PwC Regulated Utility Customer Satisfaction
Beyond the hypeWhat is the value ofcustomer satisfaction toa regulated utility?April 2015
Beyond the hypeWhat is the value of customersatisfaction to a regulated utility?2Beyond the hype: What is the value of customer satisfaction to a regulated utility?
The “traditional”customer-utility modelis rapidly evolving as aresult of new technology,competition, an evolvingsmart grid, and anincreasingly tech-savvyconsumer class. Acrossindustries, businessesare being told thatcustomer satisfactionshould be a priority, andthat it’s not only goodfor customers, it’s goodfor business. However,do happier customerstranslate into real valuefor utilities, especiallyregulated monopolies witha captive customer base?This question has beendifficult to answer withcertainty—even as thesesame utilities dedicatesignificant resources toplay catch-up in providinga superior experiencethat can increasecustomer satisfaction.To get to an answer that goes beyondthe hype, we’ve conducted researchfocused specifically on answering “whatis the value of customer satisfaction to aregulated utility?” The short answer is:Customer satisfaction does translateinto real and tangible value for powerand utility companies in a numberof ways and is indeed better forbusiness.Overview of key findings: Customer satisfaction is clearlyan important factor in regulatoryoutcomes. While our analysisdoes not point to a direct causeand-effect relationship betweencustomer satisfaction levels andhigher authorized returns on ratebase, maintaining a minimum level ofcustomer satisfaction appears to makea difference when regulated utilitiesseek a rate increase. Customer satisfaction as acompetitive differentiator can beinstrumental for utilities seekinggrowth via new unregulatedservices and products, orprotecting their core business fromdisruptive entrants. Higher levels ofconsumer trust and confidence canraise the barriers for market entrantscreating disruption and discourageyour customer base from making achange to an unknown and untriedservice provider. Utilities are investing in customerexperience and the baselinecustomer satisfaction level is rising.There appears to be a race amongutilities to deliver the best experiencewithin the industry and the bar forstaying in the top quartile of customersatisfaction keeps getting reset—and higher.To keep pace with the “changingcustomer”, utilities should create thefoundation for a superior experienceby simplifying complex interactions,personalizing interactions through theapplication of advanced analytics tocustomer data, and proactively seekopportunities and take actions that drivecustomer loyalty. Now is the time toact: because consumers today are moreengaged with their energy consumptionand do so through various technologytools and mediums, utilities have anenviable opportunity to shape thecustomer experience in ways that maynot have been previously possible.In the sections to follow, we’ll explorefurther what it “means” to have satisfiedcustomers drive value for your business,and offer recommendations on theactions to take to get the greatest valuefrom customer experience investments.3
What are the tangible benefits tohaving “Satisfied Customers”?Customer satisfaction is a measureof the positive experience customershave when interacting with a companyand thus can be viewed as an outcomeof a positive customer experience.Maintaining at least a minimum levelof customer satisfaction appears tomake a difference in the rate caseprocess when regulated utilities seekto establish the return on their ratebase. Our analysis suggests there isa relationship between the customersatisfaction metric developed by J.D.Power and Associates and the outcomesof these regulated utilities’ requests forrate increases. Utilities with a lowerscore in the customer satisfaction metricappear less likely to receive a highportion of their requested return onrate base.Although there are many factors thatinfluence regulatory outcomes, wefound that utilities with lower customersatisfaction than their industry peerswere less successful in rate negotiations.Specifically, utilities in the bottomquartile of customer satisfaction weregranted a lower percentage of therequested rate of return than utilities inthe top quartile (see Figure)Utilities with higher customer satisfaction achieved better regulatory outcomesUtility rate case success compared to Customer Satisfaction (CSAT)Percent of requested RORB authorized1.051.000.950.900.85THE CEILING: There is apoint of diminishingreturns to improving CSATTHE FLOOR: Utilitiesin the bottom quartilesaw a steep drop inregulatory returns0.80550570590610630650670690Customer Satisfaction Score (JDP, actual, 2009-2013)Quartile 1Quartile 