Marketing of Electricity Distribution

Although Electricity does not qualifies to be a product, a commodity or even a service in totality (Electricity generation being an infrastructure sector), in the current ‘fight- to – survive’ milieu, it becomes increasingly important for the companies in this business to market their output in a manner to

  • Attract more number of consumers,
  • Retain the consumers
  • Be profitable in the business.

Earlier people could not think of usage of electricity for purpose other than that of lighting. The equipments  and  appliances  manufacturing  companies  had  to  devise  innovative  methods  to market their products to the customers so as to break the conventional usage of electricity and in turn generate profitable business for themselves. People were reluctant to part with their money in exchange of these appliances. So ,it was a mammoth challenge for these companies.

They tried to reach the customers offering their products in several attractive packages, at times holding exhibitions to display their product range or still more, directly marketing at doorstep.

Focused attempts of enticing women consumers with kitchen products, or office going people with products providing some or the other utility in an office corner seemed to be common those days.

So, with the objectives almost similar to that of any other product sale, an analysis of this service is commensurate to that of any other product or event.

In the subsequent paragraphs, I’ve made an effort to do an analysis  of marketing strategy of Tata Power’s Electricity distribution in Mumbai.

The Tata Power Company Limited (TPC) is a company established in 1919, which undertakes the supply of energy to the pub lic in its Mumbai License Area and to supply energy in bulk to Licensees, under a license by the Government of Maharashtra(dated July 12, 2001).  Currently TPC provides electricity to the three  distribution  Licensees viz. REL, BEST and TPC itself, through own generation and power purchases from external sources using the transmission lines owned by TPC. Also, TPC, as a distribution licensee, distributes the power so received through its distribution network to retail consumers. The generating entity is making power available for the area from own generation and power purchases

 

Direct Marketing – Power Supply to Mumbai Consumers

The Company supplies power directly to bulk consumers as refineries ,Central and Western Railways, Mumbai  Port, textile mills, fertilizer factories, BARC, Municipal corporation and other major continuous processes  industries requiring uninterrupted power supply. The latest addition to the list of consumers is the commercial district at the Bandra-Kurla Complex and major commercial and residential complexes in the suburbs.

 

Tata Power Marketing Strategies

  • Most Economic Power Tariff (in Mumbai and its suburbs) – This is due to the fact that its power procurement is met by its own generation units in Trombay Power Station which has been in operation for many years.
  • Reliable Supply- TPC has been emphasizing on providing a reliable supply . Tata power has also provided for  ‘islanding’ in Mumbai region, which secures Mumbai against the Grid Failures (like the one that happened on July 30th, 31st 2012.)
  • Prompt restoration of power supply and Efficient Billing Services – TPC has provided mobile van for issues resolution and timely bill collection. Credit and online bill payment facility in effect.
  • Help  to   minimise  energy  costs  through  value-added  services   in  areas  of  Energy Conservation, Energy Audit and other electrical support services
  • Prompt connections at desired voltages from 220 V to 440 V / 230 V single phase-  The company adheres to the time limit set by regulations for providing new connections. In a recent case (for Tata Power’s Delhi wing) ,when it was not able to provide for the same, it paid due penalties to the consumer.

 

Long term strategies include several other initiatives :

Tata Power has been at the forefront of propagating energy conservation and efficiency in the country. The company launched several attractive DSM (Demand Supply Management) schemes for  its  customers  in  Mumbai  under  its  special  initiative,  ‘My  Mumbai  Green  Mumbai’, introduced last summer.

The following DSM schemes are currently active for its Mumbai customers and are approved by MERC(Maharashtra Electricity Regulatory Commission):

 

For Residential Customers:

  • The company has  launched a ‘ceiling  fan exchange’ programme  by joining hands with Havells India for BEE 5-star rated energy efficient ceiling fans. These fans are offered only at Rs.924, which amounts to a  50-percent discount on market price, and the fans consume only 50 Watts of energy, which is 30 percent less than the conventional fan.
  •  Tata Power is also coming out with a new programme of 5-star refrigerators for residential customers. Under this scheme, the company aims to offer the most efficient refrigerators at a good discount so that the  customers would be able to replace their old energy-guzzling refrigerators.

