Consumer Research 3rd Working Group - Accent

Consumer Research 3rd Working Group - Accent

Expectations of DNOs & Willingness to Pay for Improvements in Service Stage One Presentation Qualitative Research November 2007 Agenda Research Background Objectives, Method and Sample Context and Sample Differences Role of Electricity and Service Experiences DNO Awareness Power Cuts Voltage Issues Service Attributes Review of existing GSPs Environmental and Social Issues Willingness to Pay (WTP) for Improvements to Service Summary and Next Stage Appendices Research Background

Objectives, Method and Sample Context and Sample Differences Comprehensive Research Programme Stage One Stage Two Qualitative Research Quantitative Research Exploring relevant issues Understanding how Consumers think and feel Providing necessary context

Providing measurement Relative service priorities WTP data Stage One: Qualitative Research Objectives Understand Consumers expectations regarding DNO service Explore current experiences and satisfaction with quality of service in relation to: Power Cuts Voltage Issues Communication with DNOs Understand key priorities and areas that Consumers value Ascertain reasons for and factors driving areas of importance Understand willingness to pay for improvements e.g. undergrounding, cross subsidisation

Explore GSPs Awareness Understanding of the GSPs Review detail Provide context and direction for the quantitative study Methodology and Sample 16 discussion groups 8 with Domestics 8 with Small Businesses 16 face-to-face depth interviews

8 with Large Medium Business 8 with Vulnerable Customers (In-Home) Urban and Rural Domestic Age Older (40+), Younger (<40) SEG Lower (C2DE), Higher (ABC1) Business Size - Based on usage/annual cost: Small < 15,000; Medium 15,000 - 159,000; Large >159,000 Locations Urban and Rural spread across eight locations Glasgow (Urban) Tong (Rural) Manchester (Urban) Gloucester (Rural) London (Urban) Edenbridge (Rural) Cardiff (Urban) Romsey (Rural) Deliberative Process Short, simple pictorial presentation given near the beginning of each workshop to educate customers about the DNOs role

Spontaneous discussion about Electricity service Explanation of the Energy Chain Responsibilities of the Distributors Proportion of the bill that goes to Distributors Key Contextual Issues Seven key issues impact on response to DNO service expectations and WTP Low Involvement marketplace

Fat Cats Negativity around pricing Green = Populist Issue Increased/ Stealth Taxes Over complexity of Market Automated Service Sample Differences Location Overall, even in rural areas where there was some experience of Power Cuts/Voltage Issues, service was acceptable Acceptable

Poor Urban Rural Service Service Sample Differences Business Customers All Business Customers reliant on electricity and directly translate loss of power into loss of Differences are more about energy dependency/high voltage needs than size of business Lower Dependency Service businesses eg cafes, offices Single site only Needs = more straightforward/similar to domestic BUT still focus on potential for loss of earnings Less awareness/contact with DNO

Higher Dependency Hospitals, manufacturing, schools Multi sites High voltage Own transformers Back up generators Direct contact with DNO Greater reliance on computers since previous study amongst all businesses Role of Electricity and Service Experiences Electricity Issues and DNO Awareness Power Cuts

Voltage Issues Current Issues with Overall Electricity Supply (1) General sense of it works and thats good However, continuous supply = hygiene factor Doesnt create satisfaction if its working but creates dissatisfaction if it doesnt Current Issues with Overall Electricity Supply (2) Once pushed, Supply side issues dominate Customers mindsets mainly Neutral-Negative response Billing issues Bill shock Increases in prices Complex pricing Comprehension issues (variable with different suppliers) Estimated vs. Actual Meter readings

Customer Service Poor response (phone just rings) Problems getting through to the right department Never read the meter Switching Suppliers Confusion with changing suppliers Short term offers vs. longer term transparent deal Power Outages/ Voltage Issues Few unprompted mentions across sample Businesses with experiences of voltage issues/fluctuations Current Issues with Electricity Service (3) Billing issues I think so many people apart from myself, theres been so many elderly people get so stressed out with this

extra billing and theyre suicidal half of them, you know what I mean, they just cant cope with it. I cant. Gloucester, Domestic Switching Suppliers I have just switched and there was various incentives that havent materialised and they have sent me a bill although they have taken the direct debit but wont be reading the bill for 6 months Manchester, Domestic Customer Service Power Outages Customer services, I have been mucked about on the phone. I have called before and asked to be put through to somebody else which they are supposed to do but then the line went dead London,

