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As Price Gap Closes in Deregulated States, Customers Resist Changing Energy Providers

August 12, 2016 By Cheryl Kaften

With the price/value gap narrowing between retail electric providers and regulated public utilities in deregulated states, fewer residential customers are switching providers, according to the J.D. Power 2016 Retail Electric Provider Residential Customer Satisfaction Study, released on August 10.

In the nine states – Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, and Texas –included in the study, half of delighted customers (overall satisfaction scores of 900 or higher) said they “definitely will not” switch providers.

That’s no surprise. But here’s the kicker: Fully 37 percent of pleased customers (750-899) and 25 percent of indifferent customers (550-749) say the same.

Indeed, indifferent customers indicate they would consider switching for a cost savings of just $30 a month, and pleased customers cite a threshold of $35 a month. Delighted customers are most resistant to switching, citing a level of $46 a month to consider switching.

“Historically, the key differentiator between retail electric providers and regulated providers has been price, but that price gap has shrunk [sic],” said Andrew Heath, senior director of the Utility & Infrastructure practice at J.D. Power. “So, despite the best efforts of those providers to persuade customers to switch, they’ve been unsuccessful because customers don’t feel incentivized to do so.”

The study also shows that, in the past 12 months, customers have been shopping less often. In Texas, only 16 percent signed up with a new provider (versus 18 percent in 2015); and only 41 percent renewed their service (in comparison to 44 percent a year earlier). In the other states, only 20 percent signed up with a new provider (compared to 23 percent in 2015) and just 25 percent renewed their service (versus. 27 percent).

Nonetheless, overall satisfaction with retail electric providers in Texas is 730, an increase of 15 points from 715 in 2015. Overall satisfaction in the other eight states averages 646, an improvement of 14 points from 632 in 2015. While Texas achieves the highest score overall, New York (680) performs highest among the other eight states.

The study measures retail electric providers in competitive markets by examining satisfaction among residential customers of the 91 ranked providers in nine states across five key factors: price; communications; corporate citizenship; enrollment/renewal; and customer service. An additional factor, billing and payment, was taken into account in Texas. Satisfaction is calculated in a 1,000-point scale.

To see the highest ranking retailers by state, click here.

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