3 minute read 15 Jul 2019
High voltage post

Why US utility customers want choice despite satisfaction

By Brian Murphy

Partner, Power & Utilities Tax, Ernst & Young LLP

Seasoned Power & Utilities Sector tax executive. Renewable energy thought leader. Passionate about transforming tax functions.

3 minute read 15 Jul 2019

The survey respondents are generally pleased with their electric and gas utilities, but would still prefer to be able to choose a provider.

Most American consumers and corporate energy decision-makers (EDMs) are content with their local utility, but they still want a choice of providers in the hope that competition will lower their electricity bills. That’s one of the key findings of US Fuels of the Future, the EY survey from April 2019 of 1,500 electricity consumers across the US and more than 100 corporate executives with responsibility for managing their company’s energy usage.

Consumers’ focus on cost isn’t a new view in the power and utility industry. The sector has long believed that when it comes to electricity, consumers only care about two things: price and reliability. However, that point of view is becoming outdated.

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Price first, but environment matters

The survey found an overwhelming majority of consumers (86%) were satisfied with their electric utility. But 68% of respondents in markets without electricity competition said they would prefer to choose providers, primarily to save money.

Electricity misperceptions

26%

of respondents said their utility uses renewables to generate electricity but, according to the EIA, only 17.1% of electricity in the US is generated with renewable fuels.

Of respondents without a choice in their utilities, 88% said having a choice would lower prices and 45% of respondents cited the desire to switch to a utility that uses more renewable energy.

Although consumers prioritize affordability highest, they also display growing concern about the environment and increasing desire for more renewable energy in their electricity.

When asking consumers what would cause them to switch from their current provider, 82% cited “lower price” while 35% said they would seek a company that “uses more renewable fuels.”

Despite clearly valuing price, consumers are also willing to pay for more environmentally friendly fuel. Respondents, on average, said they would pay as much as $23.07 (21%) more per month on their electricity bill for electricity generated with 50% less carbon and $15.63 (17%) more for 50% less carbon in their vehicle fuel. 

Consumers focus on price first, but they also have environmental concerns and believe choice will give them the option to increase their share of renewable energy.
Brian R. Murphy
Partner, Power & Utilities Tax, Ernst & Young LLP

Corporates want competition too

The survey found corporate customers were even more in favor of competition than their consumer counterparts. Among the 57% of EDMs without a choice of providers, 90% said having a choice in their utility would make a difference to their company.

As with consumers, EDMs said price was a key consideration, with 87% of EDMs who believe a choice of utilities would benefit their company, citing the opportunity to negotiate lower electricity prices as a benefit, and 85% saying competition would keep prices low. Meanwhile, 45% said the ability to reduce their company’s carbon footprint would be a benefit of competition. EDMs also believe increased choice would enhance their access to the most sophisticated energy technology, with 60% citing that factor as a benefit.

Not surprisingly, corporates are less emotive about the opportunity to move into renewables; EDMs make decisions based on economics. Price is critical, since they use a lot of energy, and so is reliability, since downtime means lost productivity and profits.

EDMs with a choice in their utility said they choose based on price (86%), reliability (60%) and then the use of renewable energy (16%). When asked what would cause them to switch from their current provider, 92% of EDMs point to the opportunity for a lower price, and 37% say they would switch to use more renewable fuels in their operations.

It’s not that corporations aren’t interested in renewables. In fact, EDMs are willing to pay for more environmentally friendly fuel. Respondents, on average, said they would pay 2.22% for electricity generated with 10% less carbon and 7.61% more for electricity generated with 50% less carbon.

However, businesses have alternative pathways to greener energy, such as power purchase agreements (PPAs) with renewable providers, green tags from exchanges or even independent power generation (IPG).In fact, the US is leading the way for corporate PPAs and several large technology sector players are pursuing 100% renewable energy targets. When asked about IPG, 78% of EDMs agreed their company is interested in IPG for all of its facilities, and 85% said it is interested in IPG for some. 

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Building on customer satisfaction

These findings show both consumers and corporate customers recognize the value of electricity competition and that price and reliability continue to be the key drivers when provider decisions are made. However, the survey also illuminates increasing environmental concerns — and the desire to use more renewable energy.

Although energy customers want choice (and most do not have it), the good news is consumers are very satisfied with their current providers.

Utilities have an opportunity to leverage these strong satisfaction rates to build on already fertile ground with their customers.

Utilities can implement business models that match customers desires; embed flexibility and agility to consistently meet changing expectations; and create deeper relationships and customer loyalty through innovative service and product offerings that speak to customers current and future wants. 

Summary

While the environment is on the minds of both business and residential consumers, price and reliability remain paramount. Most American consumers and corporate energy decision-makers are content with their local utility, but they still want a choice of power and natural gas providers in the hopes that competition will result in lower prices and potentially greater options for renewable energy.

About this article

By Brian Murphy

Partner, Power & Utilities Tax, Ernst & Young LLP

Seasoned Power & Utilities Sector tax executive. Renewable energy thought leader. Passionate about transforming tax functions.