Thinking outside the meter
One nightmare scenario goes something like this. You’re a medium-size electric utility in the American south-west. In anticipation of deregulation, you decide to upgrade your meters, investing hundreds of thousands into AMR. In the next six months, you lose thirty percent of your customers to companies who do their readings the old traditional way – with a fleet of trucks and some clipboards.
Or how about this? You’re a small utility in New York State. To save on costs, you sign a Memorandum of Understanding with a gas company intended to lead to collaboration on site services. Only once the deal is signed, all collaboration comes to a halt. No-one can agree on how to serve both sides equally. Even before the courts get involved, the bickering never ceases.
One conclusion you might draw from this is simple: in these tricky times, don’t make the mistake of messing with the way you do business. But if you’re an electric utility, you know that now is precisely the time when you must re-examine how you serve your customers. In the months to come, consumers are going to become less and less likely to accept ‘dumbed-down’ meters and mediocre site services. Which is why the timing may be perfect for a company like Olameter.
A thrid-party business
Olameter is a Canadian company founded in 1998. Over the past four years, it has been quietly marketing a plan that would dramatically restructure the way electric utilities sell their services. Billing itself as a ‘third-party business,’ Olameter wants to create a new class of participants in the market – one that can handle the job in a way that would eliminate the problems described above. Neither an energy seller nor a meter vendor, Olameter is something new: a neutral facilitator that operates for the benefit of all sides.
“What makes us unique is that we never set out to compete with electric utilities or the companies that sell meters,” explains Olameter CEO Jan Peeters. “ Where we want to stake our claim is the area in between.”
The area in between, of course, is everything that’s related to the management of meters – what Olameter insiders affectionately call “cradle to grave services.” Step one is to buy or lease a utility’s meters, which may or may not include staff and other assets. Step two is to provide capital to upgrade the meters with the latest available technology, to the point that they are fully automated and part of an advanced communications system. It is at step three, however, where things really become interesting. Because once Olameter has access to a utility’s customer sites, it intends to use this “footprint” as a means of marketing a host of other automated services.
Olameter is the brainchild of Peeters. And one of the reasons for believing it will succeed is the pedigree that he and his team are bringing to the table. Olameter has the financial support of RIT Capital Partners, an affiliate of J. Rothschild Holdings of London, England. The balance of its shares is held by individuals and institutional shareholders who collectively manage in excess of C$140 billion (US$87 billion). In addition to the support of IBM, which has jointly developed with Olameter its IT network and systems strategy, Olameter also has the guiding hand of Peeters himself, who was behind one of the major tele-communications success stories of the ’90s.
When Peeters launched Fonorola, it was just one of many start-ups trying to take a portion of market share after the deregulation of the telecoms industry. By the time the long distance re-seller was sold, it had a coast-to-coast fibre optic network and a price tag of $1.8 billion. Peeters managed this in only ten years.
Not surprisingly, it was the group who backed Peeters on Fonorola who encouraged him to attend a conference on AMR in 1996. The technology he saw there impressed him greatly, but what impressed him more was that they essentially had no client.
“The technology was all there,” says Peeters, “but there was no way anyone was going to be able to afford it. That is, not unless they could figure out a way to cross-connect with other service providers and reduce the capital cost of the asset.”
Six years on, this multi-task approach has become the boldest part of Olameter’s vision. Because although its primary aim is to provide outsourced data collection for electric utilities, its end-game is to offer supplementary services that include reads for gas and water consumption, security monitoring, Internet access, set top-boxes, digital video converters, cable modems, telco modems, wired and wireless local area networks, point-of-sale and pre-processing equipment, value storage devices and e-business applications.
Needless to say, Peeters realises that to many, his ideas are “light years ahead of the curve.” But interestingly, what may make his model work is its timeliness for one of the most conservative industries of all: the electric industry. At present, most electric utilities are in a “wait-and-see” mode, but there’s no question they are entering a phase where they will become increasingly receptive to new ways of turning a profit. At the low end of the market, billing costs and bad debt levels continue to rise. And where deregulation has already occurred, utilities are facing pressure to upgrade on-site equipment at a time when customers are freer than ever to switch suppliers at any moment.
“At the moment,” says Peeters, “what you have is two conflicting tendencies. On the one hand, all the companies are competing to provide better service on-site and all of them promising their customers they can do a better job. On the other, they’re faced with the fact that any of these customers can ‘blow the clambake’ at any time and switch more or less instantly to another service provider. In other words, they’re faced with the pressing need to invest in their infrastructure at the very time when there’s a real threat that their investment will go to waste.”
Merely by streamlining their metering services, Peeters believes that Olameter can provide electric utilities with a 25 % savings off their current operating costs. But he also believes the real gains will be made if they agree to partner with Olameter in the addition of supplementary services. The buzz term for this approach is “convergence” – and it’s not hard to imagine the cost reductions that will follow because of the economies of scale. Moreover, it will mean fewer trucks on the road, fewer disruptions for consumers and a dramatic lessening of the chaos that characterises meter maintenance in general.
“There are a lot of trucks out there,” says Peeters. “And there are a lot of companies trying to provide service in isolation. The simple truth is that for most utilities, collaboration is not in their nature. It’s not even part of their language. But once they see that we are not here to act as a competitor, they’re going to realise that there’s tremendous value in having a neutral representative with the authority to make decisions on the ground.”
Making it work
Perhaps the most impressive thing about Olameter is that it is willing to put its money where its mouth is, in pledging US$150 to $1,000 a site towards upgrading its clients’ existing meters. In addition, it recently purchased the Ontario operations of Alberta-based EPCOR, with the intention of using these as the “showcase” for the concept in North America. At present, Olameter is already doing 9 million meter readings a year across a service territory of 1.2 million meters for various electric utilities, which makes it the largest independent meter reading company in Canada. It is also in discussions with a number of what Peeters describes as “very interested” Canadian utilities, and expects to expand its operations incrementally.
Mark Pietro, Olameter’s Chief Operating Officer, is the man is charge of keeping the Ontario initiative rolling. And according to him, this new venture is providing an excellent opportunity to solidify the approach that has been years in development. More importantly, it sends a message to the electric utilities that Olamater is here to stay – and ready to get down to business at ground level.
“Until recently, it was a little like missionary work. We were approaching the utilities with our concept in hand, working from the top down. Now we’re coming from the bottom up, and I think it’s giving us added credibility. Ultimately, they’re a pretty tight-knit group of folks. And although I’ve yet to learn the secret handshake, I think this is like the entry fee into their club.”
As for Peeters, he has the confidence of a man who has listened to doubters before, but is certain he has an idea whose time will soon come.
“We’re asking the utilities to make a huge conceptual leap,” he says. “But it is really only a matter of time until they recognise that this infrastructure is eventually going to be much more valuable than it is today. When they do, I’m sure the future is going to be very bright for Olameter.”