How the drive for higher JD Power scores can hurt energy efficiency
Background on JD Power Score
The trend for the past several years across the utility sector is a drive to increase JD Power scores. As a result, national scores have increased and are now at their highest rating in eight years. Most of this increase in scoring comes from better communications, corporate citizenship, and price, all of which are good for the utility customer.
Even though most utilities are not competing for customers, they do tend to compete with each other on peer rankings amongst each other. The JD Power rating, now in its 17th year benchmarking utilities on customer satisfaction, has received the lion’s share of attention from utility executives looking to improve performance. All of these trends are good for utility customers; however, we may be at the beginning of diminishing returns in the effort to achieve higher JD Power scores.
Utilities look at JD power scores and view the results in the context of:
- The absolute score and change from previous year
- The quartile rank within utilities within their category
- The absolute rank with utilities with their category
JD Power ranks 102 utilities, scores them, and then groups them into 4 regional groups and two size groups (8 total groups). Each group has between 8-16 utilities that are compared to each other. Since the industry has been getting better across the board, using the absolute scoring change from year to year doesn’t provide enough fuel to drive improved performance. That’s where the quartile rank and the absolute rank come into play and where there can be some problems with “managing to the rank.”
Because utilities’ scores are at their highest performance in eight years, the scoring gap between the top performing utilities and the lower ranked utilities has narrowed considerably. The performance gaps among the first and fourth quartile for utilities in the “Large Segments” ranged between 37 points in the South to 22 points in the Midwest (on a 1000 point scale). Specifically in the Midwest, a utility ranked 12th out of 14 utilities could jump up to 5th with a mere 12 point increase in score. With performance grouped in such a narrow range, randomness becomes the real driver of rank rather than any substantial difference in performance.
Striving for incremental points
Since a couple of points can enable a utility to get ahead of several others in the rankings, utilities are looking beyond reliability, communications, and price to drive their score. Utilities have focused intently on these areas for years, so any movement in these areas is largely outside of their control: weather, bad press, and supply pricing issues.
Within a utility’s control is how they manage their energy efficiency programs. Since finding areas to improve on the JD Power score is getting tougher, many utilities are moving their focus to energy efficiency programs to see if they can add a few points to their scores. Energy efficiency programs can raise utilities’ JD Power score in the corporate citizenship category of the survey. In this section there are key questions related to energy efficiency programs that JD Power asks customers about…
“the variety of energy efficiency programs offered”
“the familiarity with energy efficiency or conservation programs”
“efforts to help you manage your monthly usage”
“actions to take care of the environment”
Some utilities have really latched on to these specific questions and have begun to shape energy efficiency programs in ways that sometimes don’t improve the performance of the programs, but might help with their scores. Here are just a few examples…
Shifting EE spend to the small business and residential markets
If bigger is better, then smaller is worse. Finding savings in customers that don’t use much energy to begin with is much more difficult and costs more than finding savings with bigger consumers. The level of importance, awareness, education, and wiliness to invest are all lower with smaller customer. Technology, data analytics, and solid program design have helped to close this gap, but there is undoubtedly a gap still exists.
Increasing awareness through advertising programs
Awareness of energy efficiency programs is an issue. Utility programs want awareness not only for increased JD Power scores, but also to raise the attribution rate of the customers performing energy efficiency projects with the program. In other words, the utility wants to increase the influence of the energy efficiency program on a customer’s actions or “net to gross” score.
With all the non-utility companies trying to improve their image of global stewardship, it’s tough for a customer to separate the utility’s message that “we have efficiency programs” from the messages that GE, BP, IBM, Home Depot, and Proctor & Gamble put out in regards to their green / sustainability / saving energy activities and products. These companies compete on a national or global scale and have the best and brightest minds from the marketing and advertising space working for them, so it is inevitable that a utility’s message will get lost.
With all these players in the efficiency / sustainability space, awareness of energy efficiency has increased. This has created momentum for customers and, in turn, changed the business models of smaller companies and service industries looking to capitalize on the trend. Energy efficiency is not a controversial topic as a stand-alone subject. However, how it should be funded and whether a utility should be involved in the solution is a subject for debate. And it is difficult to determine if a utility’s advertising messages actually made a difference in their score.
Highlighting the utility’s involvement with EE programs
As noted above, there are many individuals, companies, organizations, and industries working to advance energy efficiency in the world. There has been a ton of progress over the past decade and there should be enough achievement to be shared by all the market actors. When energy efficiency takes place, who get the credit? Is it the customer who decided to take action, the contractor that installed the system, the government that drove codes and equipment specifications, the marketing folks that created awareness, or the utility that funded a portion of the costs? If a utility’s JD Power score is partially tied to involvement or awareness of programs, it can drive some counterproductive practices. Here are just a few examples…
- Having policies requiring incentive checks to only be able to be sent to the customer (vs. the contractor) so that “The customer knows where the check is coming from.”
- Requiring a customer to agree to language in the incentive application form stating that “The incentive was crucial to the applicant installing this energy efficiency measure.”
- Requiring application paperwork (sometimes before and after) for all measures when a buy-down process either at the manufacturer, distributor, or retailer would achieve greater participation.
Depending on your perspective, these trends may not necessarily be a bad thing. Focusing on smaller customers, raising awareness, and highlighting the utilities’ role are all worthy pursuits. However, these trends come at a cost and not all objectives can be equally attained. With increased focus on the JD Power score, maximizing energy efficiency and achieving high levels of cost effectiveness could suffer. As with everything, there are always trade offs and shifting priorities.
Steve Baab: Steve works at DNV GL as the Service Line Leader for Program Development and Implementation. Steve works to bring best practices and innovative program ideas to DNV GL clients. Before coming to DNV GL, Steve was the ComEd C&I portfolio manager where he led the Smart Ideas program from initial launch in 2008 to a program that offers a wide spectrum of customer solutions in both energy systems and market segments.