Department of Public Service

Natural Gas Survey - July 1999 - Executive Summary



ENERGY COMPETITION IN NEW YORK STATE
CUSTOMER SATISFACTION, ATTITUDES, NEEDS

THE 1999 NATURAL GAS SURVEY,

EXECUTIVE SUMMARY

JULY 1999

I. SUMMARY

The Department's Energy Competition Education Team is conducting a multi-faceted educational program to educate New York State residential and business customers about competition in the electric and gas industries. Part of this program is a systematic effort to obtain input from customers to monitor the transition to competitive markets and to guide the Department's public education program. The team is using surveys, roundtable discussions, and focus groups to obtain customer input. In 1998, the Team conducted statewide surveys of residential and small business customers to measure customers' awareness, attitudes and informational needs concerning energy competition issues.

During the spring of 1999, we conducted a mail survey of natural gas customers who switched from their utility to a marketer. The purpose of the survey was to gain insights into actual customer experience with the competitive market. The survey was sent to a sample of customers in all major utility service territories in New York State who migrated to marketers. This report summarizes the results of the 1999 natural gas survey.

The survey examined a number of issues affecting residential and small commercial customers in the purchase of natural gas from marketers. Some of the key findings include the following:

54% of residential and 71% of commercial customers are satisfied with their marketer. Customers in the National Fuel Gas Distribution Corporation (National Fuel) territory reported the highest satisfaction levels (76% residential, 83% commercial); customers in the Consolidated Edison Company of New York, Inc. (Con Edison) territory (36% residential, 55% commercial) reported the lowest.
  • Most customers estimated savings between 6% and 15% on their total gas bills. A greater number of commercial customers (69%) than residential customers (55%) estimated savings in this range. Customers in National Fuel territory reported the highest savings (81% residential, 74% commercial); customers in Con Edison territory (35% residential, 63% commercial) reported the lowest.
  • Customers are most interested in bill savings, reliability of service, bill clarity and the level of customer service.

Based on the responses to the open-ended questions in the survey, we have identified a number of important themes that will assist in developing policies to increase customer migration to the competitive natural gas market:
  1. Customers are often confused by the two-bill system and many desire a single bill.
  2. Customers want accurate and complete cost comparison information about the offerings of marketers provided by an impartial source.
  3. Customers want more reliable information about the new energy service companies (ESCOs), such as the companies' financial status, reputations, and the extent of their affiliations with parent utilities.
  4. Many customers are satisfied with their current utility arrangement, but would consider switching to a reputable marketer that maintains reliable service and provides adequate savings and good customer service.

II. BACKGROUND

The survey was sent to approximately 4,000 residential and approximately 4,000 small commercial customers in the service territories of 10 utilities in New York State. A total of 1,619 completed surveys were returned, representing a response rate of 20 percent. Approximately 62 percent of the returned surveys were from residential customers and 38 percent were from small commercial customers.

Three groups of gas customers responding to the survey were sufficiently numerous to allow analysis of their responses with statistical validity. These were customers of Con Edison, National Fuel, and Keyspan (customers of the former Long Island Lighting Company and Brooklyn Union Gas Company).

We examined several areas in the survey including:
  • Overall satisfaction with the utility and the marketer, as well as satisfaction with the utility's and the marketer's enrollment process;
  • Features considered important by customers in selection of a marketer;
  • How well customers' expectations have been met with the marketer on a series of factors;
  • Estimated levels of bill savings realized by customers;
  • How customers obtained information about purchasing gas from a marketer;
  • Length of time that customers have been with their present marketer;
  • Whether a contract was signed and deposit paid; and
  • Miscellaneous demographic information on survey respondents.

III. SURVEY RESULTS

This portion of the summary reports the key information that was provided by customers who responded. Each of the key areas are discussed below.

A. Level of Estimated Bill Savings

The survey asked customers to estimate the level of savings they realized in buying gas from a marketer. The estimated level of savings reported most frequently for both residential and commercial customers was between 6 percent and 15 percent on their total natural gas bills. More commercial customers (69%) than residential customers (55%) said they realized this range of savings. Customers in Con Edison territory estimated the lowest levels of savings: 63 percent of commercial and 35 percent of residential customers estimated savings in the 6 percent to 15 percent range. National Fuel's customers estimated the highest level of savings: approximately 74 percent of commercial and 81 percent of residential customers estimated savings in the range of 6 percent to 15 percent.

B. Overall Satisfaction Level With Gas Marketers

The survey results indicate that 54 percent of residential customers and 71 percent of commercial customers are satisfied with their marketer.

Our data analysis indicates that the higher the level of savings estimated by customers, the higher the level of overall satisfaction. When satisfaction is measured for only those residential customers who believe they saved 10 to 20 percent on their bills by switching to marketers, the level of satisfaction increases to 80 percent. For small commercial customers, the level of satisfaction is 89 percent for customers who estimated savings of 10 to 20 percent on their bills.

The results show that levels of overall satisfaction vary significantly among the service territories of some utilities. For instance, satisfaction is lowest in the Con Edison territory, where only 36 percent of residential customers, and 53 percent of commercial customers reported being satisfied. The level of satisfaction is highest in the National Fuel territory where 76 percent of residential customers, and 83 percent of small commercial customers are satisfied.

