Having navigated a difficult period that included the August 2003 blackout, energy companies maintained a stable customer satisfaction rating, while “clear signs of deterioration” were found in electric utilities’ reputations among industry leaders and analysts, according to two separate studies released last week.

Southern Co. retained its top position among electric utilities, while PPL Corp. led natural gas and electric utilities in the latest American Customer Satisfaction Index (ACSI) review. Southern scored of 81 out of 100, while PPL scored 79.

In the second survey measuring “reputation,” and based on whether respondents would invest in the electric utilities, only two, FPL Group and Southern Co. received the highest “AA” rating. That study reported declines in the ratings for seven companies and increases for four others.

The ACSI survey, which has been conducted among customers annually since 1994, found that overall, the utilities’ score has not changed much over the years. The overall industry score was 72, down 1% from 2003. However, the “stability in the aggregate masks large changes among individual utilities.” Also, the range from high to low is substantial, said Claes Fornell, director of the National Quality Research Center at the University of Michigan Business School.

“The industry has faced several difficulties recently,” said Fornell. “The August 2003 blackout called into question the reliability of services and may have contributed to some degree of distrust about industry competence and dependability. Increases in oil prices have led to higher utility bills for consumers, which does not help their satisfaction. Yet, there are utilities that have improved customer satisfaction.”

Within the survey, KeySpan, FPL and Progress Energy “have all done better this year,” improving by 4% each, Fornell said. “FPL may have been able to shield its customers from some of the price hikes by generating a significant portion of its energy through solar power and wind generators. Progress Energy has improved quality of service and consumers have not perceived that price has increased relative to service.”

However, customer satisfaction scores for several utilities fell year-over-year. “Among the largest are FirstEnergy and CMS Energy (down 9%),” said Fornell. “FirstEnergy serves 4.4 million households in Ohio, Pennsylvania and New Jersey. It has falling scores for quality as well as value. The company was given a good deal of blame for the 2003 blackout. CMS serves 1.7 million customers in Michigan. As recently as last year, it was one of the leading utilities in ACSI, but seems to suffer from large price increases, as perceived by its customers.”

With 100 being the highest customer satisfaction, the ACSI survey of electric utilities showed Duke Energy Corp. scored 78; FPL, 76; American Electric Power, 75; Entergy, 73; Edison International, 71; FirstEnergy, 69; and Reliant Resources Inc., 68. Among gas and electric utilities, Progress Energy scored 78; Sempra Energy, 77; Allegheny Energy, 75; Ameren Corp., 74; Cinergy and TXU Corp., 74; Public Service Enterprise Group Inc., 73; Pepco, 72; CMS Energy, DTE Energy, Exelon, 71; Energy East Corp. and Xcel Energy Inc., 70; National Grid Transco plc, 69; Consolidated Edison Inc., NiSource Inc., Northeast Utilities, 68; Dominion Resources, 67; and PG&E, 68.

Fornell said the ACSI survey has continued an upward trend throughout all sectors, and is now at its highest level since measurement began. “Even though there are many areas that could stand further improvements in quality and service, customer satisfaction has benefited from a confluence of factors. Among them is the fact that many companies have been forced to try harder to please customers in order to generate more revenue.”

However, analysts at Rating Research LLC (RRC), a reputation rating agency, found some things to be not as rosy. Citing the fallout from high-profile financial restatements, project cancellations, the blackout of 2003 and increased skepticism over utility senior management, the reputation strength of the U.S. electric power industry has shown “clear signs of deterioration” over the last two years, RRC said.

RRC said its assessment of the industry and its Reputation Strength Ratings (RSR) are based on in-depth interviews recently conducted with more than 350 senior industry executives and financial analysts that follow the industry. Once this year’s study was complete, its results were assessed in comparison with a similar baseline survey completed in 2002.

As a result, RRC said Wednesday that it has lowered its Reputation Strength Ratings on seven utilities: Duke Energy Corp. (to A from AA), TXU Corp. (to BBB from A), Exelon Corp. (to BBB from A), Edison International (to BB from BBB), Public Service Enterprise Group Inc. (to BB from BBB), Xcel Energy Inc. (to BB from A) and Consolidated Edison Inc. (to BB from BBB).

RRC says that its average RSRs on the industry have remained generally stable overall at the medium-quality BBB rating level. However, a number of downgrades has pushed the industry average down to mid-BBB, from a high-BBB level following RRC’s 2002 study.

As part of the reason for the deterioration finding, RRC Rating Committee Chairperson Dory Gasorek cited “the overall decline in respondents’ assessments that they would be willing to invest in electric utilities or support them in times of controversy.” However, the analyst noted that “this year’s study points clearly to the increasing importance of CEO leadership as a driving factor underpinning a utility’s perception as an excellent company.”

Despite the industry turbulence over the last two years, RRC reported that four well-positioned companies have shown significant improvement in reputation strength. In conjunction with that finding, RRC upgraded its ratings on FPL Group Inc. (to AA from A), Dominion Resources Inc. (to A from BBB), PPL Corp. (BBB from BB), and PG&E Corp. (to BB from CCC).

The company said that RSRs on six electric power companies have remained stable. They are Southern Co. (AA), Progress Energy Inc. (A), American Electric Power Inc. (A), Entergy Corp. (BBB), FirstEnergy Corp. (B), and CMS Energy Corp. (B). In addition, RRC said it has placed an RSR rating of BBB on Calpine Corp.

RRC, a joint venture between The Ratrix Group and Opinion Research Corporation (NASDAQ), assigns Reputation Strength Ratings to leading companies and publishes those rating opinions as a public service. For more information, visit RRC’s website at www.ratingresearch.com.

To review the entire ACSI survey, visit the web site at www.theacsi.org.

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