• Customer experience IT downgraded
• No business plan after $20m+
• Genesis well placed on CRM

Meridian Energy has put its flagship retail customer project on ice following the departure last Tuesday of Steve Ferguson, the company’s Retail Director, who was brought in two years ago from Kiwibank to lead a project to transform the experience for Meridian customers. A day later, as many as two dozen Meridian staff and contractors were told that the customer relationship management project, involving an IT partner understood to be Oracle, was being put on hold, after more than $20m was spent without nailing down a complete business case for the customer relationaship management and billing system replacement. Meridian spokesman Alan Seay would not discuss the figures or confidential elements of the arrangement, but confirmed the decision is separate to the wider restructuring and headcount reduction occurring at Meridian under its “Fit for Purpose” review.

The tale of substantial spend for unexpectedly little outcome is reminiscent of Contact Energy’s ill-fated $20m spending blow-out on the scoping phase of an $80m replacement enterprise management system earlier this year, at which point Contact parted company with IBM as lead consultant on the project. Like Contact, Meridian was looking to replace its Gentrack billing system. It is believed to have chosen Oracle as its preferred supplier for the new system, which was a key part of the Project Phoenix customer experience transformation plan.

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Seay says there is no decision yet on the system’s future. However, the decision points to real difficulty for Meridian in making money from its 180,000+ customers - a tiny base for a utility even by NZ standards. Only large players such as Contact and Genesis, with customer bases of 500,000+, have much potential to gain scale efficiencies from major IT spends on customer service. Contact has yet to announce a new supplier. Meridian has had to confront the value of its customer base after letting its prices consistently lag the market and then being blocked by shareholding Ministers from trying to catch up with a planned 10% increase in tariffs late last year. It now faces a period of political and market restraint caused by scrutiny on the industry and slower electricity demand growth, thanks to the recession.

Meridian now appears to be struggling to justify further significant investment in customer service when one of its primary goals this year has been to cut its high costs of customer servicing, compared to industry peers. Meridian has published very little about the project. Other elements of the customer transformation project have already proceeded - the rollout in Christchurch of 110,000 smart meters made by Meridian subsidiary Arc Innovations and the creation of a new online customer portal.

In contrast to competitors Meridian and _Contact, Genesis Energy stuck with and upgraded its Gentrack billing system, has a substantial smart meter rollout under way, and has what may be NZ’s first true smart meter tariff product on trial in West Auckland. Could the sleeping giant of NZ electricity retailing be ahead of the curve versus some competitors when it comes to being equipped to offer differentiated customer service?

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