Energy Deregulation Still a Mystery to Many Customers
Although the public's overall awareness of energy deregulation
has inched up over the past three years, a majority of residential
and business customers surveyed say they still know next to nothing
about the issue and its potential effect on them, according to the
results of two major surveys issued last week.
Six out of ten residential energy customers on average still are
basically in the dark on the subjects of electricity and natural
gas deregulation, revealed an annual study by Yankee Energy System,
parent of Yankee Gas Services of Meriden, CT. Despite the poor
showing, it found that residential customers' awareness has grown
since 1996, when about eight in ten were unfamiliar with the topic.
The low level of residential awareness is due to the fact that
"consumers only become aware of deregulation issues when they are
being directly affected by them in their own state," said Yankee
Energy Chairman Branko Terzic at a press briefing in Washington
D.C. "This is because all utility prices are local - consumers
don't care about prices in other states. It's almost irrelevant to
them, like the differences in prices of houses from state to
state." He noted that residential awareness is highest in the
West (53%) and Northeast (50.8%) due to greater customer-choice
activity by the states and imore merger activity.
At the same time, a national survey by RKS Research &
Consulting in North Salem, NY, found that only 31% of the
medium-sized businesses polled reported receiving information on
electricity deregulation, and half had not heard of major national
marketers such as Enron, Duke Energy or Southern Company. "From
this data, it's clear that mid-sized U.S. businesses have only a
blurry view of the realities of energy competition," said RKS
President David J. Reichman. But larger regional businesses (with
multiple sites) are faring better. More than half (59%) have
received deregulation information from their current suppliers, and
44% already have done business with a major energy marketing
company, the survey noted.
The Yankee Energy study, which polled about 1,000 residential
customers across the United States, focused on both electricity and
natural gas deregulation. Of those surveyed, it found that only
38.1% in 1998 were aware of deregulation, compared to 22.9% in
1996. In contrast, the RKS Research survey, which culled responses
from 692 mid-sized business and 400 larger regional businesses,
concentrated solely on electricity restructuring.
Overall, the Yankee Energy survey found that a majority of
residential customers (about 60%) either don't believe there will
be any benefits or don't know if there will be any benefits as a
result of electric and gas deregulation. Benefits could include
lower rates, increased service, more competition or other. On a
positive note, however, fewer people this year think that electric
rates will increase with the onslaught of competition (38.1% in
1998 compared with 50.6% in 1996), and a greater number believe
that electric rates will drop (46% this year compared to 37.8% in
As for the effect of deregulation on gas rates, residential
customers were almost evenly split that rates either would increase
(37.2%) or decrease (38.4%). The percentage of respondents who
think gas rates will increase under competition has dropped
significantly since 1996, from 48.9% to 37.2%, according to the
Still, the majority of residential consumers (52%) don't think
that they'll benefit from gas deregulation. The Yankee Energy study
pointed out, however, that only about half of these customers have
natural gas available to them or use gas for heating their homes.
Approximately 32% said they expected to see benefits from gas
deregulation, while 16% said they didn't know.
Not surprisingly, residential users cited rates as their biggest
concern in deregulated electricity and natural gas industries. But
Yankee Energy's Terzic doesn't think residential rate savings
should be the yardstick by which the success of competition is
judged. He said he believes it's important to introduce competition
into both the gas and electricity markets, even if the immediate
result isn't low rates.
"I'm afraid that some stakeholders [have] sold the notion that
[the] only time that society benefits from electric restructuring
or gas restructuring is if there's an immediate huge residential
saving. I don't think that's necessarily true," he told reporters.
"If the only benefits are improvements in industrial rates [that
make] our economy more competitive, that's a good thing by itself,
assuming you don't raise residential rates."
Those trying to tie the success of energy deregulation to
short-run rate decreases for residential customers could wind up
being disappointed, Terzic noted. "If we're going to be advancing
the notion that restructuring of the electric and gas industry is
only done for the immediate [rate relief of the] residential
ratepayer," residentials will look at their meager savings and say
"it's not worth the hassle" to switch.