State of New York Office of the State Comptroller Division of Management Audit and State Financial Services

Transcription

1 State of New York Office of the State Comptroller Division of Management Audit and State Financial Services DEPARTMENT OF PUBLIC SERVICE CUSTOMER SERVICE PRACTICES REPORT 96-S-85 H. Carl McCall Comptroller

2 State of New York Office of the State Comptroller Division of Management Audit and State Financial Services Report 96-S-85 Ms. Maureen O. Helmer Chairman New York State Department of Public Service Three Empire State Plaza Albany, NY Dear Ms. Helmer: The following is our report addressing the Department of Public Service s customer service practices. This audit was done pursuant to the State Comptroller s authority as set forth in Section 1, Article V of the State Constitution and Section 8, Article 2 of the State Finance Law. We list major contributors to this report in Appendix A. August 13, 1998 OSC Management Audit reports can be accessed via the OSC Web Page : If you wish your name to be deleted from our mailing list or if your address has changed, contact the Management Audit Group at (518) or at the Office of the State Comptroller, Alfred E. Smith State Office Building, 13th Floor, Albany, NY

3 Executive Summary Department Of Public Service Customer Service Practices Scope of Audit The Public Service Law allows any public utility customer to file a complaint with or request information from the Department of Public Service (Department) after the customer has been unable to resolve a dispute with the utility. The Department s Consumer Services Division (Division) is responsible for receiving and helping to resolve such complaints. In calendar 1997, the Division received about 140,000 calls, of which about 28,000 were complaints. During fiscal year 1997, the Division had 64 staff assigned to customer complaint handling at a cost of $2.6 million. Most staff were assigned to offices in Albany and New York City; about five people worked in Buffalo. The Department is operating in a changing regulatory climate. In addition, the Department is managing the process of deregulating electric utilities in New York State. While electricity transmission and distribution will likely remain regulated, the source of electricity generation will be opened to competition. These changes will likely impact on the way the Department operates. Our audit addressed the following questions relating to the Department s customer service practices as of December 1997:! Has the Department identified its future role regarding customer service?! Are customers satisfied with the Department s complaint resolution process?! Does the customer service program operate in a cost effective and efficient manner? Audit Observations and Conclusions Strategic planning helps an organization identify its customer requirements and staff capabilities, as well as ways to improve the organization and better serve its customers. The Consumer Services Division has not formalized its strategic plan on how it will interact with customers after the electric industry is deregulated. Such a plan is important since scores of new electricity providers and suppliers are likely to begin to solicit new customers across the State. Also, the Department will need to determine how many people or other customer service resources it will require under deregulation. (See pp. 5-7)

4 The Division s goal is to have a customer satisfaction rate of at least 85 percent with its complaint resolution process. To measure satisfaction, the Division sends a questionnaire to a sample of customers who filed complaints. During our audit, the Division reported a customer satisfaction rate of about 80 percent. However, existing procedures do not provide adequate assurance that survey results were determined in an objective manner. Also, our review of customer service operations at other organizations identified certain practices that could potentially be used by the Division to improve customer service. (See pp. 9-10) The Department needs to evaluate options and alternatives, including the potential to consolidate customer service operations, to improve the efficiency and effectiveness of customer service operations. In addition, the Department should do a formal analysis to determine the appropriate level of staffing for even its current customer service operation. (See pp ) In addition, the Department has negotiated incentive clauses in the rates of most of the State s electric utilities. A utility s revenues can be reduced if the utility fails to deliver adequate customer service. This penalty is based on a number of factors, including the level of complaints received. However, we question the effectiveness of the penalties alone in ensuring utilities provide adequate customer service. Also, the Department s system to record and track complaints against the utilities needs improvement to ensure it contains complete and accurate data. (See pp ) We also found the Division is not meeting the goal it set for the timely resolution of complaints. We attribute part of the problem to the Division not devoting sufficient resources to resolving cases on an ongoing basis. In addition, Department regulations require that residential or commercial customers be treated equitably, and therefore each complaint follows the same process to resolve. However, the complaint resolution process for commercial cases is generally protracted and there is question as to whether the Department s involvement speeds up the ultimate resolution or whether it delays the process. Different processes appear warranted to handle different types of customer complaints. The Department needs to further study this issue and make appropriate changes to its regulations to help expedite the process. (See pp ) Comments of Department Officials Department officials agreed with most of our recommendations and indicated they have already taken steps to implement several of them. However, they do not believe that changes are needed in their customer satisfaction survey process.

