Friday, August 5, 2011

Why Customer's Satisfaction & Preferences are important for Electricity Utilities?

The Forum of Regulators Report on Standardization of the Distribution Franchisee model (September 2010) mentions that the objectives of appointing a distribution franchisee, inter alia,
i. To minimise Aggregate Distribution and Commercial losses
ii. To bring improvement in Metering, Billing and Revenue Collection
iii. To minimise Current Assets on account of arrears
iv. To enhance customer satisfaction level by improving quality of service

Placing focus on the fourth point, we find that while much information is shared in the Distribution Franchisee RFPs, they hardly provide any information on the current customer satisfaction levels nor the customer's perspective of the network infrastructure, current quality of services etc. This is a stark thing to miss considering all CERC, CEA, State ERCs and State Discom's mandate Improving Customer Satisfaction as one of the 4 objectives of a Power Distribution Franchisee. The reason probably for the miss is that the areas being offered for franchisee are any way loss making and hence customer dissatisfaction is well understood.

However, while all utilities, licensees and potential or current distribution franchisee operators try to improve quality of service; could efforts to understand the customer's perception and expectations from the utility help the utility make more quality decisions to improve the services and have a happy, paying customer?

The answer probably is a big "Yes". Measuring customer satisfaction - using a structured methodology that relates the customer responses with consumer demographics and key factors/attributes affecting business performance - is probably the only way of independently & periodically benchmarking effectiveness of utilities operating in same or different zones. No doubt a number of such mechanisms have evolved and established themselves in the western countries where multiple state / private companies operate in the same locality.

But how really could measuring customer satisfaction or proactively identifying customer preferences help? We believe, they could in the following key ways,

Understanding and activating the power utility customer
The electricity consumer in India has for long been at the receiving end. Although, there are arrangements for public forums and grievance redressal systems in place, hardly any are attended frequently or in quorum by customers of electricity utilities. For long, being a regulated and government controlled sector, price is given and delightful customer service is unheard of. The customer themselves do not care much as long as the light turns on at the press of the button. However, customers are important stakeholders who, very basically, pay for the services and with the advent of private companies to manage distribution systems, their expectations are on the rise.

It becomes more and more important to understand the customer's needs (requirements and expectations) and factors that affect his/her satisfaction as they directly or indirectly affect the customer's behavior towards the use & misuse of the utilities services and infrastructure.

A satisfied customer is more inclined to understand the harmful effects that power stealing, etc will have on the quality of service AND the price at which they are delivered to him or her. High satisfaction and awareness of quality of services delivered to him/her enhances the support and cooperation that the end consumer can extend to the distribution utility for monitoring non-normal activity on the network infrastructure and also bring to notice untoward incidents that affect the secure working of the system.

Consider the case of NDPL, which probably - in the Indian context - is known to be the best case of turn around to become a consumer-centric utility, which by leveraging customer satisfaction & preference studies was able to lower Average waiting time for bill payment by four times and increase Customer confidence in paying bills by checks to 50 percent.

Making investment decisions for quick wins
Customer Satisfaction results are probably the most reliable way of identifying key issues that the local customer wants the utility to attend. Immediately attending to the customer's key areas of dissatisfaction would result in quick wins for the utility and allow for building up a positive perception within the minds of all stakeholders (including customer, opinion leaders, employees etc) and make them ready for bigger changes (e.g. smart meters and other innovations that would help improve the quality of service and metering efficiency). When looked into together with other factual information (utility's assets, performance figures, collection efficiency, billing, customer complaints etc) customer satisfaction and preference data can provide solid insight into the investments that, if done, would help improve business productivity and growth.

For example, high customer dissatisfaction with the current modes of payments available could result in a long meter-to-cash cycle. It would be wise on the utility's side to consider investing in making available preferred and convenient modes-of-payments, identified in the customer survey, for the customer to be able to pay his bills in time and sometimes even earlier. Measuring customer satisfaction on this attribute could be considered as an indicator (leading / lagging depending on the way dissatisfaction is measured and analyzed) of reasons why the utility is performing low in terms of collection efficiency.

The key here is to measure customer's satisfaction on well-chosen factors and corresponding attributes that appropriately represent key areas like power quality, reliability, metering, billing, payments, information systems, customer services etc.

Measuring the effectiveness of utility performance
While utilities perform they should know whether the performance is effective enough to meet the needs of the current and potential customers. Especially in the case of distribution franchisees where a complete new management will be handed over the operations of the local distribution system, it is imperative to measure the existing effectiveness of performance from all different perspectives - of which the customer perspective is a significant one.

The key question is, if we don't measure customer satisfaction, how will we manage it? Not only this is true for the distribution franchisees and operating utilities but also for the licensees who need to ensure that the objectives of distribution franchisee contract are met over the next so-many years.

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