Domestic As long as it works it doesnt matter. For us its a basic commodity. We turn on the tap, we turn on a light. Our main concerns is when we do have a problem and our main problems are billing or outage. As long as we get communication and were told whats happening and we can speak to somebody, not speaking to a machine or something. Small Business, Gloucester Awareness of DNO Brands Current DNO profile = minimal Very low awareness of DNO brands Domestic and some business unaware of Distributor existence Minority of Business customers had experience and therefore some knowledge

Vans = prompt some awareness Potential to raise awareness and create positive associations with the DNO brands Involvement with DNOs Minority of Business sample had contact with DNOs In the Past Set up/Installation stage equipment/machinery that requires higher voltage installing transformers creating direct links to sub-stations Technical advice overloading or underpowering Now

Ongoing contact Direct links in times of outages Stronger sense of relationship Where to Find DNO Details Three key sources of DNO details Yellow Pages Emergency page at the front of the book

Power Cut or Electricity Supplier Under Electricity Look up Supplier Although aware that this may not work during Power Cuts Google/Search Engine Contact Supplier ask for details ask to be transferred Look at back of bill DNO Responsibilities (1)

Majority focus on present tense Rural and larger Small Businesses more thoughtful about future DNO Responsibilities Present Tense Future Focus Continuity of Supply Safety Maintaining the voltage Restoration of storm damage or problems

Providing advice for Business Maintain sub stations Modernise the network Plan for events Develop contingency plans Pro-active Communication Environmental Responsibilities

DNO Responsibilities (2) Yeah. But I would hope that there would be some form of strategic review going on at the power stations themselves. What sort of flood precautions have they got? Is it a couple of sand bags. Ive heard stories that you have to have a couple of sand bags and thats your strategic defences. Small Business Gloucester Yeah we had a big one during the floods. But I mean thats outside. But there again should it be? One could ask that strategically they were not geared up for even that one in 100 year event. Small Business Gloucester Maintain the equipment that is out there, and invest in the infrastructure to supply businesses, in a proper and

efficient manner. Theres always new technology coming on board, they should be putting some of that 25% back in to make that equipment more efficient. Small Business, Manchester Weve not had a power cut, or surge. Its like you were saying, Ive kind of taken it for granted. I would hope that a long time before we had this conversation that they already were thinking about this green issue. Forward thinking. They are far more aware than we are, Id hope that they would be on top of everything. Small Business, London DNO Performance Largely positive comments Customer service issues drive negative comments rather than inefficient performance (for majority) -ve +ve

Low incidence of problems Minimal disruption during bad weather React well to unforeseen events eg flooding, landslide Relentless attitude to fixing Visible investment in infrastructure Good response to queries Lack of communication (during power cuts) Lack of pro-activity Poor customer service new project set-up

Power Cuts Experience of Power Cuts Overall, low incidence of memorable Power Cuts and strong sense that things have improved over last 3-5 years Frequent Definite Minority Frequent or Infrequent Significant Cuts Occasional Majority of sample Urban and Rural Never There were quite a few of them about 20 years ago. Business Gloucester Never/Occasional Similar comments across Urban and Rural locations

There are a lot less now than there used to be. When I was a small boybut I cant remember the last we had here. We havent had one at work. Small Business, Manchester Its certainly a lot better than it used to be I believe. We dont experience them Gloucester, Small Business You cant fault the actual supply. Cardiff, Small Business Where I live in Romsey it seems to be particularly prone to power cuts, it seems to be something with the ring that Im on. Domestic, South Thats the first time Ive had one in 4 years. But I have woken up in the morning and found that the clock was flashing. Glasgow, Domestic I remember as a kid we had them all the time and we had candles. Now we dont need to have the candles. Tong, Domestic I have lived at my house for 3

years and havent had any London, Domestic Weve had minor ones but it will be minutes rather than anything really. Kent, Domestic Impact of Power Cuts (1) As with the previous study, range of emotions from mild to major across sample Inconvenient Romantic Life Threatening Frustrating For most, low experience of Power Cuts means mild frustration vs. anything stronger Impact of Power Cuts (2) Inconvenient Romantic Life Threatening