5 Contents Introduction Strategic Planning Background...1 Audit Scope, Objectives and Methodology... 3 Response of Department Officials Recommendation...7 Customer Satisfaction...9 Recommendations Efficiency and Effectiveness of Customer Services Appendix A Consolidation of Customer Service Operations Recommendation Staff Resource Needs Recommendation Monitoring Utility Customer Service Recommendations Data Reliability Recommendation Resolution of Complaints Recommendations Major Contributors to This Report Appendix B Comments of Department of Public Service Officials

6 Introduction Background Section 12 of the Public Service Law allows any public utility customer to file a complaint with or request information from the Department of Public Service (Department) after the customer has been unable to resolve a dispute with the utility. In 1981, the Department consolidated various operating units into the Consumer Services Division (Division). During fiscal year 1997, the Division had 64 staff assigned to customer complaint handling at a cost of $2.6 million. Among the functions of the Division is the handling of consumer contacts through the Consumer Assistance Program (CAP) unit. Most staff were assigned to offices in Albany and New York City; about five people worked in Buffalo. In 1995, CAP implemented a computerized telephone call center to handle consumer complaints and inquiries. This system improved the efficiency of CAP staff. A recording informs the caller that the complaint must first be presented to the utility before the Department may become involved. Instead of having a customer service representative answer all calls, the system allows them to handle only complaint calls. Division records indicated that the CAP answered approximately 140,000 telephone calls in About 28,000 of these calls were complaints or inquires requiring further staff action. Simple customer complaints, such as double billings, may be resolved immediately by contact staff within CAP. More complex cases are referred to more experienced CAP staff for resolution. Once a decision has been reached, either the consumer or the utility may request an informal hearing (reviewed by another CAP representative). Either party has the right to a subsequent formal appeal (reviewed by another CAP representative and presented to the Commissioner for determination). As of December 31, 1997, there was a total active caseload of 5,571 complaints, 268 informal hearings, and 129 appeals. During that month, the CAP had opened 2,264 cases and closed 3,308 cases. CAP staff enter each complaint/inquiry in a computerized Complaint Tracking System. This system accumulates case data by utility, type of complaint, and type of customer. The system allows CAP managers to track the location and progress of complaints and to accumulate complaint data for a variety of uses. For example, CAP prepares a monthly report on complaint statistics that is distributed to every divisional director in the Department. In addition to providing a narrative trend analysis by type of complaint, the report shows each utility s complaint rate per 100,000 customers. This information allows a comparison of consumer satisfaction

7 among the utilities and is used as a performance measurement in various rate incentives which the Department has negotiated with most utilities. In addition, the system provides information to do trend analysis and enable the Department to: take complaint-based rate incentive actions, identify and help correct problems at utilities, implement policy initiatives, initiate legislative changes, and serve as a learning tool for utility management. According to Division officials, their trend analysis of consumer complaints has led to various actions such as suspending the operating certificates for telecommunications companies with a history of slamming complaints (switching long distance telephone service without the customer s knowledge), and a moratorium on mandatory time-of-use rate conversions for ConEd residential customers. Established in a time of tightly regulated monopolies, the Department is now operating in a changing regulatory climate. Over the next five years the electric utilities will be moving towards deregulation, which means competition. The Department is managing the process of deregulating the electric utilities in New York State and has established a broad deregulation framework by issuing a series of orders and directives. The electric utilities are developing individual deregulation plans for the Public Service Commission s (regulatory body) review and approval. It is unclear exactly how deregulation of the industry will ultimately impact residential and commercial customers. However, Department officials told us that electricity transmission and distribution will remain regulated, while electricity generation will be open to competition, with scores of new entrants likely to emerge in New York State. In a purely competitive market, consumer choice could theoretically eliminate the need for any Department involvement in the electricity generation portion of the industry. However, the recent history of complaints in the deregulated telecommunications industry in New York and other states suggest that there may be a need for providing continued and changing customer service to electric consumers in the future. Customer-loyalty surveys among various industries show the importance of how complaints are dealt with. For electricity providers, it is important for problems to be fixed quickly. Customers whose problems get fixed quickly tend to be more loyal than those who never even experienced problems. 2

