Executive Insight

C&I customers in US deregulated electricity market

Frost & Sullivan

U.S. customers are satisfied with their existing electricity providers, and few intend to change their providers at the end of their contracts, according to a Frost & Sullivan customer survey to determine customer perception and purchase criteria for electricity and energy service management among commercial and industrial (C&I) companies.

Frost & Sullivan surveyed 250 medium and large C&I companies across five verticals — manufacturing, data centers, hospitals, small franchises and education — for the report, “Commercial and Industrial Customers in the US Deregulated Electricity Market.”

Highlights include:

  • Among customers with five-year contracts, financial viability and line of credit were more important purchase criteria than power reliability.
  • On average, electricity accounts for 9 to 11 percent of yearly operating costs and up to 20 percent for select customers.
  • Approximately 40 percent of C&I customers expect their electricity consumption to increase in the next 24 months.
  • Approximately 80 percent of C&I customers are concerned about the future costs of energy.

“Nevertheless, the majority of customers do not plan to switch providers to lower energy costs, as they perceive little product differentiation among the utilities,” said Farah Saeed, energy and environmental principal consultant at Frost & Sullivan. “Therefore, vendors that focus on product development and enhanced offerings, particularly in the area of energy management, will win new customers.”

Energy providers can offer customer value and differentiation through services such as supply management, energy efficiency management, facility optimization and demand response; however, most customers conduct these functions in-house and do not seek to outsource them to third-party vendors.

Nearly 70 percent of those who outsourced energy management services preferred utilities as the primary vendors. They might be persuaded to collaborate with a third-party energy management solution provider if it can demonstrate operational cost savings clearly.

“Currently, customers do not comprehend the difference between distribution utility and competitive electricity retailer,” Saeed said. “Therefore, appropriate marketing campaigns that promote the benefits of deregulations will go a long way in increasing participants’ market shares and brand awareness.”

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