1. Stephen Prince Vice President Strategy, Innovation & Product Development Alliance Data Systems, Inc. Building an Effective Outsourcing Relationship

2. Building an Effective Outsource Relationship: 1 – Kinder Morgan 2 – Optimizing the Customer Relationship 3 - Regulators, Rate Cases & The Customer Discussion Topics

3. Leading provider of transaction, billing, and business process services to Fortune 500 utilities, petroleum, retail, and financial service providers. 7000 employees in more than 27 locations. Serving over 300 clients and 50 utilities through: 5 Data centers 15 US call centers 3 Billing statement facilities Alliance Data Systems Dallas, TX Westminster, CO Denver, CO Lenexa, KS Columbus, OH Voorhees, NJ San Antonio, TX Montreal, Quebec Toronto, Ontario Johnson City, TN Buffalo Grove, IL Kennesaw, GA Cincinnati, OH Calgary, Alberta Seattle, WA Bend, OR Philadelphia, PA Scottsbluff, NE Atlanta, GA Gahanna, OH Tulsa, OK

4. Building An Effective Outsourcing Relationship: 1 Kinder Morgan

5. Kinder Morgan:  One of the largest midstream energy companies in America  Provides retail natural gas services to 240,000 customers in Colorado, Nebraska, & Wyoming  Market cap of $20 billion Kinder Morgan outsources customer care including:  CIS management  Billing  Bill distribution  Call center  Remittance processing  Collections

6. Customer Lifecycle In outsourcing billing and customer Care, Kinder Morgan has a partner that understands its customer relationships, resulting in:  Streamlining and automating of business processes, making customer service easier & more cost effective.  Analytical tools that leverage business intelligence for competitive advantage.  Lifecycle management expertise that often results in more satisfied customers.

7. Kinder Morgan: Process Notification  60% reduction of open service orders (after interval date)  90% reduction in order errors  75% reduction in service disconnect costs  50% improvement in debt recovery  Annual savings of $700,000 (on a cost of $42K per year) Through re-engineering process notification activities in the collections process, Kinder Morgan captured:

8. Kinder Morgan: Bill Tech Productivity Through automating bill set up and rate validation processes, Kinder Morgan’s billing productivity increased 15% while it reduced labor costs by one FTE.

9. Kinder Morgan: Automated Enrollment An automated gas choice enrollment program allows Kinder Morgan to offer gas supply via the web or through an automated phone system. KM’s web-based customer care allows customers to service their account online which:  Significantly lowers KM’s bill print and mailing costs.  Speeds business processing by lowering the amount of calls into Kinder Morgan’s call center  Helps eliminate errors and improve customer satisfaction Online Customer Care

10. Building An Effective Outsourcing Relationship: 2 Optimizing the Customer Relationship

11. 1. Customer Lifecycle: Definition: Each function in the revenue cycle from meter read to collections. Customer Lifecycle Management: Streamlining and automating of business processes through best practices, methodologies, and project management. Each lifecycle component is interdependent and many are human capital intensive.

12. 2. Enterprise Performance Management : QA Models: Using multiple quality models allows the provider to manage billing & customer care to a comprehensive set of performance metrics. Demand & Variance Management: Managing work volume and variation ensures consistent and ever-improving performance. Continuous Improvement: Continuous re-evaluation ensures enhancements in the effectiveness and efficiency of business processes. Optimizing the Customer Relationship

13. 1.Customer Analytics – Know: - Who are my “best” customers? - What do they value? - What is my ROI? 2.Frequency Marketing – Communicate with or change customer behavior through personalized statements 3.Loyalty Programs – Reward customer behavior with compelling incentives 3. Customer Equity Tools:

14. Optimizing the Customer Relationship 4. Return on Equity: Managing the customer lifecycle, continuously improving business processes, and incenting loyalty may result in: Higher Customer Satisfaction Regulator & Wall St. Influence Shareholder Equity

15. Building An Effective Outsourcing Relationship: 3 Regulators, Rate Cases, & Customers

16. The Outsourcing Myth: “Utilities can’t outsource billing and customer care because of…”

17. What Really Matters: The Customer  When outsourcing billing and customer care, all solutions are not created equal.  You’re not solving for lower cost; you’re solving for revenue, earnings, analyst perception, and shareholder value.  This changes the way you serve customers.  Yet for many utilities, customers aren’t in this equation (really).  Utilities have little control over the commodity. The control is in the customer relationship.  Flip it! Put your customers first!

18. Customers as a Strategic Asset  Satisfied customers are an asset that utilities don’t effectively leverage for increased revenue or margins – beyond the commodity service.  Yet, utilities are often a customer’s most trusted provider.  Being highly rated in customer satisfaction, against all other utilities, plays well with regulators.  Regulators may allow rate cases for infrastructure needs if utilities demonstrate higher customer satisfaction scores.

19. Effective Outsourcing Relationships as a Strategic Tool 1.Learn what your customers perceive to be “fair or reasonable” service levels – and will pay more for – then provide them. 2.Partner with a outsource provider that understands the utility / customer relationships and has the tools and experience to increase customer satisfaction. 3.Proactively use your customer performance to influence:  Rate cases  Wall Street analysts  Shareholders  Public opinion  Your customers Source: Energy Markets: EEI Strategic Issues 2004

20. Take Aways: Four Simple Ideas about Customer Satisfaction 1.Customer satisfaction is driven by delivered value. 2.Business processes create delivered value. 3.Sustaining success requires the utility to continuously improve the value it delivers. 4.To achieve this, many utilities are enlisting the help of competent billing and customer care providers to: Define business process needs Measure the processes Analyzing the results Implement the improvements