All DSM programmes for this category of customers are the one which provide energy-efficient electrical appliances to participant consumers at a subsidised rate. The company has tied up with major consumer appliance manufacturers to provide these appliances at a very heavy discount over the current market rates. Moreover, a portion of the cost is also borne by Tata Power.

 

For Industrial and Commercial Customers:

Since  industrial and commercial customers  have  high consumption, a  wide range  of DSM programmes have  been designed for them. These programmes are a mix of both — schemes where the consumer is provided  solutions at a discounted price and schemes where they are incentivised for participation. Current programmes  being conducted by the company are as follows:

  •  Energy audits: Under this programme, the customer’s premises are audited by a certified energy audit agency and recommendations are provided by this agency for achieving further reduction in energy consumption. The consumer pays only 25 percent of the fees, while the remaining is borne by Tata Power. Tata Power has so far carried out these audits for over 45 consumers and cumulatively provided  recommendations for reduction of over 12 million units.  The  audit,  conducted  by  professional  and   specialist  energy  auditors  accredited by BEE(Bureau of Energy Efficiency), enables consumers to  undertake a studied approach towards energy saving by mapping their unique power consumption pattern and identifying several opportunities to save energy.
  • Thermal storage technology for air conditioners: This technology has been introduced for industrial / commercial customers having large central air conditioning systems. The chillers are run in night hours to convert water to ice and in daytime the energy stored in ice is used to cool the premises. The advantages of using this system are:
  1. Since the chiller plant is run in the night, the customers pay for night tariffs which are lower than day tariffs.
  2. The  maximum  demand  is  not  charged  in  the  night;  hence  the  customer  gets  the opportunity to shift his demand to off-peak and also saves on demand charges.

Tata Power ,under this programme, is incentivising the customers who shift their peak loads using thermal storage technology.

  • Demand response: Tata Power is the first utility in India to carry out this programme.

Utilities the world over typically carry out these programmes to  ward off high cost of external power purchase, in case of transmission constraints, emergency conditions arising in the system, etc. Here, the  consumer  is asked to  voluntarily reduce their  load at  a pre- determined time as required by the utility.  Their actions involve changes in temperature settings of AC plants, shifting of work times, staggered switching of lighting supply, shift in pump operations, load curtailment using building management systems, and switching on the standby generation. Incentives are then provided to participating customers based on  the quantum of load reduction achieved. Tata Power has already enrolled a capacity of 10MW load under this programme and has carried out several load curtailment events in 2012. Tata Power incentivises such customers by paying them an amount of about Rs2 per unit saved.

The company endeavours to roll out several innovative initiatives which would help customers to save power from time to time under this initiative.

To implement the above DSM initiatives, Tata Power has carried out extensive load research which involved studying the consumer behaviour, load variation patterns and determining peak load contributors by gathering information on various high energy consuming equipments used by consumers. Based on this load research conducted, Tata Power has designed specific DSM programmes and classified them according to the various  consumer categories ie, residential, commercial and industrial.

 

Tata Power’s Safety awareness during this Ganesh Utsav

Tata Power undertook several initiatives to promote and ensure safety not just at the workplace but also in its  neighbouring communities. During this year’s festival of Ganesh Utsav, Tata Power conducted a special safety awareness drive at various locations under their Jan Jagruti Abhiyan initiative. The drive spread awareness about the dangers that are involved in having pandals close to Extra High Voltage (EHV) lines and the precautions that need to be undertaken to avoid any accidents.

With the onset of Ganesh Utsav several pandals are erected around the city of Mumbai and the risk of electrical  accidents increase. Keeping this in mind, Tata Power began a special safety awareness drive by conducting special sessions with Volunteers of all mandals .Apart from these sessions, huge awareness banners were also set  up at various prominent locations such as the pandals and    the                 water bodies  where     the   immersion        has                been   taking             place.  Jan Jagruti Abhiyaan is  aimed  at  increasing  awareness amongst  citizens  of  the  hazards  of carrying out dangerous activities under/in the vicinity of High Tension (HT) Lines.

