The Legal Separation of National Grid ETO and ESO; Opportunity for the transmission customers

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A perspective of Legal Separation of NG ESO and ETO and how the time is right for Transmission Operator to be more proactive with customers.

On April 1, 2019, Britain’s electricity industry learned that a key transformation program had gone live. The National Grid’s Electricity System Operator (ESO) had formally and legally separated from the Electricity Transmission Operator (ETO) and become an independent ESO.

Being part of the Capgemini team that helped deliver this monumental transformation over the past two years has given me insight into its implications for the industry and the benefits that an independent ESO would bring to the UK energy consumer.

As with every change, there are opportunities and risks – and a lot of attention across the sector and within the National Grid has been focused on the post-separation of the ESO.  In this blog, I would like to concentrate on what I believe are the many new opportunities for the ETO as result of the legal separation, particularly within the customer space.

A simple analogy

Who owns the ultimate product?  This is a question I have asked colleagues in both the ESO and ETO many times.

Let’s take the transmission connections as an example. In this context, the final connection of a customer to the transmission system is a product or service delivered by the ETO. Granted, the customer’s contractual relationship does remain with the ESO, but the product is ultimately what the transmission operator produces and offers. Taking this perspective and recognizing it, has important implications. It means that the ETO needs to have a view of, and proactively manage and innovate the end-to-end customer journeys.

If “connections” were akin to a car, then the transmission operator is the designer, producer, and marketer of the car while the ESO is the “dealer” and the point of “sales and distribution.” What this shows is that as product owners the National Grid ET, as well as the other ETOs, need to take the lead on customer management, customer experience, and customer engagement. They should do this by influencing the ESO, understanding constraints, removing them, and steering initiatives that allow them to become more customer oriented.

An independent ESO allows this perspective to become more emphasized and visible. The ETOs, and especially the National Grid ET, need to capitalize.

A central view of the customer

Legal separation has given the National Grid ET more accountability over customers than ever before. And so the old maxim “the customer is always right” will need to be taken more seriously.  ETOs can no longer be asset and engineering companies, they need to be customer service organizations.

Customers want their products faster, cheaper, and they want more innovation and flexibility.  This has never been more true in the electricity industry than it is today. The fact that the industry is decentralizing means the ETOs’ customers are becoming more varied and are increasing in numbers. Regulatory and non-regulatory businesses become customers and suppliers of each other. Adjacent industries begin to collaborate.

For the ETOs, the customer mindset cannot be limited to the commercial departments. Leading the customer experience, engagement, and insight needs to be driven centrally, and be done from an end-to-end journey perspective. It doesn’t matter which department this central function sits in, as long as it has a holistic view and is able to integrate all functions that have customer touchpoints along a single vision, mindset, and ways of working. In short, a single customer journey. One could even envisage a Chief Customer Officer in the future for the ETOs as they seek to compete. With Ofgem promoting competitive onshore transmission, and DNOs becoming competitors as a result of decentralization, this could just be around the corner.

The benefits of implementing this approach are profound. It allows ETOs to use multiple channels of engagement effectively, departments begin to collaborate, and data is collected for a central hub to provide a stronger insight. When it comes to behaviors and ways of working, customers begin to see a significant difference, as both operational centers and commercial teams begin to speak the same language.

Industry collaboration

The SO-TO codes and other industry codes are designed to ensure that the ETOs work with the ESO in a transparent, fair, timely, and effective manner. However, times are changing and these codes were designed for a centralized, large actor, sector expert, and low customer volume industry.  Energy transition is disrupting the landscape with an increasing number of decentralized, diverse, and numerous new actors. These codes need to adapt and the ESO has a program to drive this.

Legal separation has set a critical new platform for this step to be taken. There are varied views about how the codes should transform, or even if they are required at all. Without a doubt, there is industry collaboration required here, and however it evolves, there are two key requirements:

  • Let’s start immediately. By its nature and given the complexity of stakeholder map, the work needs to start now. There are benefits from removing redundant, less valuable processes, and shuffling accountabilities where they best reside.
  • Let’s ensure that we build the codes with a view on how they would enable the ETOs to take more accountability for customers, have a larger participation in driving consumer benefit, identify value and deliver on best experience. Codes need to be written to support end-to-end customer journeys.

Capabilities and transformations

I believe the biggest opportunity legal separation has brought the ETOs and specifically the National Grid ET, is the chance to get closer to customers and build and deliver on better value propositions.  Indeed, in this new sector model all the ETOs have a chance to express the value of their brands and bring them before the consumer. To achieve this, they need to refresh perspectives, begin to push for industry collaboration and start to extend on internal capabilities.  Building and enhancing customer capabilities are at the core of any transformations the ETOs should embark on.

To have a discussion on the topic, feel free to get in touch with me.

 

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