J.D. Power’s Founder’s Award: How MidAmerican earned it and what it means to a utility

By Betsy Loeff, contributing writer

You can’t buy it. You can’t apply for it. There’s no politicking involved.

The only way to earn a Founder’s Award from James David Power III himself is to do something that takes time, determination and effort: You have to prove your commitment to customer service by dramatically improving your scores in the J.D. Power & Associates customer surveys.

On Nov. 31, 2006, MidAmerican Energy Company earned this high honor when Power handed over his handpicked prize to MidAmerican’s David Graham. Graham is vice president of quality assurance for the Des Moines, Iowa, based MidAmerican.

In the 38 years since his namesake company began researching customer views, J.D. Power has singled out 16 companies to receive this distinction. Only one other gas and electricity provider (Raleigh, N.C., based Progress Energy) has earned it during the eight years J.D. Power has been looking at utilities.

Veering from middle-of-the-road
According to Al Destribats, executive director of J.D. Power’s utility practice, MidAmerican scored right in the middle (36th out of 74 large U.S. utilities examined) in a 2001 survey of electric residential customers. The company was 14th among Midwest utilities in that same survey.

Such lackluster scores are now history for MidAmerican.

During the past three years, J.D. Power and Associates has conducted 10 different studies of utility-customer views, Destribats says. On four occasions, MidAmerican ranked first in the Midwest. On six, the utility took second place. Such improvement caught the eye of Mr. Power.

“MidAmerican is a good example of a utility that takes customer-satisfaction seriously, analyzes the results of the study and defines actions to take” that should lead to better survey results, Destribats says.

The utility’s quality chief, Graham, says his company’s executives convened a cross-functional team several years ago to address lackluster satisfaction scores. Each year, that team creates a customer-satisfaction plan to follow. Most years, the “sat” plan contains anywhere from 45 to 50 initiatives, and team members monitor progress in monthly conference calls.

At first, MidAmerican’s quality team focused on what Graham calls “low-hanging fruit.” To help customer report outages, for instance, the utility added a call-in system that can take 108,000 calls per hour. They also added online payment options, which helped satisfaction scores rise.

This year, Graham says, a new appointment-scheduling software will go live. “Right now, we have a package that requires customer-service associates to go into a couple of different systems to schedule an appointment, and that may prompt an error,” He explains. The new software aims to eliminate steps and reduce opportunities for mistakes.

And, the utility pushes its many energy-efficiency services, such as the home-energy audit program. Through it, MidAmerican will send energy experts to a residential customer’s home to check insulation, windows, electric fixtures and more, looking for ways to cut bills through energy efficiency. More than 11,000 households took advantage of the program in 2005.

Another customer satisfier: stable energy rates. MidAmerican’s last electricity rate-increase for residential customers happened in 1995, and the utility has promised not to raise its rates again until 2010, says Allan Uris, director of corporate communications. Uris and his team promote the rate-stability message aggressively, adding it to almost every news release and to many customer communication pieces. He adds that utility managers think those stable prices boost customer satisfaction.

Those stable prices probably help MidAmerican with its public utilities commissions, as well. But, so will the J.D. Power and Associates Founders award.

Satisfying results
According to Destribats, there is more payoff to raising customer satisfaction than just a feel-good glow.

Like J.D. Power and Associates, Standard & Poors — a provider of independent credit ratings, indices and investment research — is a business unit of the McGraw-Hill companies. Desbribats says S&P researchers analyzed J.D. Power studies and found a link between customer satisfaction and how regulators respond to utilities. “Higher customer satisfaction typically leads to better regulatory treatment,” he says.

That means utilities with higher customer satisfaction may have more luck when they go to their PUCS with a rate case for something like automated meter reading or new transmission lines. They may also enjoy a better environment for situating those transmission lines with less public outcry.

And, because regulatory treatment is one of the considerations S&P factors into debt evaluations, customer satisfaction can ultimately lead to more favorable bond ratings.

In fact, Destribats says his company’s research shows that higher satisfaction also is linked to higher earnings. J.D. Power and Associates’ research shows the two are correlated.

But, Destribats adds, it isn’t that customer satisfaction leads directly to higher earnings. Rather, he thinks higher satisfaction results when companies are well run in the first place.

Betsy Loeff has been freelancing for the past 14 years from her home in Golden, Colo. She has been covering utilities for almost four years as a contributor to AMRA News, the monthly publication of the Automatic Meter Reading Association.

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