 

The impact of all the marketing initiatives of Tata Power

  • With a  consumer  base  of  around  3,00,000  ,Tata  Power  daily receives  around  300-350 consumer applications for migration from Reliance’s network.
  • In 2011-12 alone, around 1,20,000 customers changed over to Tata Power.
  • At the end of 2011-12 ,the no. of consumers with Tata Power stands at 4,87,378 against a figure of 23,630 in 2008 whereas that of Reliance is at 28,05,000 against 26,30,000.
  • TPC registered an annual growth rate far greater than 200% .

Tata Power has literally pulled the rug from under Reliance Infra’s Distribution Wing with an unprecedented increase in its no. of consumers. With a commitment to provide better services viz. Smart Grid applications, Green Power etc. ,Tata power has indeed outclassed its competitor in that regional distribution market.  There are some issues associated with Green Power marketing

 

Green Marketing-

Marketing and promoting your green electricity is not as easy as it looks.

Corporates  —————————–   Improve Corporate image    

                                                                   Achieve CSR targets                                    

                                                                             

Consumers—————————-    Willingness to pay

 

The consumers have a subdued will to use RE but it needs to be spurred by some forces.   A differentiated segment targeting approach is required to market green electricity.  Higher income, higher education level, affiliation with an environment conscious organization are the few factors that need to be emphasized upon while marketing green products.

Basic  reasons  for  failure  may  be  cited  as  failure  in  marketing  research,  overestimating hypothetical consumer willingness, poor communication about the products.

For sustainable green market penetration ,it would become important to target clients as govt. institutions, high income groups having capacity to influence others in the vicinity. Marketing campaigns should highlight the other benefits of green electricity making them to be as personal as possible. Also the organization has to be persistence in marketing efforts, as it might take time for the benefits to become visible.

 

Conclusion

So effective marketing tactics that not only spread the awareness about a product/service but also deliver what is being promised, lead to astoundingly positive outcomes in any kind of product or service business.

The same applies to Electricity Industry . With the kind of scope available for improvement in the sector dynamics, hereafter ,competition is poised to only increase in the sector which would induce the requirement of more innovative strategies to market one’s business and carry it out more efficiently.

 

Saurabh Srivastava

MBA(Power Management)

National Power Training Institute,

Faridabad.

 

Sources: tatapower.com, “Splintering urbanism in Mumbai”,2007, Marie-Helene-Zerah. 

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3 Responses

  1. raj says:

    Mumbai and tata area represents miniscule area of operation . Mumbai gets continuous supply at the cost of small town and rural maharashtra . if power is distributed on equitable basis , mumbai would have brown out of 4 hours every day .
    Marketing is fine but in other places which go without electricity for 6 /8 hours what can be marketing strategy ?
    Ahluwaliah approach that merchant power plants fatten at the cost of rural consumers may not be acceptable vote conscious authorities .
    market in UP … agra kaanpur and collect dues would be real feat in power marketing

    • saurabh.srivastava says:

      Tata power has been trying for long to strengthen its foothold in Mumbai and thereby making conscious efforts to consolidate and keep its Mumbai operation well sustainable. That in turn gives it an opportunity to transcend to the next levels of efficiency in operation and services there. Regarding areas in UP, the basic premise to be met is of Generation availability. Electricity (viz. MUs) can be marketed only when it is available at a reasonable rate. When you purchase huge quantities from market ,and are already encumbered by immense dues, it barely leaves any margin to improve or even provide sustainable services. So UP and other similar regions must ensure sufficient availability on self support basis. Only then , the utilities can dare to proceed (provided political willingness is there) to market electricity to the consumers on a rational basis.

  2. V.J.Vachharajani says:

    As one engaged in ‘Mission Consumer Safety Against Electrical Accidents’ after retirement from Voltas in 1985 & at the ripe age of 79 years, grappling with State Discoms, particularly in Gujarat, where I started the ball rolling, for them to comply with IER-1956 / CEA Regulations 2010 / Indian Standards, & provide safety against Earth fault, Dangerous Neutral Potential / Touch Voltage build up beyond 25V / Adverse consequences of Neutral / Earth break etc, which has been denied for close to fifty years, I would like to know whether Tata Power will provide Safety Certificate to any consumer requesting for it to cover safeguards detailed above. I want to use it to set an example to State Discoms who are hesitant to provide it as with their TT System & extremely high earth resistance of five ohms it is just not possible to do so.

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