consumer opinion tainted by outages

Stu Solomon, Accenture

The consumer is the most important element in the reliability equation. When it comes to utilities’ relationships with their customers, two truths stand out.

“- Truth #1: Most consumers don’t understand the challenges faced by utilities in keeping the lights on all the time because they haven’t needed to understand. In North America, power reliability has been at such high levels for generations that consumers have come to expect it. They flip the switch, the lights come on. (In some foreign countries, the power goes out many times a day, and it’s accepted as a way of life.)

“- Truth #2: Most customers are accustomed to hearing primarily bad news from utilities, about things like rate increases or storm outages. Or, their relations with their utility have been sparse and handled by customer service groups, responding to billing inquiries or turning their power on and off.

Because of the perceived lack of need for positive customer information programs, many utilities have grown lax in this area.

In an Accenture survey in early 2004, about 60 percent of consumers affected by the August 2003 blackout said their utility and the government hadn’t done enough to inform them of the causes. In addition, 85 percent said their utility should provide more information on the electrical system and supply.

Utilities now are recognizing their need to grow more proactive. Proactive communications can include measures utilities are taking to prevent outages, as well as improved outage response and what it means for customers.

A side benefit: Explaining the relationship between outages and overgrown trees may help to reduce residential resistance to tree trimming.

Broadcast public service announcements seem to be the best vehicle to get across these messages. Bill inserts, on the other hand, are not proven to be highly effective. Experience has shown that customers tend to see the bill and don’t bother to read the other materials.

Better customer communications will require tighter integration between the field service/engineering functions and customer service, which in the past were wholly separate functions in utilities.

It is clear that responsibility for communications rests with the local utility that delivers the power, even if the consumer buys it from another source.

Much has been done to secure the electrical system since the blackout, but consumers see the effort as “not enough.”

In the Accenture survey, 71 percent said the August blackout had raised doubts in their mind about the stability of the nation’s electricity supply, and 59 percent said that not enough had been done to secure the grid following the blackout.

Fully 50 percent expected another blackout this year or were unsure. In the survey, the three most mentioned reasons for the blackouts were failed backup systems (72 percent); poor coordination between power companies (60 percent); and insufficient investment in equipment by the power companies.

If there is another major blackout, consumers’ high expectations for reliability would translate into low levels of tolerance for an outage. Consumers, regulators and politicians would all put the squeeze on utilities. This underscores the need for better communications to all; easing the impact on customers alleviates the pressure on utilities.

Even though grid reliability in North America traditionally has been at “99 percent plus,” there still is room for improvement. But, who will pay for the necessary improvements? Along with extremely high reliability, electricity consumers have grown accustomed to relatively low electricity rates in most areas of the country. Many utilities haven’t had rate increases in seven or eight years, or even a decade.

The Accenture survey in February found that 55 percent of those affected by the blackout would be willing to pay more in their electric bills for improved reliability of the electricity supply. About 43 percent of respondents said they’d pay up to 5 percent more, while another 9 percent said they’d pay 6 to 10 percent more.

It remains to be seen whether regulators will allow utilities to pass along to their customers the costs of grid upgrades. Regulatory approval is necessary if utilities are to show they can recover the improvement costs so they can attract investments from debt and equity markets.

Government is the other option for funding grid improvements. Tax incentives are one way to attract public funding. Whether government or the capital markets are more efficient at paying for the grid upgrades is a debate that will rage. In either case, the costs ultimately come back to the consumer, either in their electric bills, or taxes.

That’s all the more reason for utilities to give consumers a seat at the table by opening lines of communication.

Solomon is a partner at Accenture.


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