C. Utility and Gas Marketer Involvement In the Enrollment Process

When customers choose to switch to a marketer, they typically give the marketer authorization to obtain their billing and usage information from the utility. If the marketer offer is appealing, customers authorize the marketer to initiate the switching process. The utility will then notify the customer of the marketer request and pending switch, and ask the customer to contact the utility if the customer has not authorized the switch. The survey examined how residential and commercial customers view the enrollment processes used by the marketers and the utilities.

The data shows that 66 percent of residential customers and 72 percent of commercial customers are satisfied with the role being played by the utilities in the enrollment process. These levels of satisfaction are lower, however, for customers in the Con Edison territory.

The data shows that 70 percent of residential customers and 82 percent of commercial customers are satisfied with the performance of the gas marketers in the enrollment process. These levels of satisfaction are lower for customers in the Con Edison territory.

D. Factors That Are Important to Customers

The survey also examined various features and services to determine if they are important to customers. Ten factors were examined in the survey, including
  1. overall bill savings
  2. reliability of service
  3. clarity of bill
  4. level of customer service
  5. whether a security deposit is required
  6. use of budget billing
  7. whether multiple utility service (e.g., cable, electricity) is desired
  8. whether miscellaneous services such as furnace repairs are provided
  9. whether credit cards are allowed, and;
  10. availability of direct billing to bank accounts.

Residential and small commercial customers are most interested in these four factors, respectively: bill savings (97% to 99%); reliability of service (96% to 94%), bill clarity (88% to 89%); and the level of customer service (84% to 82%). There were no major differences in the responses of residential and commercial customers.

We also examined how customers' expectations were met on these four factors. We found that for the service reliability variable, 94 percent of residential customers and 97 percent of commercial customers stated that their expectations were met. This was true across all service territories. Regarding bill clarity, 62 percent of residential customers and 76 percent of commercial customers are satisfied. (Only 42 percent of the customers in the Con Edison territory were satisfied with the clarity of their bills). Regarding customer service, 60 percent of residential customers and 74 percent of commercial customers are satisfied. Lastly, regarding bill savings, the study found that 52 percent of residential users and 72 percent of commercial customers are satisfied with their estimated level of bill savings. (Only 35 percent of the residential customers in the Con Edison territory are satisfied with their estimated level of bill savings).

E. How Do Customers Find Out About Purchasing Gas from a Marketer?

The survey also asked customers how they found out about the option of switching to a marketer. Approximately 57 percent of residential customers said they learned about the option in brochures. Most small commercial customers learned about the process either from brochures (47%) or word-of-mouth (46%) and, to a lesser extent, from trade journals (17%).

For both residential and commercial customers, the main source for specific information about the program was the gas marketer (residential 70%, commercial 76%). The utility was the next most frequently reported source of specific information for both groups (residential 56%, commercial 34%).

F. Contract and Deposits

As part of the Commission's marketer eligibility process, marketers are required to file for staff's review a sample standard contract. All customers switching to marketers are expected to have entered into a contractual agreement. In response to the survey question asking customers whether they signed a contract, 80 percent of residential customers and 86 percent of commercial customers said they had done so. Less than 10 percent of all consumers paid a deposit when signing a contract.

G. Analysis of Open Ended Questions

We also examined a number of responses to open-ended survey questions. A total of 750 surveys were analyzed statewide in this regard.

The following themes emerged:
  1. Customers want to receive one bill only. They are confused by the two bill system.
  2. Customers want valid cost comparisons among suppliers to help them make informed decisions about whether to switch to a marketer. Moreover, they would like to know how much they have actually saved by switching to the marketer.
  3. Customers want to receive additional information about the marketers such as understandable brochures with the marketers' telephone contact numbers and rates, as well as general information about the marketers such as their financial viability, reputations, and the extent of their affiliation with parent utilities.
  4. Customers want to deal with reputable companies with "brand name" status. They want the marketers to contact them using informed, friendly, and knowledgeable customer service representatives. In the past, such customer service amenities were often perceived to be lacking.

IV. ISSUE IDENTIFICATION T

The survey examined numerous issues for residential and commercial customers who are purchasing gas supplies from marketers. Based on the responses, we have identified a number of important themes that should help more customers decide to participate in the competitive natural gas market:

Theme #1. Customers are often confused by the two-bill system and prefer one bill.

Theme #2. Accurate and complete cost comparison information among marketers is desired by customers, and it should be provided to them from an impartial source.

Theme #3. Customers want more reliable information about the gas marketers. Among other things, they are interested in the companies' financial status, reputations, and the extent to which they remain affiliated with parent utilities.

Theme #4. Many customers are satisfied with their current utility arrangement, but would consider switching to a reputable marketer that offers reliable service, adequate savings and good customer service.

Theme #5. The level of satisfaction and estimated savings is lower in the Con Edison area than in the rest of New York State. The level of satisfaction and estimated savings is higher in the National Fuel area than in the rest of New York State.

Theme #6. There is little information available about customers who considered whether to switch but did not.

Theme #7. The survey provides information on how customers found out about the marketers. This information shows that brochures and word-of-mouth are important communication devices.



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