2Quartile 3The debt component of return on rate base is basedon interest rates of outstanding debt and often hasa smaller delta between requested and authorizedamounts. Thus, the benefits of higher customersatisfaction would contribute primarily to the negotiationover the equity component of return on rate base.4Quartile 4*Percent of requested Return on Rate Base calculatedas the ratio of requested RORB and actual RORBfor each case of rate adjustment published in SNLRate Case History reports. Customer Satisfactionscore in each year corresponding to rate request isplotted to the ratio. Source: JD Power Gas UtilityBeyond the hype: What is the value of customer satisfaction to a regulated utility?Industry reports (2009, 2010, 2011, 2012 and 2013);SNL Industry reports and Rate Case History, dataobtained 11/01/2014Note: Companies represented in each plot may vary,according to available information and data
Customer satisfaction is a measure of the positiveexperience customers have when interacting with acompany and thus can be viewed as an outcome of apositive customer experience.While our analysis has notfound a direct cause-andeffect relationship betweencustomer satisfaction levelsand authorized rate of returns,customer satisfaction is clearlyan important factor in regulatorynegotiations.Customer satisfaction levels oftenreceive higher attention from regulatorsin the aftermath of widespreadreliability issues, such as following majorstorms, or when customer satisfactionis consistently low or has recentlydeclined. In such contexts, utilities canexpect heightened regulatory scrutinyof their customer-service performance.For example, after a utility experienceda decline in customer satisfactionlevels over a two year period, the StatePublic Service Commission required anaudit of this utility’s customer-servicepractices. The audit report attributedthe decline to aggressive cost cutting,a failed implementation of a newonline customer channel, and a lackof commitment to customer service. Inresponse, the utility made an investmentto improve customer service, particularlythrough digital channels. The utilityinvested capital and increased operatingexpenses to shore up the customerservice function and regain customersatisfaction which ultimately erodedthe cost savings they had originallyachieved.How do I capture the full benefitsof customer satisfaction?To capture the full benefits of customersatisfaction, utilities need to regardthemselves as incumbents in their corebusiness and, potentially, as entrantsinto new service areas. In each role,they will have specific opportunitiesto make investments in customerservice and operations that promotecustomer satisfaction and help todifferentiate them from the competition.Higher levels of consumer trust andconfidence can raise the barriers formarket entrants creating disruption anddiscourage your customer base frommaking a change for an “unknown”and “untried” service provider. Ouranalysis suggests that utilities in general“agree” as investments in customerexperience along with baseline customersatisfaction levels are rising. And, thebar for staying in the top quartile ofcustomer satisfaction keeps gettingreset—and higher as the race amongutilities to deliver the best experiencewithin the industry is intensifying.When exploring new services orproducts, utilities should consider theexperience that incumbents deliver andthe corresponding level of customersatisfaction. A new entrant must delivera superior experience and exceedcurrent customer expectations to grabmarket share and grow revenue. Onthe other hand, to defend their corebusiness against innovative, disruptiveentrants, utilities need to maintain theirfocus on customer satisfaction throughcontinual improvements in customerservice and innovative product and/orservice offerings.Certain industries have been disruptedby new entrants that deliver especiallyhigh customer satisfaction. Netflix,Apple, and Amazon are some companiesthat are harnessing technology todeliver impressive customer experiencesand consequently are achieving highcustomer satisfaction levels and revenuegrowth, as shown below.5
Revenue growth compared to CSATAcross industries, companies delivering higher customer satisfaction levels have also seen significant increases in revenue CAGR.Total Revenue CAGR e WarnerAT&T 70T—Mobile75808590SprintAverage customer satisfaction score (ACSI, 2009–13)Size of the bubble based on 2013 revenue*Source: ACSI Customer Satisfaction by company; Financial data sourced from SNL Company snapshotsThe airline industry provides another examplewhere higher customer satisfaction can have animpact on market share growth.6Beyond the hype: What is the value of customer satisfaction to a regulated utility?
