For utilities managing a resource mix that increasingly depends on renewable generation, large commercial and industrial customers enrolled in interruptible programs can be an underappreciated grid resource. When these customers reduce load on demand, they function as a flexible, dispatchable capacity without requiring new generation investment. For this capacity to show up reliably, the customer relationship must be strong enough to support it.
When a large business customer isn’t prepared to respond to a peak event, they might not participate or reduce enough load. As a result, they could receive steep penalties and the utility might have to scramble to reduce demand.
To better prepare these customers, key account managers (KAMs) should regularly communicate with key accounts before, during, and after events. We spoke with representatives from WEC Energy Group and Austin Energy to learn what strategies their utilities use to address new challenges to customer interruptible programs.
The risks to customer interruptible programs
Some utilities are beginning to see an increase in peak load events as they add renewable generation, retire old generation, and add new customers.
Supply constraints mean large business customers are operating on thin production margins. And employee turnover is creating a loss of program knowledge and readiness at both the customer and utility organizations.
If utilities don’t proactively prepare customers and adapt their programs, they’re at risk of miscommunicating, damaging relationships, and not achieving enough load reduction.
Utility capacity
Many utilities have historically had enough grid capacity that they haven’t needed to call on customers often to reduce load.
Greg Smedema, manager of key accounts at WEC Energy Group, explained that the utility has built up a lot of generation resources while offering load curtailment programs. So peak demand events were rare. But today, this period of excess resource capacity and limited peak load events is changing.
New renewable generation. Not only is load increasing but utilities are also adding more renewable generation and retiring resources like coal and older natural gas units. And utilities are becoming more reliant on these intermittent renewable resources.
Utilities need dispatchable generation to support renewable energy when it’s not available. And if utilities don’t replace coal with new dispatchable generation, like advanced gas or batteries, they could see more emergency peak events.
Increased need for demand reduction options. Some utilities may not yet have an interruptible program option for large business customers. For utilities that do have interruptible rates, their participants often have benefited from lower prices without having to respond to many events.
Utilities should start preparing for the possibility that they’ll need to add new interruptible options or alter existing programs to accommodate capacity changes.
Customer growth
Since the economic downturn from the COVID-19 pandemic, we’re seeing customer segments recover and grow again. If a customer’s load has increased, it will impact their ability to respond to an event.
Load growth affects firm service level (FSL). A change in a customer’s load can affect their:
- FSL—the level of demand they need to reach during an event
- Interruptible amount—the amount of load they need to reduce to get to the FSL
If KAMs don’t regularly review contracts with customers, and then the customer’s load changes, the customer might not be able to meet their firm demand level. Or they might have untapped potential to shed even more load during an event.
Reaching program targets may require new participants. The target segments for your interruptible programs could be changing as new customers come online. Utilities may have had the same customer participants for a long time, but they may need to add customers to the program to get enough load reduction. Or they may need to target new customers with high demand.
Smedema, of WEC Energy Group, and Bill Sparks, director of commercial and key accounts at Austin Energy, both noted that they’re seeing new data centers with high demand come online in their service territories.
Some new data centers may want to use on-site renewable energy to power their operations. Commercial customers such as data centers also may want multiple sources of power to maintain constant operation, including utility-side, customer-side, and other backup power.
More load reduction requires more planning. Existing participants may need to reduce more of their load as the frequency or size of events increases.
If customers haven’t had to respond to events in a while, or if your utility needs more load reduction from them, they may need to notably alter their operations during an event to comply. And figuring out how to adjust operations can take time.
According to Sparks, Austin Energy developed a new agreement with a large business customer to reduce 50% of their load during grid-scale load shed events. The customer will reduce several dozen megawatts without completely shutting down complex operations.
Austin Energy is relying on big load reduction from its industrial customers to prepare for a potentially large load shed event.
Employee turnover
Utilities saw an increase in retirement rates during the pandemic, and those rates have remained high, even in KAM roles. Some utilities are still seeing 30%–50% turnover in account management in a given year.
Loss of internal knowledge and relationships. Less-experienced employees may not be as knowledgeable about interruptible programs and customer contracts. Utilities will need to do more-frequent training to get newer employees up to speed so they can develop strong relationships with key accounts.
For insights into recruiting and retaining account managers, see the E Source report What we learned at the Fall 2023 Account Management Leadership Council.
Loss of customer contacts. Your large business customers are also experiencing employee turnover. If the utility hasn’t called on the customer to reduce load in a while, there may be new employees that aren’t familiar with the program or the KAM.
