ACSI Commentary April 2012
April 17, 2012
Commentary on Ambulatory Care, Cooperative Utilities, Hospitals, Investor-Owned Utilities, and Municipal Utilities
Customer Satisfaction with Energy Utilities Surges to 18-Year High
Customer satisfaction with utilities that provide electric and natural gas service improves for a sixth straight year, rising 2.7% to an ACSI score of 76.7, the highest level since measurement began in 1994. Multiple factors contribute to the largest year-on-year gain for energy utilities in a decade—the growing supply of natural gas has led to lower prices and a mild winter throughout much of the country has reduced energy usage, resulting in lower utilities bills.
Natural gas remains the major contributor to the overall gain in customer satisfaction for energy utilities. While household satisfaction with electric service is flat at an ACSI score of 75, satisfaction with natural gas service improves for a fourth year in a row, gaining 1% to 81. Lower natural gas prices for most households coupled with better service reliability—storms do not typically cause natural gas outages—makes natural gas in many ways a superior energy source.
Smaller rural cooperative utilities continue to post the highest score among the three categories (cooperative, investor-owned, municipal) despite a modest 1.2% dip to an ACSI score of 81. The much larger categories of investor-owned utilities (+2.7%) and public municipal utilities (+4.1%) are tied at 76. While both categories stay well below co-ops, strong gains in 2012 have reduced the gap somewhat.
Among the co-ops, Touchstone Energy Cooperatives—an alliance representing around 700 local electric cooperatives—falls 2% to 81, but remains among the top quartile of all energy service providers. The aggregate of all other co-ops moves in the opposite direction, gaining 4% to lead the category at 83.
The Salt River Project (SRP) stays the highest-scoring municipal utility, despite a slight drop of 1% to an ACSI score of 81. Unlike the cooperative category, there are large customer satisfaction differences among the major municipal utilities. CPS Energy is unchanged at 79 and follows closely behind SRP, but then there is a drop-off to the next-highest utility. The Los Angeles Department of Water & Power (LADWP), the largest municipal-owned utility in the country, gains 5% to a score of 69. Falling even further behind is the Long Island Power Authority (LIPA), which plunges 11% to 58, the lowest score among all utilities. LIPA’s territory was slammed hard by Hurricane Irene last August and many outages lasted more than a week.
Customer satisfaction for investor-owned utilities is also mixed, ranging from a high ACSI score of 83 for both natural-gas provider Atmos Energy and gas-and-electric provider Sempra Energy to a low of 59 for Northeast Utilities. There is a good deal of volatility as well, including the ACSI plunge for Northeast. Natural gas anchors the top of the category, with Atmos and Sempra followed closely by gas provider CenterPoint Energy at 82—all three utilities experience 2% gains from a year ago. Good weather and better service reliability boost Southern Company and NiSource into a tie at 81 (up 5% and 7%, respectively). Other utilities that perform well above average include PPL (+1%), NextEra (+3%), and Dominion Resources (+4%), all at 80.
Other gainers include American Electric Power and Ameren, both of which improve 10% to 79 and 78, respectively. Ameren’s gain comes despite the utility’s ongoing annual rate increases, but many Ameren households can avoid paying Ameren’s rates if their municipality contracts with alternative electricity suppliers. By contrast, Exelon falls 4% to 70, joining Northeast Utilities as the only significant decliners among the investor-owned utilities. Higher rates, coupled with power outages that exposed service deficiencies for Exelon’s Chicago-based Commonwealth Edison utility, contributed to the decline. Another rate hike appears to be in the making—not usually good for bolstering customer satisfaction—but legislation approving the increase stipulates that ComEd must invest to storm-proof its electric grid in order to improve service reliability.
At the bottom of the investor-owned category, two utilities are heading in opposite directions. A year ago, Pepco Holdings had one of the biggest single-year ACSI drops ever recorded—not only for a utility, but for any company in the Index. The utility’s score plummeted 23% to an industry low of 54. Frequent and lengthy outages pointed to many problems within Pepco’s transmission system and created a firestorm of criticism. In response, the utility made substantial improvements to its power grids and was able to restore power quickly in the wake of Hurricane Irene in August 2011. Generally mild weather throughout the past twelve months helped as well. Pepco Holdings gains 28% to 69, almost wiping out last year’s major downturn.
This year, Northeast Utilities duplicates the precipitous decline of Pepco Holdings, plunging 21% to a category-low score of 59. In addition to outages caused by Hurricane Irene in August and an unusual outbreak of tornadoes in June, the New England area was hit by a massive snowstorm in late October. Most of the foliage was still on the trees, causing extra weight and leading to more downed power lines than might have occurred had the same magnitude storm hit in January or February. Outages lasted up to two weeks in some cases, and the backlash over delays in power restoration ultimately led to the resignation of the CEO of Northeast’s subsidiary Connecticut Light & Power. It remains to be seen whether Northeast Utilities can rebound as quickly as Pepco Holdings, or if higher customer satisfaction will take years in the making, as it did when Ameren experienced a similar decline in 2007.
Health Care & Social Assistance
Customer satisfaction with the health care sector is essentially flat, improving a mere 0.1% to an ACSI score of 78.5. Still, despite the high cost of care, customer satisfaction with these services exceeds the national average for all sectors and industries by a significant margin (75.8 as of the fourth quarter of 2011). Among the different types of services measured, the category known as ambulatory care (which includes office visits to doctors, dentists, and optometrists) continues to offer a much more gratifying experience than overall hospital care. The ACSI score for ambulatory care improves by 1.3% to 81, while patient satisfaction with hospitals dips 1.3% to 76.
If patient satisfaction with hospitals were solely a function of inpatient services (ACSI score of 81) and outpatient services (score of 79), the hospital category’s patient satisfaction would be statistically similar to that of ambulatory care. Emergency room (ER) services score much lower at 66 (down from 72 in 2011), which depresses overall patient satisfaction for hospitals. Long wait times (on average more than 4 hours nationally) are the main culprit, but also represent an opportunity for hospitals to improve. Many hospitals, for example, now publish their average ER wait times and set performance goals around reducing the average.