Customer perceptions of utilities
Over 60 per cent of CEOs (63 per cent) believe customer perceptions of utilities are worsening and 33 per cent believe they are not improving. Just 4 per cent believe customers have a better view of them than previously.
The results are to be expected. Utilities and bills have come in for considerable public scrutiny in recent times. A recent BBC survey has suggested that more people worry about paying utility bills than any other household expense. There is also bad press to deal with.
Colin Skellett, CEO of Wessex Water, acknowledges “we are getting an increasingly poor reputation as a sector. The prolonged dry weather has led to criticism about water companies over things like hose pipe bans and leakage. I can understand why people are frustrated. It’s a gift to the media, and the mood music is picked up by politicians and regulators.”
He adds: “You can plan for prolonged dry weather – we have water resource plans. We’ve not had to implement a hose pipe ban in 40 years. The difficulty for the public is one of differentiation between the various businesses. Attempts to establish brand separation have not been successful.”
David Bird, chief executive at Co-op Energy, agrees: “It’s a shame that customer perceptions aren’t changing, given that overall customer satisfaction levels are increasing significantly.
“There is also widespread public concern about the smart meter roll out. Somehow, we have to engage with consumers and get across the benefits that smart meters bring as well as other programmes that are important to them, like energy efficiency advice and support and renewable community generation. And suppliers need to be seen to be adding value, so the discussion is not all about price.”
Bird says it’s “frustrating” that all the major investments utility companies have made in upgrading the infrastructure are adding to the bills for customers now “but they’ll only get the benefit in five or six years’ time.
“We’ve got to become better as an industry at putting over the benefits to the customer and the wider benefits to the country. The whole debate seems to be focused on price – but it has to become focused on value. We have to up the level of the debate.
“For example, with decarbonisation , we have to educate consumers to the implications of this. We should be talking about renewable energy and benefits rather than price.”
Public re-education has to extend to many other areas, he says. “As a nation, we’ve been profligate in our usage of energy and water. Using treated water for garden hose pipes, for example. We have to start thinking differently.”
One hundred per cent of power network CEOs believe perceptions of them are becoming more negative, as do 75 per cent of domestic water wholesalers and 50 per cent of non-domestic water retailers.
No sector, apart from energy generators, believes their customers’ perception of them has improved. In energy generation, 20 per cent of CEOs perceive an improved perception. Of the rest of their peers in that sector, 40 per cent believe perceptions are becoming more negative and 40 per cent believe they have neither worsened nor improved.
In two sectors – energy retailing and non-domestic water retailers – more CEOs believe customer perceptions have remained unaltered than have worsened, or improved: specifically, 63 per cent of energy retailers believe perceptions are the same – the thinking being that that they were poor already, as do 50 per cent of non-domestic water retailers.
Frustratingly for other CEOs who spoke to us about the findings, it’s not just that the public does not distinguish between brands, but also that it fails to see the difference between different sectors of the business. Regulated businesses point to good customer satisfaction in their own sectors, which then does not translate into perceptions of utilities more widely.
Peter Emery, CEO of Electricity North West, says he believes networks are well perceived, but that customer expectations continue to increase in all sectors. “And that’s not going to change – we have to continually improve, and the RIIO frameworks helps with that.
“The ongoing flack about smart meters, price caps and environmental damage will always damage reputation of the sector. All we can do is make sure we put the customer first and that’s what we’re doing.”
John Morea, CEO at SGN, agrees: “We work extremely hard on improving our customer satisfaction levels, through the continual training and increased awareness of our people, to investing in new technology to make the whole customer experience with us better and seamless. I think the excellent results we see in our company, line-up to the effort we put in.
“Overall, the gas networks have record customer satisfaction rates of almost 90 per cent, demonstrating the reliability of and support for our energy network companies. The RIIO framework has helped enable this while our contribution to bills has fallen, while at the same time we’ve invested to improve safety and a network to support a sustainable future.
In the increasingly consumer-focused industry, Morea says his company’s approach is “quite simply, to instil and develop a culture of continual improvement and innovation to benefit customers.”
Likewise, Steven Edwards, director of regulation and commercial at WWU, says his customer satisfaction score, using the Institute of Customer Satisfaction survey, “is similar to that of Amazon and John Lewis”. He believes networks are putting “huge effort” into customer services through under RIIO.
Picking up on the one bright spot in the results – the better reception for generators – Matthew Wright, managing director of Orsted, says: “At a macro level, customer perceptions are similar to those in 2017. Overall, they are fairly negative but 20 per cent of energy generators’ customers say they are improving. Could this be down to positive consumer views about renewables and a green energy future?
“I certainly think that renewables is a great way to improve public perception. It’s well supported by the public at large, and offshore wind has become fairly uncontentious, now the cost has come down and it’s gone further offshore so there’s not so much impact. It’s enjoying far wider support than other technologies. We should therefore accelerate that path.”
Concluding remarks
The results of this survey reveal a cohort grappling with an uncertain political and economic landscape, frustrated by regulatory frameworks, and despairing of the poor, yet perceived unfair reputation that is engulfing the sector.
While the good news has been the buoyancy of the UK economy which has surpassed the expectations shown in last year’s CEO survey, concern is mounting on the impact that Brexit could have on financial stability. Brexit worries have particularly grown amongst CEOs of energy retailers where a downturn in the economy could impact on customers’ ability to pay their bills. Those we spoke to across utilities more widely, highlighted the growing risks that they faced over the cost of materials and labour.
On-going tensions with regulations and regulators are brought out by our research, with regulators seen to be increasingly out of touch with their sectors – though as might be expected this is not uniform. Nearly two-thirds of CEOs across the utilities spectrum say their regulatory regime is not fit for purpose. The figure leaps to 100 per cent amongst energy retailers, energy generators and non-domestic water retailers, and to 75 per cent amongst domestic water wholesalers.
As well as gathering trends and common concerns across the waterfront, our research also delved into sector specific issues and challenges. The turmoil that we are seeing in the energy retail sector and the expectation that this would only get worse was certainly a strong message to emerge from the research and those we subsequently spoke to.
Despite the slight decline since last year, it’s clear that business model change is something all CEOs see as necessary and inevitable as utilities evolve to meet growing consumer expectations and a low carbon future in both energy and transport. Opportunities are certainly there, but CEOs will need to overcome immense challenges to make the most of them.