Airline Industry—Market share vs. 35%26%20022013Jet BlueSouthwestDeltaAmericanSouthwest’smarket sharehas increasedby 60%,a 4% CAGRover the period90%85%ACSI Customer satisfaction scoreShare of domestic revenue passenger miles (%)100%838180%75%70%686565%646260%55%50%UnitedUS AirwaysOther airlines2013JetBlue AirwaysSouthwestDeltaAmericanUS AirwaysUnited*Source: United States Department of Transportation, Bureau of TransportStatistics, http://www.transtats.bts.gov/Data Elements.aspx; ACSI Customer Satisfaction index for airline industry7
Utilities have traditionally taken pride in providing“safe, reliable, and affordable” energy and thispromise should continue to lie at the heart of theirvalue proposition.In these examples, high customersatisfaction is clearly not the only driverof revenue and market share gains.However, it is difficult to ignore thehigh customer satisfaction achievedby companies such as Netflix orSouthwest, as a leading indicator of thedifferentiated customer experience andits role in capturing market share.How do I keep up with evolvingcustomer demands and create asuperior customer experience?Solar panels and energy managementdevices, among other technologieshave opened up a new world of energysupply and control possibilities forcustomers. As a result, some customersare becoming more attuned to theirenergy consumption and thinkingabout their energy and the relationshipwith their utility in new and differentways. For the incumbent utility, theincreased penetration of advancedmetering infrastructure (AMI) and“behind the meter” devices hascreated more potential interactionsbetween customers and their energyutilities. This means there aremore opportunities to please—ordisplease—customers with the servicethey receive. Moreover, customersare demanding multichannel access toutilities through call centers, web sites,mobile apps, and walk-in centers. Theywant the convenience and availabilityof digital technology, including mobileand social media, to enable easierand simplified use of services, getinformation from the utility and othercustomers, and express their opinions.8To meet these evolving customer demandsfor digitally supported interactions,utilities should:1. Create the foundation. To simplifycomplex interactions and createenjoyable experiences, utilitiesshould focus on their highest-volumeinteractions—billing, field service,and outages. The start-serviceexperience should be the highestpriority, so that new customerrelationships begin with a positivefirst impression. Utilities shouldsegment the start-service experienceinto each of its components, fromreceiving the request and initiatingservice to providing the first bill, andstrive for excellence throughout theend-to-end process.2. Personalize interactions. Today’sconsumers expect personalizedinteractions, which means thatutilities must take a more fine-grainedapproach to providing products andservices than traditional customersegmentations allow for. Fortunately,by applying advanced analytics toincreasingly available customerdata, utilities can gain insightsinto customer preferences on anindividual level and tailor productsand services accordingly—offeringthem at the right time and throughthe right channel. Understanding thepreferences of self-service customersis critical. In addition, timely andpersonalized communications aboutoutage events can work to easecustomer dissatisfaction duringuncertain and emotional situations.Beyond the hype: What is the value of customer satisfaction to a regulated utility?3. Add value. When designing apersonalized customer experience,it is essential that utilities maintaina sharp focus on providing valueadded products and services. Thisvalue-added focus will require asignificant mindset shift for utilitiesthat have spent generations providingcommoditized products andservices to ratepayers. The ultimateaspiration should be to motivatecustomers to proactively pursue newand different ways to engage witha utility, in contrast to customersregarding such interactions as anecessary inconvenience.For many utilities, the starting point onthe journey to providing a value-addedcustomer experience will begin withapplying this new mindset to customerservice and operations. Utilities canapply advanced analytics to anticipatecustomer behavior and take proactivesteps to resolve situations before theybecome bigger problems. For example,analyses of customer inquiries can beused to proactively address area-wideservice problems and resolve issuesbefore most customers contact theutility. The mobile and social mediastrategies included in the foundation ofthe customer experience are essentialelements of a value-added approach toservice and operations. Utilities shouldstrive for mobile and social interactionsthat enhance service and operations andprovide measurable outcomes.
Beyond value-added customer serviceand operations, utilities that providea truly superior customer experiencewill offer innovative products andservices that meet “customers”evolving needs. Achieving this goal willrequire building capabilities to identifywhat customers really want based onanalyses of consumption and behavior.Utilities may also want to acceleratethe speed of product development tokeep pace with rapidly changing trendsand demands.As incumbents, utilities should takeadvantage of their position to becomethe “go-to resource” for meetingcustomers’ evolving energy needs.Success will require creating anecosystem of partners to serve broadercustomer wants and expectations, suchas connecting customers with ancillaryenergy services—including solarproviders, water heater installation, andenergy efficiency products.What can I do now?A utility should take three stepsto begin its journey to providing asuperior customer experience andpromoting world-class levels of customersatisfaction. Utilities that fail to masterany one of these steps are likely to fallshort of their customer-experience goals.First, utilities should define acustomer experience that is alignedwith their brand promise. Utilitieshave traditionally taken pride inproviding “safe, reliable, and affordable”energy and this promise shouldcontinue to lie at the heart of their valueproposition. However, some