Utilities Intelligence Report
December 2023
The nation’s electric, gas and water utilities are headed for a referendum on price, reliability, and sustainability in 2024. As we come out of a year that saw record-high prices and record-high demand, there are currently 63 electric and 52 gas rate cases pending in 37 states and the District of Columbia[1]. Meanwhile, as tensions continue to escalate around utility safety and the timetable for transition to more sustainable energy sources, all eyes are turning to utilities to see how they will navigate this volatile period and what changes they will need to make along the way.
JD Power has been tracking consumer sentiment with all aspects of utility service and delivery for the last two decades, evaluating everything from customer satisfaction with the price, reliability, and service of local utilities to opinions on sustainability and clean-air initiatives. Based on those accumulated insights, below are JD Power’s predictions for the biggest trends to watch in the year ahead.
Electric Utilities Face Consumer Backlash on Rates
Customer satisfaction with electric utilities has been trending down for the past two years as average prices rose 14.3% in 2022 and 27% through the first half of 2023. Now, as many of those same electric utilities are pursuing rate cases that add up to a combined $23.7 billion in increases nationwide, many consumers are reaching a breaking point.
That’s going to create a ripple effect of challenges for electric utilities. In fact, when tracking the correlation between utility customer satisfaction and utility profitability, JD Power has consistently found that utilities with higher overall satisfaction scores are far more likely to receive rate increases that are closer to their actual request than those with low satisfaction scores. Conversely, lower levels of customer satisfaction correlate to lower returns and lower rate case approvals. Utilities in the bottom quartile of customer satisfaction scores typically receive an approval rate that is between $2 million and $8 million lower than utilities in upper quartiles.
Utilities need to get out in front of this issue. While there’s little they can do about the costs they are incurring, there are things they can do to offset the negative sentiment their customers are feeling by ramping up communications, delivering more personalized service and making sure customers are aware of infrastructure improvements. Right now, that’s not happening at most utilities.
Uneven EV Adoption to Define Utility Leaders and Laggards
Nationwide, total electric vehicle (EV) market share is now at 9% as growing numbers of consumers transition away from gas-powered vehicles. At the state level, however, a stark division is emerging between the top 10 states for EV adoption, where EV adoption rates are growing steadily, and the bottom 10 states for EV adoption, where year-over-year average adoption rates are declining. This division line is creating a very different dynamic for electric utilities in different states, with some quickly emerging as EV pioneers and others being cast as the old guard.
While many electric utilities have been sitting on the sidelines of the EV evolution, some leaders have positioned themselves as EV advocates. Recognizing their critical role in delivering the infrastructure to support EV transformation and the huge potential upside that could come from widespread EV adoption, utilities such as Xcel Energy in Minneapolis and Colorado, PG&E in San Francisco and Austin Energy in Texas have launched aggressive community outreach programs that are making headway. Events like EV ride and drives and efforts to educate consumers on incentives and infrastructure improvements are helping utilities step out of the shadows and take a more active role in leading the EV transition.
Gas Confronts its Own Mortality
Despite threats to ban gas stoves and looming questions about the future of natural gas, consumers still like gas. In fact, according to JD Power data, 50% of gas utility customers have a fuel preference for natural gas in their homes, with 77% relying on natural gas for heat and 59% using it to cook.
However, with the average gas bill in America up 37% through June 2023 and price satisfaction down 49 points (on a 1,000-point scale) from a year ago, that consumer preference might not be there forever.
Gas utilities are confronting a difficult scenario in which several outside forces are conspiring against them, and most are doing very little to combat that with proactive communication, active community outreach and widespread visibility as a source of comfort and safety. Gas utilities have some major image work to do and that all starts with customer communication. Will this be the year they get on the right track? Time will tell, but so far, the outlook is not terribly promising.
Utilities Find Religion in Branding
The common bond in all of the challenges that utilities face, from high prices to concerns about sustainability, is that they can all be addressed with proactive communications efforts. In fact, in the inaugural JD Power Utility Brand Appeal Index (BAI) Study, we found that utilities with the highest brand appeal scores have average overall satisfaction scores that are more than 300 points higher than those with weak brand appeal scores. The utilities with the strongest scores rank in the top quartile in customer satisfaction and enjoy greater loyalty and advocacy. These brands also outperform on customer trust, marketing execution and company reputation metrics.
The concept of branding in the consumer-packaged goods sense of the term is a relatively foreign concept for many utilities that grew up in an era where reliable gas or electric delivery were the only priorities on the corporate mission statement. Now, as consumers increasingly look to utilities for guidance on everything from public safety to energy transition, these brands are facing an enormous opportunity to level-up their customer touchpoints and experiences to earn a premium brand value in the process.
Utilities Finally Embrace Digital
To say utilities have lagged on digital adoption is like saying it took a while for the Chicago Cubs to win their third World Series. As recently as this year, 30% of the largest utilities in the nation still did not offer a mobile app. However, as the number of customers who have signed up for an online account is now up to 71% and the number of customers signed up to receive an e-bill climbing to 62%, utilities are finally starting to realize that digital is where their customers live. This could be the year they seize that opportunity to up their digital games.
Pressure Builds on Water Utilities
Local water authorities throughout the nation have been under enormous pressure to remediate any trace of lead and copper from public water supplies as they’ve raced to comply with the Environmental Protection Agency’s (EPA) Lead and Copper Rule. The rule, which needed to be implemented between December 2021 and October 2024, introduced strict requirements for corrosion control treatment, source water treatment, lead service line inventory, lead service line replacement, public notice, monitoring for lead in schools and childcare facilities, and public education. In many cases, that meant literally going door-to-door to root out old infrastructure and test water samples.
Now, water authorities will be under pressure to deliver on the promise of clean water. One key litmus test for success will be whether customers will drink it. According to JD Power data, roughly 21% of residential water utility customers say they never drink their household tap water. However, customer satisfaction levels are significantly higher among the 36% of customers who do drink their water all the time. The proof of how well water utilities are delivering clean water and communicating that to their customers will reveal itself in the trajectory of this metric during the course of the year.
Find out More
This Utilities Intelligence Report is based on data and insights gathered across all JD Power Utilities Intelligence studies conducted over the course of 2023. It was authored by Andrew Heath, managing director; John Hazen, managing director; Chris Oberle, managing director; Adrian Chung, director; Mark Spalinger, director; Ramah Vaughn, director of Utilities Intelligence at JD Power.
Please contact us at the numbers below to connect with the team or to learn more about the underlying research.
Media Contacts
Brian Jaklitsch; East Coast; 631-584-2200; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]
[1] S&P Global Market Intelligence https://www.spglobal.com/marketintelligence/en/news-insights/research/us-energy-utilities-seek-almost-24b-in-pending-rate-cases