Greg Aliff & Branko Terzic
Deloitte & Touche LLP
Consumer awareness of electric deregulation took a dip for the first time in five years according to the results of our recently released 2002 Deloitte & Touche Consumer Awareness Survey of Electric Deregulation.
This was our fourth annual national survey of about 800 residential consumers across the United States. International Consumer Research Inc. of Media, Penn. conducted the survey for Deloitte & Touche by telephone.
A key finding this year was that significantly fewer consumers responding (24.7 percent) are aware of changes in the electric industry compared to last year (39.7 percent). The survey also found that fewer consumers expect electric rates to increase this year (47.9 percent) than last year (56.2 percent). (See figures.)
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We also discovered that while few consumers (5.3 percent) reported direct ownership in electric utility stocks, a majority (57.1 percent) still found published financial statements useful in their understanding of the financial condition of their holding.
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From 1998 to 2001 successively fewer respondents believed that rates would decrease under deregulation. In 2002 the trend reversed with 41.8 percent believing rates would decrease under deregulation vs. 35.2 percent last year. However, at this time more consumers still think electric rates will go up (47.9 percent) than down (41.8 percent) but the gap has closed. (See figures.)
Why did these trends reverse? Why do fewer people this year than last year think rates will increase? Conversely, why do more consumers now think rates will decrease compared to last year? We believe that last year's survey reflected nationally reported news of increasing prices and potential power shortages in the California market. That widely reported power crises was the main driver of consumer opinion in the summers of 2000 and 2001. The prior surveys also reflected the fact that about half of the 50 states initiated some programs related to electric competition at that time. However, there was little new activity at the state level in the 12 months between the survey dates of September 2001 and September 2002. We believe the survey reflects that as well.
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The survey also quizzed consumers about their expectations concerning electric service quality under competition or deregulation. More consumers continued to believe that service will improve rather than get worse but the gap is narrowing. In the 2002 survey, 39.5 percent felt service would improve while 27.4 percent responded that service would get worse, with the remainder believing that service will not change.
How do we reconcile the fact that a larger number of consumers feel prices will increase while service will improve? In our opinion, the earlier trend showing concerns about increasing rates was fed by reports of California problems and some local disappointments when rates did not decrease as has been promised by proponents of deregulation.
The most recent poll, we feel, was done in the absence of any national news about electric price increases. Absent such news we believe it reflects consumers' innate feelings that competition (deregulation) in general is expected to bring lower prices than continuing monopoly. This, we feel, accounts for the shift in the direction of opinion this year. Last year's big story was the Sept. 11, 2001 tragedy. Except perhaps in California, electric deregulation has not been a major issue. The results of our survey this year would indicate that fewer consumers have paid any attention to the electric issue at all. Adding the consideration that few states have taken any significant action the past 12 months that would stimulate consumer interest, this low level of awareness is understandable.
Copies of the full results are available from Deloitte & Touche by contacting Sally Wilson at 703-251-4333 or swilson@deloitte.com.
