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Turn back the clock on deregulation?

• Major business customers find few benefits to date from electricity deregulation

New nationwide survey documents disenchantment among largest energy users; less attention from utilities, and low marks for new brands & utility regulators.

NORTH SALEM, NY, Feb. 27, 2002 — U.S. businesses, already buffeted by soft economic conditions, the after-effects of September 11 and the Enron fallout, no longer welcome electricity deregulation, according to a new independent national survey.

A majority of key accounts–the largest multi-site energy users–register disenchantment with deregulation, according to the survey. For example, a third of the businesses sampled–34 percent–feel deregulation should be postponed indefinitely, while another 17 percent want states with choice to turn back the clock and return to regulated markets. Only 35 percent believe the rest of the country should accelerate or stay the course to deregulate electricity markets.

Customers who have replaced their electricity supplier are less satisfied with the performance of their new provider across the board, the survey notes. And companies with a choice of suppliers are the most critical of any customer segment, registering lower ratings for performance and loyalty than businesses in regulated markets.

Nevertheless, business customers rate their suppliers’ performance significantly higher than their state regulatory commission. Indeed, state regulators rate only a 5.5 score on a 0-10 performance scale, significantly behind the 7-8 range achieved by energy suppliers. And regulator performance ratings in California and Western states fall below the national norms.

Although competitive activity and choice spread in 2001, the survey documents a nearly 10 percent drop in contact with U.S. businesses by their energy supplier’s account representative, service center or designated phone number. Nearly a third of these business customers report no contact at all over the past year.

And while deregulation preparations drove the creation of new names and merged entities over the past seven years, the new identities have not impressed the largest key account customers. In fact, scores for renamed or reorganized energy suppliers were lower in nine areas of customer service–and significantly lower in two other dimensions of performance, according to the new national survey.

These results are part of the year-end 2001 national surveys of business customers conducted by RKS Research & Consulting, an independent market research and public opinion polling organization based in North Salem, NY. RKS completed individual telephone interviews with energy managers at 805 medium-to-large U.S. businesses, plus 402 key account customers during November, 2001. The data from these RKS national customer assessments are now being reported to clients nationwide.

“These latest findings confirm, for the first time, that customers in regulated markets are no longer looking forward to having choice” said David J. Reichman, RKS president. “Many of the causes of this loss of momentum can be traced back to self-inflicted decisions by energy suppliers. For example, repeated reorganizations, name changes and cost-cutting at the customer service level seem to be disrupting the continuity and relationship-building so vital to retaining larger business customers.”

While the RKS data indicate that business customers remained generally satisfied with the performance of their energy supplier in 2001, the data mask some important regional and operational variations. Businesses in the South, for example, are the most satisfied with their energy supplier, while the West has supplanted the Northeast as the most negative part of the country. And businesses served by electric cooperatives register higher scores than customers of municipal or investor-owned utilities.

Further, critical gaps persist between key areas of utility performance and customer communications, according to the RKS survey. For example, ratings for communications regarding power service, such as outage updates, restoration progress and system maintenance, fall a full point short of actual performance in providing electric service.

“These scores confirm that there’s more to the business customer relationship than price,” said Reichman. “Suppliers who stress value, relationships and service communications can stand out and prosper in a more competitive marketplace.”

Now in its 28th year, RKS Research & Consulting designs and conducts both syndicated and customized marketing research and public opinion polling service for energy and natural resource clients and their major associations. RKS operates from headquarters in North Salem, NY, plus field offices in New Jersey, Florida, Ohio and California. More information is available on its website, www.rksresearch.com.