If history is any indication, Pepco customers could be in for a rocky few years after the utility gets acquired by Exelon.
Historically, customer satisfaction slumps temporarily after companies in the service industry — including utilities, cable and airlines — merge, according to David VanAmburg, managing director of the American Customer Satisfaction Index, a national cross-industry measure of customer satisfaction in the United States.
That is usually because companies with two separate portfolios of customers have to integrate their technology systems, which often leads to glitches on the customer service side, he said.
“Everyone bills but not everyone uses the same software and so on, and that can cause some difficulty,” VanAmburg said. “For example, in the airline industry, you see people whose reservations end up canceled or loyalty points that don’t get transferred.”
However, the Exelon-Pepco combination may be an exception, VanAmburg said, because both companies’ customer satisfaction ratings are rising, while satisfaction ratings at many other utilities are declining, according to a report released by the organization this week. The index measured customer satisfaction in the energy utilities, healthcare and consumer shipping industries on a scale of 1 to 100, based on telephone and e-mail surveys of 7,500 households across the United States.
Of the 24 investor-owned utilities that were considered in the index, Exelon ranked 18th, with a score of 75 (up 1 percent compared to 2013), and Pepco Holdings ranked 20th, with a score of 73 (up 3 percent). The two were among only eight utilities that maintained or posted gains in customer satisfaction compared to the previous year. Sixteen utilities — including Virginia’s Dominion Resources (down 2 percent to 80) and Northeast Utilities (down 3 percent to 71), saw customer satisfaction ratings fall compared to 2013.
“There’s a chance here for it to go well here because Pepco gained a little this year and, similarly, Exelon is at an all-time high,” VanAmburg said. “These are two on the upswing, that could bode well for a combination.”
In its quarterly earnings report released Wednesday, Pepco Holdings reported profits of $75 million, or 30 cents per share, compared to a net loss of $111 million or 47 cents per share for the same period in 2013. The company attributed the increase in profits to higher rates (it’s begun to recoup investments in smart meters, for example), lower operation and maintenance expenses and higher weather-related sales in some parts of its territory.
On April 29, Pepco and Exelon announced their plans to merge in an all-cash transaction based on a $27.25 share price. The deal is expected to close by the third quarter of 2015.