Commercial and Industrial Customers in the US Deregulated Electricity Market
Summary of Findings
Frost & Sullivan research indicates that customers seem unaware about the difference between a competitive electricity retailer versus a distribution utility. An overwhelming majority of respondents stated that they negotiate directly with a distribution utility versus a competitive retailer, whereas the companies listed were in fact competitive electricity retailers.
oThis might indicate indifference about deregulation, lack of customer awareness, or poor communication from market participants in these regions.
Customers in general are concerned about future cost of electricity, while power reliability does not seem to be a major issue.
Frost & Sullivan research shows a strong comfort level with the existing provider. Customers are in general satisfied with their current provider and very few have plans to switch provider upon the end of the contract.
The typical contract frame is years. A select few have a -year contract, -month contract, or a -month plan.
The amount of electricity consumed did not seem to have an influence on the length of the contract. However, customers with a contract of years or more did seem to think that financial stability and deposit (line of credit) to be very important selection criteria than the other respondents.
This research shows that there is not a strong preference for one particular contract. The choice of variable, fixed, combination contract, and specifying electricity rates in the contract is almost evenly divided.
oThere does appear to be a stronger preference for a year contract with fixed and combination rate versus variable. Overall, a -year contract period is the preferred choice.
About this report
Of the 24 states in the U.S. having deregulated markets for energy, 14 are fully deregulated in both electricity and gas with liberty to purchase from the best-price bidder while continuing to get electricity delivered using the distribution lines of the local utility. Between October and November 2013 Frost & Sullivan conducted a customer survey of 250 commercial & industrial medium and large companies to determine customer perception and purchase criteria for electricity and energy service management.Evaluating 6 of the 14 fully deregulated states, mainly, Illinois, Ohio, Pennsylvania, New Jersey, Maryland, and Connecticut found respondents of manufacturing, data centers, hospitals, small franchisees, and education end user profiles spelling out customer requirements to suppliers of choice in a market dictated by low customer loyalty, high price competition, and low market entry barriers. While these conditions were revealing of fractioned market, it demonstrates why price cuts cannot be the only method for customer retention and loyalty in the C&I market for electricity, and that customer apathy on the subject of electricity might just be explained by their ignorance of the difference between a Distribution Utility and a Competitive Retailer when choosing a supplier and not by generalising it a phenomenon observable in different ways throughout the market.
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