Utility customers’ knowledge base about deregulation skyrocketed this year, according to the 2000 edition of Deloitte & Touche’s annual Consumer Awareness Survey of Electric Deregulation.
And while they know significantly more details, they like deregulation even less.
“A majority of Americans are now aware of changes in the electric industry in a big jump from the previous year,” stated Branko Terzic, director of Deloitte & Touche’s energy/utilities services and former member of the Federal Energy Regulatory Commission. “The 2000 survey shows that 50.5 percent of Americans say they are aware of changes in the electric industry.” (See Figure 1)
That number is nearly a 13 percent increase from 1999, when only 37.6 percent reported knowledge of deregulation. Awareness in preceding years clocked in at 38.1 percent in 1998, 33 percent in 1997 and 22.9 percent in 1996 (the first year of the survey).
“Once again there are strong regional exceptions with awareness highest in those areas where state governments have introduced competition in the retail electric sector by offering choice of electric power suppliers to all classes of customers,” Terzic pointed out.
Currently, a total of 14 states have varying forms of energy supplier options for consumers. Estimates reflect that only about one percent of customers has decided to exercise that option though, and-if they have-they are most likely in Pennsylvania, New York, New Jersey, California or Massachusetts.
Perhaps in response to problems in California this summer, awareness increased sharply in western states, growing by almost 14 percent from 45 percent in 1999 to 58.6 percent this year. There was also a large leap in the north central states, which jumped from 32 percent to 54.5 percent.
General awareness was highest in the West with 58.6 percent. The South came in the lowest with a mere 40 percent. And while the West saw a leap in awareness, the South-where deregulation is at mere crawl-showed no change in percentage. (See Figure 2)
“Not only did the survey again reflect awareness of the state-by-state regulatory nature of the U.S. electric industry, but I believe it also reflected well-publicized problems with the California electric grid and increased prices for energy overall,” Terzic said.
Consumers see cost, service problems
Customer opinion of deregulation has sunk according to the survey, with an additional 10 percent of aware consumers jumping to the belief that rates will balloon with deregulation. In 1999, consumers were rather evenly split on the idea: 43.5 percent thought rates would rise, 43.2 percent thought they would fall. This year, 52.7 percent forecast an increase on their bill. (See figure 3).
This is an even further departure from 1998’s numbers when a mere 38.2 percent believed deregulation would cost them more per kW and 46 percent believed electricity would be cheaper after deregulation.
“Clearly recent price increase in natural gas, fuel oil and gasoline have affected public opinion,” Terzic commented.
Robert Hahne, managing partner of the Deloitte & Touche energy/utilities services practice agrees. “It appears that consumers are attributing the price increases to deregulation rather than market forces,” he added.
And price isn’t all they’re afraid will suffer after deregulation: Some consumers look for service to plummet as well. In 1998 only 20.6 percent thought service would be impacted by restructuring. In 1999, that number increased to 26.5 percent. This year, it rests at 30.9 percent. While the majority-42.7 percent-believes service may improve, clearly the negative numbers are growing. (See figure 4.)
“Consumers continue to have increasingly negative perceptions of future service quality under deregulation,” Terzic said.
In fact, general skepticism about deregulation having any benefits at all for consumers increased to 54 percent this year from 52.3 percent last year and 42.6 percent in 1998. Such numbers must send a chill down the collective industry spine.
“Advocates of competition must find it troubling that more than half of consumers feel that they would not benefit in any way from electric power deregulation,” Terzic commented.
He added, “Last year we warned that the proponents of electric competition would have to change increasingly negative public opinion and skepticism about any benefits of deregulation. This year’s results bear that out and indicate that proponents have an even harder task.”
However, a continued 44.5 percent of consumers report no concerns about deregulation, while those with concerns rank rate increases and questions about service quality at the top. This year saw a large jump for the idea that “no one will control it/regulate it,” which moves into the bronze position. “Confusing information,” the previous third-place winner, drops to fourth.
Deloitte & Touche added a new question to the survey this year concerning the environment. They asked consumers if they would be willing to pay higher rates for the increased use of cleaner fuel technologies. Nearly a third-33.4 percent-were absolutely unwilling to pay an added 20 percent for environmental aide, and a small minority-14 percent-indicated they were all for it. An additional 12.2 percent fell in between, in the “somewhat willing” category.
“It could be that this result shows that Americans are not yet very concerned about global warming,” commented Dwight Allen, director of energy research for Deloitte Research.
“Another way to read it is that Americans do care, but they expect government and industry to solve the problem without asking them to make sacrifices,” he added.
The 2000 Deloitte & Touche Consumer Awareness Survey of Electric Deregulation was conducted by International Consumer Research Inc. Copies of the results are available by contacting Sally Wilson at 703-251-4333 or via e-mail at email@example.com.