How customer satisfaction drives returns on equity for regulated electric utilities.
Andrew Heath, Senior Director, Energy Practice, J.D. Power and Associates
The business model for the electric utility industry might appear backwards, compared with models used by traditional businesses today. Utilities often spend money first, and then recoup it later if they can demonstrate trust and explain the need for expenditures to the Public Utilities Commission. If the utility does a good job, its rate case outcome might be positive. It takes a savvy utility leader to know when to apply resources, allocate funds, and develop successful customer service programs to drive operating margins, return on equity and shareholder value.
How do utilities know if it’s all working? Customer satisfaction is a key indicator. It’s an important variable, and leading utilities are constantly aware of how customers perceive them. Customer satisfaction affects a utility’s credit rating, profit, return on equity (ROE), and shareholder value.