Account managers should meet with key account customers at least once a year to review interruptible contract expectations and communication protocols. KAMs should also make sure their customers have an event response plan in place.
Smedema explained that the people who originally wrote the interruptible program contracts at customer organizations may be long gone. Someone else likely inherited the contract without knowing exactly how it works or what to do during an event.
Supply chain constraints
Large production facilities are often operating on just-in-time production schedules and reduced inventories. Just-in-time production is a strategy to align a company’s supply orders with its production schedule. Supply chains are already tight and are still experiencing delays. Because of this, some customers decide to not respond to an event and pay the utility penalty instead.
With an annual review, an account manager can help customers think through these decisions before they happen. This can avoid a customer surprise and reduce their frustration when they have to decide to ride through an event without decreasing demand.
Operational costs outweigh curtailment costs. For some businesses, the cost of reducing operations and not serving their own customers’ needs outweighs the cost of not participating in an event and paying more. And according to Smedema, many of WEC Energy Group’s customers save enough money with demand programs throughout the rest of the year, despite the higher prices during economic curtailment periods.
WEC Energy Group calls economic events when market pricing for the next day shows it will be more cost-effective for customers to cut load than to pay for the price of energy. The utility will notify customers that they can save money by reducing load on these days. But the price reduction is often small and production needs are too important for customers to want to participate.
Alternatively, Austin Energy’s interruptible load program uses a pay-for-performance model. The utility doesn’t charge customers a penalty for not participating. Customers either get an incentive for participating or they don’t get an incentive if they opt out.
Current incentives and penalties may not be high enough. As peak events bring utilities closer to their generation capacity, utilities might not be able to get enough demand reduction if customers opt out and take the penalty.
You may need to increase the financial incentive for customers to secure enough demand for events. If your utility plans to add or increase penalties, your KAMs will need to work with customers to help them understand the risk, adapt existing contracts, or make a new plan.
You may also want to offer other types of DR options to other business customer types. In the E Source report How AutoDR can improve your C&I demand-response portfolio, we highlight how automated demand response (AutoDR) is increasing in the business customer market for large and small businesses.
Event reduction is more consistent using AutoDR because the utility controls customer equipment. And because AutoDR is usually paired with equipment like lights and thermostats, the program can have a big impact by aggregating small business customers together.
Key account relationships
Customers often have to meet specific targets during an event to avoid penalties. If your utility has steep penalties, an underperforming key account can:
- Raise questions internally about the KAM’s relationship with the customer
- Get the attention of utility executives when the customer gets fined
Communication with key accounts is especially important if you expect higher penalties or an increase in emergency events.
On some of its rates, WEC Energy Group assesses a penalty of $35 for every kilowatt the participant fails to reduce below their FSL.
Once the utility notifies customers on the day of an event, customers reduce as much load as they can before the curtailment or interruption period starts. During the first 15-minute interval after the curtailment period starts, the customer will receive a penalty for any load above their FSL. The penalty will stay the same for the event as long as the customer doesn’t increase their load any higher during the curtailment period.
But for some of WEC Energy Group’s other rates, the penalty is $3.50 per kilowatt-hour. (A per-kilowatt-hour penalty is notably higher than the per-kilowatt penalty.) This means that if the customer doesn’t reduce their load to the FSL before the curtailment period starts, their penalty will keep accumulating until they reduce the rest of the agreed-upon load.
How utilities should communicate with key accounts regarding curtailment events
Your key account customers are busy. Their operations, load, and personnel could change at any time. Make sure you set expectations and help them prepare for peak events by communicating regularly throughout the year.
Effective planning and preparation not only improves awareness and customer response but also reduces surprises and negative experiences when a customer decides not to curtail and is penalized.
Communicate before an event
Consider scheduling annual meetings with key account participants before your peak demand season. Or meet with customers quarterly if you experience peak events throughout the year.
Most utilities set their contracts with customers on an annual basis. It’s important to set clear expectations for the year with customers before events happen. Make sure participants:
- Understand the penalties and incentives
- Know how the notification and communication process works
- Have a plan in place to reduce load
Explain the details of the program and historical results. Remind customers about the importance of DR and its benefits. Consider offering an overview session for your customer’s employees who might be involved in responding to a DR event.
During your meetings with key accounts, share the historic and projected savings and penalties from the program. Review clear, documented expectations with customers about how to participate and what to expect. This should include information about when the events can happen, the duration of an event, and when and how the utility will communicate ahead of an event.
