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The Value of Customer Satisfaction – Subduing the Eddie Haskells

By October 12, 2015November 12th, 2021Energy Rant
customer satisfaction

I did some research on features and benefits, in general.  A quick internet search of features and benefits revealed that definitions vary from one source to the other.  Indeed, we surveyed our own management team for features and benefits of the services and programs we provide.  I found that one person’s program description was another’s features.

Going further, what I found was that benefits aren’t necessarily the end of the story to the buyer.  What is the value of the benefit, and how does that relate to customer satisfaction?

Customer satisfaction is a benefit of energy efficiency programs to any utility that is thinking straight.  But so what? Most users of electricity and natural gas in the United States still have little or no choice for buying these necessities.  This paper describes it well, from a historical perspective:

As a monopoly, utilities had little need to focus on customer experience or customer satisfaction, and interaction between the customer and utility was scarce. Each month, the bill would arrive, and those who didn’t pay simply lost electricity or water.[1]

Versus…  Distributed Energy Resources

Have you ever done anything irrational just to get back at someone?  Or maybe an easier question is, have you ever been a child or adolescent and did you have siblings or friends during those years?  The universal answer to these questions is, yes.

This presents a rather obvious reason to have high customer satisfaction and customer experience – distributed energy resources, aka DER, in general, but photovoltaic in particular.  I think only engineers and other geeks would pencil out the entire financial impact of installing PV.  The rest buy on incomplete information, like subsidies and tax credits only, and emotion.  One emotion for some customers is “I hate my utility so I will install PV and make my own power”.  This is the irrational part.  The reason for hating the utility is irrational.  Buying a PV system may otherwise be completely irrational.  Therefore, customer satisfaction is critical to prevent people from falling into this loopy mindset.  Once there, they are likely goners.

Another point on PV before moving on to reason number two (the biggie) for customer satisfaction, is the coming years will feature an ongoing battle in public relations over fairness surrounding PV owners / utility customers and the rest of us conventional utility customers without PV.  When I Google “solar war utilities” I get a million hits (literally), and the vast majority of links are utilities/states/regulators versus PV.  I’ve read dozens of these articles myself in recent years.

Customer satisfaction is a great way to keep customers in the rational, listening, and understanding mindset and out of the irrational, combative, hostile mindset.  This entire subject is going to be very delicate for utilities to handle in coming years so every opinion, perception, and point of view counts.

The Biggie

For fully regulated monopolies that own everything from the fuel rods, coal piles, and wind turbines, to the meters hanging on your houses, there is a payout for customer satisfaction.  Having been serving the utility industry for 20 years, I suspected the following, but as part of my research on features, benefits and value, this white paper from West Monroe Partners confirmed my decade-long hunch.

I would say the biggest reason for high customer satisfaction and great customer experience is higher profits.  The West Monroe paper reports that every 10 point increase in JD Power score results in 0.04% increase in return on equity (stock).  Whoa!

West Monroe says that utilities in the top quartile of JD Power rankings landed 0.5% greater return on equity in their next rate case.  These utilities get more of what they ask for in rate cases.  “The message coming from the survey is that a positive customer experience and quality service helps build rate change cases.”

This is consistent with our business and every other long-lasting successful enterprise.  High customer satisfaction and higher profits go hand in hand.

customer satisfaction
customer satisfaction

Ratings and Moving the Needle

Suzanne Shelton presented the first chart (click to enlarge) at the AESP Spring Conference.  Following that one is the University of Michigan’s American Customer Satisfaction Index ratings.  Utilities generally rank just above other utilities including internet and cable TV.  The thing is, utilities, namely electric utilities, are like the offensive linemen of industry.  They mainly get noticed when there is a power outage (versus a holding penalty for the lineman), and when prices rise.

Utilities have few opportunities to engage customers and improve customer satisfaction.  The main engagement tools include energy efficiency and helping customers visualize and manage the use of the commodity.  Energy efficiency programs are, of course, an easy sell to regulators, with full cost recovery for programs and sometimes fixed return on rate base via decoupling and other mechanisms.  Energy management/visualization tools can be implemented as part of these programs.

Engaging customers and helping them use the product more effectively builds trust.  Trusting customers will be far less motivated to shop for alternatives, complain, or seek retribution.  Trusting customers are more satisfied customers giving way to less resistance by regulators to allow deserved rate increases.

What’s not to like?

[1] Certainly rules for cutting off customers vary and in some states it is not allowed.

Jeff Ihnen

Author Jeff Ihnen

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