Frustrating Experience of some Businesses = more negative Higher frequency OR low frequency, significant cuts can have considerable impact Worst case 15 each year for 15 minutes or more (Tong) Sense of declining service for small minority Lack of response to problems when they arise adds to frustration What Contingency Plans Are In Place? Contingency plans variable Dependent on energy dependency and past experience

Majority here More rural locations Domestic and business Minority here Higher dependency Business Customers Causes of Power Cuts General acceptance that some issues are out of DNO control BUT low tolerance with those caused by perceived DNO inefficiencies Out of DNO Control

Act of God - Severe Weather Trees falling on cables Terrorist act Customers old equipment/ fuses Within DNO Control Problems with cables Not managing power surges etc Rationing Supplies act of God you can throw as much money as you want.its not going to stop the wind blowing a tree over. Domestic, Kent Are People More or Less Tolerant?

Greater Tolerance Strong suggestion that infrequency of power cuts and severe weather events creates higher tolerance level Less Tolerant However, broader climate of high energy prices = customers are paying a lot for a service and therefore it should work theyre making a lot of money, theyre all huge, huge companies, I dont think theres any excuses whatsoeverwhy havent they got these big generatorsthey know theyre going to have a bit of roadworks going on . Small Business, Kent Priority Action at Times of Power Cut Immediate priority is steps 1 and 2 1. Efficient restoration of supply

2. Proactive communication Manage expectations - knowing when its coming back on 3. Apology and explanation Why did this happen? 4. Reassurance What we are doing to make sure it doesnt happen again 5. Compensation Critical to communicate that everything possible is being done to rectify the problem Choices

Hypothetical choice - differences occur amongst Domestic and Business Customers Infrequent, Longer cuts Frequent, Shorter cuts Domestic customers prefer frequent, shorter cuts Inconvenience vs. anything more You can plan for 4 hours Wouldnt even notice at work/kids at school/asleep No need for pre-notification Assuming some level of prenotification

Business customers prefer infrequent, longer cuts Enables them to plan Organise staffing Tie in with shut downs Questioning caused concerns in some groups about energy rationing Is this a strategy for the management and control of dwindling energy resources? Need to provide reassurance in quantitative Voltage Issues Voltage Issues Not really a domestic issue high voltage requirements can cause problems for business customers Domestic Voltage issues fairly difficult for customers to identify Most unsure of whether theyve ever had a surge or a dip! Isolated incidence of UPS purchase to regulate voltage

Business Businesses have strategies to manage surges/dips Monitoring equipment Protectors/UPS Can be up to the limit of voltage Part of business Issue for minority e.g. hospital distressing for patients Need to consider whether this is worth including in quantitative Service Attributes Review of GSPs Environmental and Social Issues Review of GSPs

Overall Awareness of & Attitudes Towards GSPs Low awareness of specifics of GSPs but more savvy customers recognised that some form of measurement would be in place Low awareness of GSPs and detail across the sample Those with greater experience of Power Cuts vaguely recall some notification for compensation (minority) Principle of service standards welcomed Ensure that DNOs have targets Strong call for penalties if standards not met reflects lower level of tolerance In order to promote greater transparency of DNO role need to work with Suppliers to increase awareness of GSPs Principle of Compensation Mixed response to compensation principle For Compensation

Self focused Deserve compensation for poor service Resentment about high costs Teach DNOs a lesson Reduction should be automatically applied to the bill Is that an automatic payment or do you have to fill in 101 forms and wait for an answer? Gloucester, Domestic Neutral/Against Compensation Focus on bigger picture Want DNOs to learn from mistakes vs. focus on compensation Sense that personal bills will increase to pay compensation

Anti compensation culture If they are fined then they would want extra revenue and that would come from us Manchester, Domestic Amount of Compensation Significant differences in responses from Domestic and Business customers Business Domestic Even as a gesture payment, current levels are unacceptable for Business customers and create negative feelings For domestic customers responses are more varied BUT if framed in context of personal insurance and bill size then acceptable