utilities maywish to expand their brand promise,striving to become customers’ “go to”energy adviser. For example, Powershop,a New Zealand company, has achievedworld-class customer satisfaction ratingsby defining itself as an electric utility“where you make the rules.” Customerscan instantly access their energy usageand costs, pay in advance or as theyuse energy, and take advantage offrequent discounts.Utilities should conduct a formalmaturity assessment to understand theircurrent performance in each of the fiveattributes of customer experience.For some utilities, this assessmentwill reveal areas of strength for whichcontinued investment will createa valuable source of competitivedifferentiation and brand building.However, most utilities are likelyto find one or more attributesrequiring additional investments toreach the levels expected by today’sdemanding consumers.Five attributes of customer experience.QualityPerformance andvalue receivedSupportFriendliness and easeof receiving helpConvenienceAnywhere,anytime accessPresentationAesthetics, arrangement,and pride in presentationCommunityCustomer’s personal brandand connections with others9
Second, utilities should take aninventory of all projects, programs,and committees that are tryingto move the needle on customerexperience and satisfaction, suchas website redesign or social mediastrategy definition. These effortsare often dispersed throughout anorganization and conducted withoutcentral oversight. Once a utility hasidentified “who, what, when, andwhere” for each of these initiatives, itshould seek to centrally coordinate themand give them executive-level oversightand exposure. To build momentumand seize opportunities to innovate, allinitiatives should aim to achieve small,agile improvements at a fast pace andallow for continual refinements alongthe way. In today’s rapidly changingenvironment, big capital projectsrelated to customer experience are atrisk of obsolescence before they candeliver results.10Finally, utilities need to transitionto a culture in which employees arefocused on the customer experienceand prepared to design and supportinnovative approaches that raisecustomer satisfaction. Customerexperience programs will not delivertheir intended results without such asupporting culture. Transitioning froman engineering culture to a customercentered culture is a significant changeand will require training and neworganizational enablers.Utilities that apply these insights anddefine a robust customer-experiencestrategy can be better positioned toweather the challenges of evolvingcustomer demands and a changingcustomer-utility business model.Utilities successful in securing satisfiedcustomers stand to gain tangiblebusiness benefits that go beyond simplyhaving “happy customers.”Beyond the hype: What is the value of customer satisfaction to a regulated utility?
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www.pwc.comTo have a deeper conversationabout how this subjectmay affect your business,please contact:Jim CurtinPwC Principal 1 (281) 794 2698james.m.curtin@us.pwc.comGeoff PlesePwC Managing Director 1 (678) 419 1585/ 1 (678) 428 3876geoffrey.e.plese@us.pwc.comH. Austin ClarkPwC Senior Manager—Lead Power &Utilities Analyst 1 (401) 419 4035austin.clark@us.pwc.compwc.com 2015 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to thePwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only,and should not be used as a substitute for consultation with professional advisors. MW-15-1920
Average customer satisfaction score (ACSI, 2009-13) Size of the bubble based on 2013 revenue *Source: ACSI Customer Satisfaction by company; Financial data sourced from SNL Company snapshots The airline industry provides another example where higher customer satisfaction can have an impact on market share growth.
Customer satisfaction has identified as an important influencer on customer loyalty. Further, customer trust impacted by customer satisfaction which proved that customer satisfaction is an antecedent of customer trust. Moreover, an indirect relationship between customer satisfaction and loyalty through customer trust was observed.
of satisfaction and quality, i.e. if one perceives quality and customer satisfaction as a process (cf. Deming, 1982). Consequently, technical and moral quality affect customer satisfaction, while the manufacturer can determine the level of customer satisfaction and respond via product innovations to ensure even greater customer satisfaction. By .
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strategies and customer satisfaction. ii. Ho 3b - There is no statistical significant relationship between honest complaint resolution strategies and customer satisfaction. LITERATURE REVIEW Concept of Customer Satisfaction Customer satisfaction refers to a person's satisfaction with a product, a service, or a supplier (Terpstra
i. Definition of Utility Mapping. ii. History of Utility Mapping. iii. Objectives of Utility Survey & Mapping in Malaysia. iv. The scope of Utility Mapping in standard guidelines for underground utility mapping. v. The role of utility owner, surveyor and JUPEM in underground utility mapping. 1 UNDERSTAND THE UTILITY QUALITY LEVEL ATTRIBUTES i.
customer satisfaction correlated positively with customer satisfaction. Badara, et. al. (2013) states the importance of customer satisfaction as it is a significat predictor to customer loyalty. In the airlines area, airline companies have recently realized the importance of customer satisfaction to find themselves in this competitive world.
the words "evaluation" and "opinion", and satisfaction with the word "feeling". Customer satisfaction can be experienced at the specific encounter level or at an overall level of satisfaction. Service encounter satisfaction is the customer's satisfaction or .
A/ B. COM - SEMESTER I – GENERAL ENGLISH (2019- 20) University Paper Style (total 4 questions, 70 marks, 2.30 hours) Unit/s Topic/s No MarksQuestion style I Lessons Beautiful Minds (Gujarati Medium) Pinnacle (English Medium) Q. 1. 1 to 3 (a) Answer in brief - 3/5 (b) Write a short note - 1/3 (09) (08) II Q. 2. Poems 1 to 3 (a) Answer in brief - 3/5 (b) Write a short note - 1/3 (09) (08) III .
