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Energy Deregulation Still a Mystery to Many Customers

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 &amp 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 1996.)

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 survey.

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.

Susan Parker

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