Test alternatives for compensation for Business customers drop altogether, change to tailored system Compensation vs. Penalties General feeling that compensation across GSPs needs to be automatic this will directly benefit the customer and act as a penalty to DNOs GSP wording currently lacks clarity about compensation/penalties Unclear that DNOs are penalised if standards are not met and incentivised when they are met Current interpretation is that the onus is on the customer to claim and if not then DNOs are in the clear Customers need to understand that DNOs will be fined for poor performance and therefore have a deterrent

BUT also to communicate the form these fines take as there is currently a misconception that it is monetary fines to Ofgem, and a distrust in the regulation system as a result GS2: Restoration of Supply (Normal Weather) Should this be covered? Specific Detail Compensatio n Yes most important aspect

- Strong rejection of 18 hours Much too long No justification for 18 hour length Sophisticated equipment = find faults easily Lacks sense of urgency Low tolerance in these circumstances Expect DNOs to have contingency plans in place 6 hours = optimum Test: 4-18 hours 3 month time limit = prohibitive Initial 50 for domestic OK Then concern that lesser payment for extra 12 hours 100 for Business customers rejected Insulting/laughable Test: 50 initial, then 50 for every 12 hours, proportion of bill, individual contracts GS2: Need clear definition of normal weather, test reduced lengths of time and frame compensation within context of gesture payment

GS11: Restoration of Supply (Severe Weather) Should this be covered? Specific Detail Compensatio n Yes most important aspect 24 hours = acceptable Feels quite short in examples given eg flooding, Boscastle Especially compared to GS2 18 hours Far greater tolerance in these circumstances Lightening feels shorter term/less severe DNOs should prepare for severe weather scenarios 24 hours = optimum Test: 12-48 hours 25 feels extremely low 200 maximum = ok for domestic Business issues as before GS11: Show pictures of various types of severe weather with

explanations, test longer times to create differentiation between normal and severe GS2A: Multiple Interruptions Should this be covered? Yes Provides cover against frequent Power Cuts Specific Detail 3 hours/4 times a year OK for domestic customers who favour shorter, frequent cuts Frustrating and disruptive for business customers Can take time to process as they are not experiencing multiple interruptions Should be in any 12 month period - why April-April? Provide reasons why frequent Power Cuts may occur Compensatio n Need to say 50 per year

Low for domestic and business customers Ongoing problems require greater compensation increased frustration GS2A: More explanation would be helpful, test compensation issues GS4: Notice of Planned Interruption Should this be covered? Specific Detail Compensatio n Yes important to provide advice where possible for maintenance General consensus is 2 days is not long enough DNOs must know in advance so provide as much notice as possible Via Letter through the door Businesses request 2 weeks Changing date = extremely frustrating Poor business planning

May make alternative arrangements What would be reason for this change? Test: 2 days, 7 days, 14 days Why only 1 month time limit? Helpful if standards are consistent Amount of compensation seems v. low Avoidable situation so compensation should be higher GS4: Test new timeframe, test higher compensation levels GS8: Making and Keeping Appointments Should this be covered? Specific Detail Compensatio n Yes

Split between Domestic and Business Positive response to 2 hour time band from Domestic customers Better than other service industries say am or pm Business customers expect a dedicated appointment slot Big frustration when appointments not kept Would require an explanation Test: appointment, 2 hours, am/pm 20 feels low for Domestic and Business Domestic customers take day off work so require better compensation Business customers reject 20 GS8: Test alternative timings for business customers, test higher compensation levels Is There Anything Missing? Cross matching the GS against spontaneous DNO responsibilities highlights importance of modernisation/investment of network, environmental issues and development of disaster plans Present Tense Future Focus

Continuity of Supply Safety Maintaining the voltage Restoration of storm damage or problems Providing advice for Business Maintain sub stations

Modernise the network Plan for events Develop contingency plans Pro-active Communication Environmental Responsibilities Environmental and Social Issues The Environment Hot topic expect DNOs have strategies in place People know Green is an issue Majority of Domestic customers and Business

customers claim they are doing something Changing machinery Investing in standby equipment Turning lights off Turning off standby Recycling Whilst they see this as important for DNOs, limited WTP to support this Rotate WTP questions in quant so environment not always last The $15 million question.. In the event of a Power Cut, would you rather be back on immediately using a generator or wait for a while and be greener Everyone recognises they ought to say yes

