marketers for residential customers.
"We wanted to give customers an 'apples to apples' comparison for the many and sometimes confusing marketers offers," said Glazer. "Just giving customers a choice is not enough. We felt responsible for giving customers the tools to make an educated choice." The PUCO says it has received hundreds of calls each week from Toledo customers who have used the information to enter the Customer CHOICEsm program.
A survey conducted by Columbia in the Toledo area after the launch of the Customer CHOICEsm program indicated that, as a result of the multi-faceted public education drive, the customer awareness level regarding the program was a remarkable 75 percent.
Tongren was particularly pleased with what his agency was able to accomplish through its consumer outreach efforts.
"Education was a key to gaining acceptance of Customer CHOICE," he noted. "By providing information about the program and tips for evaluating the options available, the Ohio Consumers' Counsel helped residential customers gain an understanding about making wise choices in a competitive environment."
O'Brien thought the various communications programs were well worth the effort.
"I'm thoroughly impressed with how well the details of Customer CHOICEsm were communicated," she said. "It was unbelievable in comparison with pilots in other parts of the country."
The Future
The future of the Customer CHOICEsm program and unbundling at the residential level is bright, according to Skaggs, who noted that the program saved participating residential customers an average of $8.50 on their gas bill during its first month of operation. Enrollment has been climbing steadily, with more than 20,000 customers enrolled in the program for May and more than 25,000 for June. Seventeen marketers have qualified to participate.
"I'm extremely proud that our program has achieved record-setting customer and marketer participation. Columbia is looking forward to making CHOICE® available to its customers throughout the state," he said.
Skaggs adds that, while the program gives consumers choices and opportunities they've never had before, it's a breakthrough in more ways than one.
"To be able to bring such diverse groups together and, through compromise and cooperation, craft a program like Customer CHOICEsm, makes me very optimistic that the process will work for other issues and programs."
Skaggs noted that the flexibility and innovative thinking which made the program possible will be crucial in tomorrow's natural gas industry.
"I'm convinced that the local distribution company as we know it today is on the verge of radical transformation," he said. "For example, I think the concept of customers choosing their natural gas supplier will become universal, and I see the marketers becoming a much more significant part of our customer mix.
"Columbia's early and aggressive participation in that process through the Customer CHOICEsm program puts us in the best possible position to both foster and take advantage of change that will positively impact our customers and our company."
CHOICE® is a registered service mark of Columbia Gas of Ohio, Inc.
