The utility industry faces some of the biggest challenges since the days of Thomas Edison. There are many disruptive forces impacting the industry, e.g., changing economics for base load, competitive providers and aggregators entering the market, flat or declining load, to name a few. What has not been a focus is the role of the customer for the utility sector’s continued viability.
DEFG’s Annual State of the Customer Survey of 1,000+ Americans focuses on changing customer perceptions and preferences in the utility sector. There are a number of tracking questions from prior years to provide trends analysis. More importantly, there are a number of new survey questions to test some of the basic assumptions in the industry from a customer perspective.
This year’s findings represent a classic case of glass half full or half empty. On one hand, customers rate highly the customer service provided by utilities and believe utilities provide a higher value than other comparable service providers. The increase in electric vehicles (EVs) could provide an opportunity to completely change the customer service model provided by utilities.
Yet, there have been significant declines from last year’s survey in how customers view utility customer service. The trend lines are not positive.
There are also troubling signs that customers will not be on board for rate increases tied to grid infrastructure or increased reliability. And there is a high likelihood increasing amounts of customers will leave the utility if they can.
The glass half full findings:
- A majority of respondents gave high marks for their utility’s customer service (53% gave a “top 3 box” on a 10-point scale), yet the highest ratings declined significantly from last year.
- Two in three customers (68%) who directly contacted the utility over the past two years found the experience to be “easy”.
- Customers felt that their local utility provided a better or equal value to all comparable service providers (e.g., cable or Internet).
- But … 22 percent of customers are very likely (top 3 boxes on a 10-point scale) to switch to a provider other than the utility as soon they can. Another 50 percent (4 – 7 boxes on a 10-point scale) may consider it if the offer was right.
- Customers are most likely to switch to lower-cost providers than the utility.
- Four in ten customers would choose a $10 gift card rather than have power restored within 30 minutes or less.Only 24% of customers would pay slightly more for disaster planning for “hardening the grid” and increased reliability.
Centrifugal Force: an apparent force that acts outward on a body moving around a center, arising from the body's inertia.
The findings from DEFG’s Annual State of the Customer Survey point to a similar situation in the utility sector.
Utility customer translation: segments of customers that act on the traditional customer service model, arising from the inertia of a regulatory and business framework focused on delivering reliability and basic customer service in the least-cost fashion.
The utility service model has long been centered around the “customer” – the customer who wants a high degree of reliability, the bills to be timely and accurate, at the lowest cost possible. And overall, the utility sector continues to serve that customer well, thus the high marks given by customers when describing their utility’s customer service.
However, even as the utility sector and the regulators oversee the industry struggle with rate design, the role of new entrants in the market and arguments for more revenue to increase reliability and strengthen the grid, the limits of the traditional customer service model are becoming plain from a customer perspective.
The artificial construct of the industry’s “customer” is starting to spin away into a new state of being quite different than before.
There is still a solid foundation of customer support and satisfaction to successfully maneuver. However, the utility sector needs to develop a more segmented view of the customer base and to support different levels of service.
The utility sector should look to pivot to a bifurcated service model. On one hand, there will be a core group of customers, probably the majority, who simply seek what they always have gotten with an increased focus on ease of doing business.
On the other hand, utilities should look to build a different service model tailored for two broad segments of customers seeking more from their utility. One based on need (low-income customers with a focus on improving service and thereby reducing costs) and one based on value creation (customers who have made investments in solar, electric vehicles, or other customer-initiated efforts with requirements for a different level of customer experience aligned with customer decisions that should result in increased revenue.)