Outsourcing Comes Late, If Ever, to Utilities

By Published On: March 13, 2004

The cubicles don?t quite absorb the ubiquitous corporate cliques and buzzes in the humid call center. ?Your call may be monitored for customer satisfaction. . .? You?ve pressed 3, then 7, then # for ?yes.? Your call is answered somewhere in the Midwest or, more likely, Asia. The old Ma Bell bumper sticker comes to mind: ?We don?t care. We don?t have to.? In reality, you, the customer, aren?t satisfied. The person who answers the phone doesn?t know where Pomona is or whether that Santa Ana wind blowing in from the Mojave is threatening your service. ?Santa Ana?? That might be the phone company, but lucky for you it is not usually your energy utility. In fact, with the possible exception of Southern California Gas and San Diego Gas & Electric, California utilities, both investor-owned and public, use few outside services. Outsourcing is not just the media-highlighted operations in New Delhi or Shanghai, but anything that the good ol? utility doesn?t do, or completely control, in-house. For munis, the mantra is ?local.? For investor-owned utilities, it?s almost the same. For the latter, a part of it is that the energy industry is slow to embrace change, but also?despite the glitches and complaints?management does appear to respect ?customer service.? ?We don?t route calls to India or Ohio,? said Tom Habashi, Roseville Electric general manager. ?It never comes up. Everybody implicitly knows why. You can?t take our business, put it in boxes, and move it overseas.? Although munis seem to relish their community ties by ducking outsourcing, investor-owned utilities? shareholders could rejoice at outsourcing. Those corporations are beholden to their shareholders and have no usual obligation to larger socioeconomic interests. Outsourcing could save investor-owned utilities money that could be passed on to shareholders in dividends. Economists say that the flow of money to shareholders raises the tide for the economy as a whole, so more money is available for more investments. But there?s this tricky problem with investor-owned utilities. They are regulated by policy makers. Those policy makers have their own views on how the socioeconomic system should work. If regulators get wind of outsourcing, there could be political trouble. Shareholders account for only a tiny percentage of the population to which regulators are beholden. If local workers?union workers?lose their jobs, there?s a downward salary pressure on the jobs that are left. There is less money to go around in the local economy and less money with which to pay former workers? utility bills. In the investor-owned utility world, Southern California Edison thinks of outsourcing as staff augmentation. ?You can?t operate a system the size of ours without contracting,? Bob Foster, Edison president, said. While the in-house staff does what he calls the ?vital? work, ?the truth is, we can?t get enough trained people to do all the work.? The issue has yet to surface in a utility general rate case at the California Public Utilities Commission; thus, utilities can pretty much do as they will until it becomes a public debate. General rate cases use past ?test? years for a benchmark?two or three years prior to the actual rate case outcome. Utilities may not have used outside vendors to any extent during the test year and at the time of hearings may not predict that they will in the future. Because it hasn?t come up in a rate case, outsourcing hasn?t been subject to public debate. If outsourcing does come up in a rate case, ratepayer advocates could face a dilemma. Yes, it could be cheaper for ratepayers to have utilities send their call centers out of state or overseas. But it could seriously degrade utility service quality. And unions and politicians are ready to pounce in defense of domestic economies. Then again, ratepayer advocates aren?t considering recommending outsourcing for cost savings if a utility doesn?t extol it first. Then there are munis. You could say that they?re behind the times, but they seem to hold this old-fashioned idea of community service. Those I contacted at least paid significant attention to the perception of service to their ratepayer/taxpayer customers. ?Our focus is on customer service; it?s the most common interface,? said Thomas Evans, Riverside Public Utilities director. ?We like the local presence,? Larry Owens, Silicon Valley Power customer service manager, added. Eight years ago the utility outsourced some bill-related work, but Owens said it resulted in quality problems. Munis want to keep their customer service in-house, like the Los Angeles Department of Water & Power?s own force of 8,100 in its call center, according to Thomas Hokinson, assistant general manager. But they do outsource construction, printing, experts, consultants, lawyers, and Web masters. The Sacramento Municipal Utility District, for instance, bolsters its own staff by outsourcing tree trimming, according to John DiStasio, assistant general manager, customer service. SMUD calls it ?staff augmentation.? The outsourcing issue hasn?t even been discussed by the muni?s board. ?They?re more focused on policy and planning,? DiStasio said. The customer call center is nearly sacrosanct. ?It might sound corny, but we really do emphasize service,? Edison?s Foster added. ?I don?t think we look at it as cheaper labor. We need people who know our system.? Edison, does, however, route its billing calls to Coppers Cove, Texas. Its outage and service calls are taken in call centers in Rancho Cucamonga and Long Beach, but the 20 percent of calls that deal with billing go out of state. Pacific Gas & Electric takes nearly all of its customer calls in-house. A Columbus, Ohio, firm, 21st Century, takes about 2 percent, or around 275,000 calls per year, according to PG&E spokesperson Christy Dennis. The calls ?come through our line first. If we reach peak capacity it rolls to their line. It could be a portion of a day or a month,? she said, adding, ?We believe in customer service.? PG&E has been under legislative pressure for more than a year to make its call centers more responsive. Complaints reached a feverish pitch in winter 2002?03 and surfaced again this winter (see <i>Circuit</i>, Jan. 9, 2004). As much as the state?s two biggest utilities want to express their concern for customers through in-house labor, the two Sempra utilities?SDG&E and SoCal Gas?failed to respond to repeated inquiries on the matter. They refused to reveal current or planned outsourcing; of course, that leads me to believe they?re the only ones serious about it. However, my calls were answered in San Diego, not Shanghai, as far as I could tell. There does seem to be a true difference between the old Ma Bell?and now its even more exasperating babies?and the energy industry. Yet I find it difficult to believe that economic pressure won?t eventually affect that provincial vertically integrated domain.

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