Creating Superior Utility Returns with Customer Satisfaction

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From Direct Options Executive Market Intelligence   November 30, 2009

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Far-sighted utilities have been successful because they place customers—not investors or regulators—at the center of their business.  Satisfying customers with low prices, high reliability, personalized service, and an overall excellent experience all contributes to positive regulatory outcomes, leading to higher regulated rates of return.

“Everything starts with our customers,” one utility executive tells us.  “In today’s world, complex operating decisions need to be driven by simple principles.  We have got to be bigger than our bottom line—we must become part of the fabric of our communities.  And our experience has been that if we take good care of our customers, the regulators will recognize that and treat us accordingly.”

This executive’s operating utilities have been fixtures atop the J.D. Power and Associates annual customer satisfaction surveys.  In its most recent rate case, one of those OpCps received an 11.25% return on equity from its regulators, which is meaningfully higher than utilities with lower customer satisfaction scores.

Awarded ROE from regulators is the ultimate validation of these simple business principles.  Across the country, utility customer satisfaction remains under pressure, often declining in response to repeated price increases, outages, capital construction programs, or even utility vegetation-management practices.

Utility Customer SatisfactionBut time and again, customer perceptions about the utility have improved sharply, by as much as 20%, when customers begin participating in a utility efficiency program.  Customer satisfaction rose 18% for Georgia Power customers who received a Personal Energy Report as part of the utility’s Smart Energy Program, which it began piloting with Direct Options in 2009.

“The Personal Energy Report that is part of Georgia Power’s Smart Energy Program provides customers with detailed, personalized information about their energy usage,” said Jan Moore, president and chief executive at Direct Options.  “Customers have asked for energy information that is easy to understand and actionable.  In this economy, they want and need specific steps they can take to reduce energy use and manage utility bills more effectively.

“We expect that the Smart Energy Program will be the first step towards customer enrollment in Georgia Power efficiency programs, which will contribute to continued high levels of customer satisfaction,” Moore said.

Over the course of its 20 years working with utilities, Direct Options has found that customer education is essential to achieving high enrollment levels in customer programs.  But the information revolution that empowers customers to order customized clothing and create unique playlists on their MP3 players drives expectations of their energy providers.  The era of “one size fits all” is clearly over.  Utilities have achieved greater customer credibility when they speak on a one-to-one basis with their customers.

To discuss how Direct Options could boost customer program enrollments, increase customer satisfaction, and support a positive dynamic with your state regulators, contact Harlan Jackson, 513-779-4416, [email protected].

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