Thinking about utility customer engagement

In the last two decades regulators in Australia and the UK have increasingly required and/or incentivised utilities to have a greater customer focus. It has led to significantly more customer engagement, and for the most part the key stakeholders seem happy.

However, there appears opportunities for improvement with a more nuanced and considered approach that recognises the limitations of customer engagement. A key concern is that customers are being engaged on topics for which they have little knowledge or interest. There is (literally) decades of empirical research – based on surveys on fictitious topics – that finds people respond to questions despite being uninformed.

Furthermore, there is evidence that these uninformed responses are not just random noise but are biased – influenced by related knowledge and cues that are available. For example, on average people rated a fictitious brand of cheese more highly if the brand name sounded French. A risk that is utilities misinterpret the information they obtain to justify decisions that are not in the customer interests. This concern became prominent in a recent dispute between Ofwat (the economic regulator of water companies in England and Wales) and some water companies it regulates.

Yet another, perhaps larger, risk is that important options are not considered and analysed because utilities and regulators over-rely on the customer engagement process to identify priorities and options. Using customer challenge panels and other deliberative engagement can help to mitigate the above issues. But there are limits to what can be effectively achieved through such deliberative processes.

So, what should be done?

Engagement might be improved with greater consideration of the uninformed respondent bias. A simple test for any topic is to question whether the respondents are likely to be sufficiently informed. There would also be benefit in reviewing the purpose of engaging on a topic. That is, whether engagement is required for information gathering, for stakeholder management and/or for reviewing and challenging proposals.