BUT personal/business strategies in place to offset carbon So give me the Generator Because I run a business, sorry I dont run a green society, I run a business that employs lots of people and makes money. Large Business, London Give me the generator Manchester, Domestic Generator all the way London, Domestic Id go for the generator as well. My Small Business isthe main thing I want it on for the Small Business. Home is important obviously with the Small Business is important. Cardiff Small Business Views On Undergrounding Broad consensus that replacing existing infrastructure with Underground cables is sensible Benefits Concerns Improvements in safety (hidden stops cancer)

Prevents problems eg cutting through cables Reduce maintenance My Aunty lives right under a pylon, in the middle of the country, in the Yorkshire Dales, you can hear the electricity, the crackling. I dont want to live anywhere near one of those. Small Business, Manchester Cost Short term disruption

Ongoing maintenance Would that cause our bills to go up? If it would then no I dont I can live with that eyesore if it means electricity stays cheap. Cardiff, Domestic But its not felt to be a priority WTP for Undergrounding In previous research people told us that they would be willing to pay an additional 20p per annum for every 1% of existing overhead cable that was put underground in national parks and other places of outstanding natural beauty 20p is not considered a lot of money Feels a reasonable contribution BUT only 1% of cable customers feel it will take forever to achieve For the quantitative, consider expressing in monthly terms consistent with others and more understandable Cross Subsidisation - Urban Argument As with previous study, majority of Urban customers adopt

fairly selfish attitude to cross subs We dont care if the railway system in Scotland is down as long as the London transport system is running and if we have to pay more for that then i want it to go on to London transport London, Domestic Selfishly I wouldnt give a damn,, I dont think I would enjoy paying for other peoples pleasures in rural areas. London Large Business Willingness to Pay Overall on WTP Noticeable shift since previous research with strong barriers to increased bills -ve Barriers +ve Barriers No need

Electricity supply = fine Have back-up plans in place Why would we pay more for something that is acceptable? If you were talking 15 or 20 years ago then maybe but we have moved on and things should have been updated so it doesnt happen as often Tong, Small Business Lack of trust in industry too many layers

Unsure of where the money would go Energy costs are too high anyway Investment from DNO profits Everything gets put on the Customer Need for supplier contribution They are making a lot of money and I dont want to have to pay a penny more otherwise they will

be milking me and they already make millions and millions Domestic, London Scale of WTP Rejection of WTP is based on principle rather than / % amount Once pushed, some acceptance at amounts tested 4% not out of the question for Business customers 4% 5 3% 2.00 2% 0.50p 1.00 for Domestic customers

0 Business levels feel ok for quantitative but domestic ceiling = 3 pm Prices need to be tested in the context of persuasive arguments Arguments for WTP Some Business customers who consider loss of power in terms of loss of can be persuaded Guarantee that money will be spent in their areas Highly visible investment in infrastructure Investment in Underground Cabling No alternative - Non investment = meltdown in 10 years time

Moving to rural areas Experience of increased or significantly long power cuts More severe weather forecasts Cost increase is lower than potential loss of productivity Increased dependency Raised DNO profile may support acceptance of WTP via sense of understanding and worth Minimum Expected Service Requirements Customer Service hopefully = last resort. Secondary to core business focus of investment in networks

Freephone number UK Call Centre Personal OR Up to date Recorded message Length of time getting through 5 rings Not being passed around Efficient resolution of problem Information is accurate

Staff are polite, well informed and willing to help Proactive call backs if power is not restored within dedicated times (Higher dependency customers) Text update (Domestic customers) Conclusions and Way Forward Qualitative Summary In general, incidence of Power Cuts/Voltage Issues infrequent and service = very good across sample types Minimal differences in urban/rural satisfaction Higher dependency businesses = more specialist issues Awareness of DNOs limited and opportunity to increase profile

Provide consumer confidence in network investment Longer term may support greater WTP Awareness of GSPs limited but principle of standards is important Scope to amend detail on some Potential to include new incentives on future investment in infrastructure, environmental targets and communication guidelines Compensation creates negativity amongst Business customers thus need to review compensation and penalty system Stronger qualitative barriers to WTP than previous study Sceptical about efficiency of spending Question the need efficient service already Way Forward Final qual report by 3 December

Draft questionnaire by 21 December Pilot conducted by 18 January Main stage conducted by 21 March Final project report by 16 May

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