Account managers at WEC Energy Group provide customers with a one-page, printed summary during annual meetings. It explains:
- The basics of their tariff
- When the utility calls events
- What the penalties are
- When customers can adjust their contract
Confirm loads and potential load growth with customers. Consider doing a collaborative assessment of the customer’s load flexibility and curtailment options to confirm or change their plan. This could include developing a DR event and contingency plan to help them meet their load commitment.
Some utilities even test or validate the customer’s ability to meet the DR target. You should also review how potential load growth will affect the customer’s DR targets and curtailment plan.
Confirm and adjust contracts as needed. You should review the customer’s interruptible program contract annually and make sure they understand all of the expectations, including how the expected firm service level (FSL) and load reduction are related to savings or penalties. The customer should have a clear plan in place to reduce load and meet those expectations.
WEC Energy Group has recently standardized the process for KAMs to confirm FSLs with customers. The utility allows customers to renominate their FSL within the contract or tariff constraints once a year before January 15 as part of their annual review.
WEC Energy Group can then commit a certain amount of load reduction to the Midcontinent Independent System Operator (MISO) for the year. The utility uses the annual review process to verify the FSL with the customer rather than just rolling it over.
Confirm contacts and the event notification process. Make sure the customer is aware of and can use all systems for communication, notification, monitoring, and reporting. Verify that the account management team also has access to the systems. You should also explain how you’ll communicate about high-likelihood curtailment days and how you’ll communicate around actual events.
Have a regular plan in place to confirm the customer’s contact information and test the notification process throughout the year. WEC Energy Group has a semiannual review process with participants every April and October. The utility verifies that it has multiple contacts and up-to-date contact information and it tests the communication system with those contacts.
Keep customers up to date on communications from the grid. To help customers better prepare for events, keep them up to date on when the system is nearing a peak. Greg Smedema, manager of key accounts at WEC Energy Group, and his team monitor information coming from MISO before they call any events.
If Smedema sees a notification from MISO that they’re nearing max generation, he’ll let key accounts know in advance that an event might be coming. The advance notice helps customers better prepare for an event by making sure staff are at the facility and know what to do.
Communicate during an event
You should use an automated event notification system for your interruptible program. Verify that your customers received the notification either automatically or through personal outreach. And make sure KAMs and customers have access to tools to monitor performance during an event. Reach out to any participants that aren’t reducing enough load.
Confirm notification and monitor response. Verify that the customer received the event notification, and clearly communicate the specifics of the event including the start and end times. Then monitor the customer’s response to the event notification. Your account management teams should also be aware of the specifics of the event.
Monitor performance in real time and provide support. Use real-time data to monitor the customer’s load reduction and your utility’s overall targets during an event. WEC Energy Group has a sophisticated energy information system (EIS) for KAMs and customers to use. The EIS shows minute-by-minute energy information in real time, including total load, FSL, and interruptible load.
Have trained staff available to answer questions and help customers with issues as they come up. At WEC Energy Group, KAMs encourage customers to use the EIS tool to monitor their own performance. This helps reduce calls and wait times for customers that want to check their load during an event. KAMs also monitor customer information on the EIS and reach out to customers that haven’t hit their FSL yet.
Communicate after an event
Share the performance results with each customer after an event. You’ll need to understand if customers met their load reduction target partially, fully, or not at all. It’s important to explain exactly why a customer incurred any penalties and let them know before their next bill.
You should also ask for customer feedback on each event experience and use it to make improvements to the program.
Evaluate event performance. Review how the customer responded to the event and if they met their targets. If customers didn’t meet their load reduction target, find out why. Did the customer receive the event notification? Did they try to reduce load? Or did the customer not participate to maintain operations?
Use tools to review the results of the automated notification systems and any needed updates to customer contacts. If a utility doesn’t have up-to-date contact information, the customer won’t receive an event notification. They’ll likely be upset about paying a higher price for not participating without knowing.
Share the results with customers. Provide a comprehensive report that explains the customer’s performance. Have your billing teams send you the incentive and penalty information for each customer.
Then you can prepare for a potentially tough conversation with customers to tell them what to expect on their next bill. Surprise or unclear penalties can create a negative customer experience. If the customer didn’t meet their FSL, discuss strategies to help them meet the target next time.
Request and review customer feedback. Collect customer feedback that you can use to improve future events and programs. Both positive and constructive feedback can help make your program better.
The utilities that treat large customer interruptible programs as a strategic capacity resource are the ones best positioned as grid conditions tighten. The account relationship is what makes that resource dependable. Investing in it consistently, before the next peak event, is what converts a contractual commitment into capacity you can actually count on.
