February 10, 2003

Contact: Richard Claeys (408) 867-6430

STILL SEEKING SATISFACTION: KEY ACCOUNTS STEP UP SWITCHING OF ENERGY SUPPLIERS, BUT FIND FEW BENEFITS, ACCORDING TO NEW NATIONAL SURVEY

Large C&I Customers Give Suppliers & Utilities High Performance Scores; On-Site Options on the Increase

NORTH SALEM, NY-Key Accounts-large commercial and industrial enterprises with monthly energy bills in excess of $100,000-are leaving their local utilities in increasing numbers, but remain dissatisfied with the results of the switch, according to the latest national customer survey conducted by RKS Research & Consulting, a nationwide market research and public opinion polling firm.

In contrast, these large customers report major improvements in key areas of energy supplier and utility performance in 2002. In particular, power delivery ratings show major improvements, as the number of outages experienced by these large accounts dropped to half the 2001 total.

Co-operative utilities earn the highest performance scores from key accounts, while municipal systems show major gains in their rankings, according to the survey. Performance marks for investor-owned utilities remain unchanged from the 2001 levels. And the survey establishes a direct link between energy supplier/utility account manager performance and key account perceptions of provider value, performance, and loyalty.

For the first time in the last three years of these surveys, combination utilities-those that offer both electricity and gas service-receive lower performance ratings from key accounts than electric and gas-only suppliers.

For this major market assessment, RKS held interviews with 402 headquarters energy managers, representing 302 industrial firms plus 100 commercial enterprises. These interviews were completed at the end of November, 2002, and RKS is now delivering detailed findings and analysis to study sponsors.

This latest RKS energy market survey confirms increased activity by key accounts in the face of uncertain business and economic conditions. For example, nearly half of these large customers have invested in on-site power generation options, a substantial increase from the penetration rate reported one year ago. And significant majorities among these customers report dual power feeds and uninterruptible power supplies as well.

Some six in 10 of these large energy customers-59 percent--opted to retain the supply services of their local utility, a substantial decline from the 71 percent retention rate in 2001, according to the survey. Setting aside transfers to utility affiliates, the rate of defection by key accounts to new suppliers nearly doubled to 16 percent at year end 2002, as tracked by this latest survey.

These trends suggest an increased effort by key accounts to boost efficiencies by reducing the number of energy suppliers with whom they do business, according to the RKS analysis.

However, key accounts remain measurably disappointed in the results of their decision, according to the survey. Specifically, only a third of the customers that switched are satisfied with their new supplier, down from the more than 50 percent approval rating expressed one year ago.

Key accounts surveyed by RKS offer specific suggestions for improvement. For example, majorities of these large customers express interest in choosing among pricing options and flexible or indexed rate structures instead of a single rate design. And two thirds of these large customers would be willing to participate in key account advisory panels, meeting periodically to deliver ideas and suggestions directly to their energy firm.

"Many of the issues that trouble key accounts today-repeated reorganizations, mergers/acquisitions, and liquidity concerns-are the direct result of utility decisions," said Carmine Grastataro, RKS president. "Instead of this instability, key accounts tell us they want a secure long-term relationship with energy suppliers and utilities that act as allies, helping these large customers deal with their own economic, production and competitive uncertainties. Utilities that convey a sense of confidence and control of their destinies have more opportunities to prosper in this demanding market."

In addition to the analysis of deregulation and switching patterns, the RKS key account survey contains national benchmark measures among critical dimensions of supplier and utility performance, including outage restoration, billing, pricing, and account services. Composite "market leader" rankings allow comparisons to acknowledged top performing utilities across a wide spectrum of criteria.

Now in its 30th year of business, RKS Research & Consulting designs and conducts both syndicated and customized market research and public opinion polling for energy and natural resources clients, including their major associations. RKS operates from headquarters in North Salem, NY, plus field offices in New Jersey, Florida, Ohio, and California. Further information is available at www.rksresearch.com.