Ways to measure utilities’ service debated

Kevin Rademacher

Tuesday, May 17, 2005 | 10:56 a.m.

Hearings opened Monday morning on efforts to establish a mechanism to monitor the effect on customer service of a 1999 merger between Nevada Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno.

The initial debate in the hearings centered around the fine points of tracking customer service satisfaction, particularly a plan proposed by economist Gayatri Schilberg, who was testifying on behalf of the state Bureau of Consumer Protection.

Her proposal would link at least one portion of the overall grade to customer survey results. While that item is similar to the proposal made by a utility-hired expert, she said only respondents grading the company with a nine or 10 out of a possible 10 should be counted.

An expert for the utility recommended a more flexible window of respondents giving the company grades of five to 10.

Schilberg said that the tighter grade was the same measure that the utilities have used internally when measuring customer service to determine bonuses.

"It's useful to use a metric the company itself finds meaningful," she said.

She also recommended weighting the survey results based on the number of customers, not revenue, arguing that high-revenue commercial or industrial customers receive more personal attention for the company.

However, utility attorney Julia Sullivan pointed out that those large customers are likely to be among the most demanding.

The hearings are expected to continue today.

The hearing is the product of a 2004 general rate case. In issuing its final order in the case, the Public Utilities Commission of Nevada directed the utilities to create a mechanism for measuring customer service levels. Those levels would have to ensure the PUC's original directive in approving the merger that customers would not be harmed by combining the companies.

A sensitive subject for the parties involved has been the ability to measure declines in customer service associated only with the 1999 merger.

Given that so much time has passed since the merger -- and that the utilities experienced fallout from the Western energy crisis of 2000-01 since the merger -- such a mechanism could be difficult to create, said Jake Mercer, a utilities analyst for Piper Jaffray & Co.

"If you are trying to compare something to 1999, it's probably a little late," Mercer said. "As far as a company is concerned you can have great service, but more and more customers are going to be upset because rates are going up."

Sierra Pacific Resources -- parent company of Nevada Power and Sierra Pacific Power -- saw its customer satisfaction rating inch higher in a recent J.D. Power and Associates survey. It was, however, short of the West Region average score of 100 and below the industry average 103.

Back in 1999, a similar J.D. Power survey credited Nevada Power with one of the highest residential satisfaction rates in the country. In that study, the Las Vegas company grabbed a score of 108, well above the industry average of 100, the highest score in the West and fifth-best in the country. Sierra Pacific Power scored a 102 in the study.

By 2002, amid fallout from the Western energy crisis and the associated dramatic rate increases, the parent company was worst in the West for customer satisfaction. The company began its climb out of the cellar the following year.

Mercer said that linking customer service to regulatory bonuses is generally a positive means of dictating performance.

"On a going forward basis, it's probably a very good idea," he said, adding that such difficult measures have also brought utility mergers to a halt.

"For the most part, we have not seen mergers, and we still have a very fragmented industry," Mercer said. "PUCs are very critical of companies acquiring another company, (requiring) that there be no interruption in service and no lag in customer service."

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