Why Energy Providers Should Consider Subscription Pricing

In an advisory for NRECA, Navigant discusses the drivers, innovation, and benefits surrounding subscription pricing

Subscription pricing is prevalent in many industries including, television, mobile phones, transportation, and more. In a Business and Technology Advisory for NRECA, Lon Huber, director at Navigant, argues that it’s time for energy providers, including cooperatives, to integrate this popular business model into their own services, making way for new technologies, changing customer preferences, and increased use of renewable energy sources. 

“Customers are shifting their focus towards purchasing products and services that are ‘customized’ to their preferences, including a notable preference for convenience and environmental stewardship,” Huber said. “…As a result, a growing number of industries are developing tiered offerings, with varying prices and perks, to meet the changing expectations of their customer base.

Huber says electric cooperatives are particularly well-positioned to be leaders in what Navigant calls an Energy Service Subscription Pricing (ESSP), or an energy-based offering that creates a multiyear fixed bill for the customer. This is because:

  • They are member owned with a long history of delivering what their member-consumers want.
  • Many are not state regulated, so they are generally more nimble than regulated utilities in offering innovative programs.
  • It can be a natural extension of existing member-consumer programs (e.g., community solar, energy efficiency).

According to the advisory, ESSPs are already being successfully used by some energy providers, including Inspire Energy, Origin Energy, Green Mountain Power, and Arcadia Power. 

“ESSPs challenge us to rethink the customer and utility cost/risk swap, as marginal costs to serve continue to decrease (from an energy standpoint),” Huber explained. “….With greater amounts of zero marginal cost electricity and customer sited demand reduction technology, a new era in rate design can emerge to meet evolving customer expectations and preferences.”

Read the Full NRECA Advisory

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