8 Audit Scope, Objectives and Methodology We evaluated the Department s strategic plans for consumer services in the advent of electric utility deregulation in New York State. We also analyzed electric utility complaint statistics from April 1994 through December 1997, and assessed Division practices related to the complaint resolution process. Our objectives were to determine whether the Department has identified its future role regarding customer service, whether customers are satisfied with the Department s complaint resolution process, and whether the Department s customer service unit operates in a cost effective and efficient manner. To accomplish our audit objectives we interviewed Department personnel, reviewed staff qualifications and training records, visited customer service operations and observed call center operations, and evaluated the effectiveness of the complaint-based rate incentives. We also contacted utility regulators in other states to determine how they are planning for deregulation and to learn about their customer service activities. We also contacted representatives from other customer-oriented industries, such as banks and credit card companies, to learn about their customer service activities. We did our audit in accordance with generally accepted government auditing standards. Such standards require that we plan and do our audit to adequately assess the operations of the Department that are included in our audit scope. Further, these standards require that we understand the Department s internal control structure and compliance with those laws, rules and regulations that are relevant to the operations included in our audit scope. An audit includes examining, on a test basis, evidence supporting transactions recorded in the accounting and operating records and applying such other auditing procedures as we consider necessary in the circumstances. An audit also includes assessing the estimates, judgments and decisions made by management. We believe that our audit provides a reasonable basis for our findings, conclusions and recommendations. We use a risk-based approach when selecting activities to be audited. This approach focuses our audit efforts on those operations that have been identified through a preliminary survey as having the greatest probability for needing improvement. Consequently, by design, finite audit resources are used to identify where and how improvements can be made. Thus, little audit effort is devoted to reviewing operations that may be relatively efficient or effective. As a result, our audit reports are prepared on an exception basis. This report, therefore, highlights those areas needing 3

9 improvement and does not address activities that may be functioning properly. Response of Department Officials A draft copy of this report was provided to Department officials for their review and comment. Department officials generally agreed with our audit recommendations and indicated that they have already taken steps to implement several of them. However, they do not agree that there is a need to modify the customer satisfaction survey process because, in their opinion, it provides sufficient information to give the Division a general indication of overall satisfaction. Their comments were considered in preparing this final report and are included as Appendix B. Within 90 days after final release of this report, as required by Section 170 of the Executive Law, the Chairman of the Department of Public Service shall report to the Governor, the State Comptroller, and the leaders of the Legislature and fiscal committees, advising what steps were taken to implement the recommendations contained herein, and where recommendations were not implemented, the reasons therefor. 4

10 Strategic Planning Strategic planning is a key component of the overall management process of successful organizations. Effective strategic planning develops the knowledge and skills that can help an organization meet its organizational goals and objectives. The process helps an organization identify its customer requirements and staff capabilities as well as ways to improve the organization and better serve its customers. The Department s overall strategic plan has three goals: (1) reduce rates, (2) open or increase competition, and (3) assess and use technology to improve internal processes. While the Consumer Services Division has taken steps to address how it will interact with customers after the electric industry is deregulated, it has not formalized these steps in a strategic plan. Scores of new electricity providers and suppliers are likely to begin to solicit new customers across the State. For example, more than 100 companies have registered to be electricity service providers in California, which was to officially deregulate January 1, The Department has defined some goals for its complaint resolution and tracking process, and has recently established eligibility requirements, and licensing procedures for companies that will emerge in the electric marketplace. However, the Department has not done an analysis to determine how many people or other customer service resources it will need in the future under deregulation, and it has not established standards with which to measure actual performance toward goals. The Department has taken positive steps to deal with electricity deregulation in New York State. Other states are also addressing how their regulatory agencies will function after electric utility deregulation, as well as the possible effect deregulation will have on their consumer services process. For example, both Texas and California have detailed plans for deregulation and how they plan to focus their consumer service efforts. To illustrate, the California Public Utilities Commission officials told us that their plan lays out methods to implement organizational and operational changes to reform the Commission and that the plan addresses four critical areas: (1) commitment to customers, (2) accountability to the public, (3) improving internal accountability, and (4) creating an effective organizational structure and efficient internal operations. From our telephone survey of public utility commissions in six states (California, Pennsylvania, Texas, Massachusetts, New Jersey, and New Hampshire) we obtained a number of predictions of what will happen as the electric industries are deregulated: 5

11 ! Monumental changes in the delivery of electric service will occur. Customers will likely be confused by the increase in the number of electricity service providers, their different standards, and the multitude of different pricing plans.! Deregulation will result in additional consumer inquiries and complaints to the state regulatory agency, thus increasing the demand for additional telephone call center representatives to handle the additional workload. This will be similar to what occurred when the telecommunications industry was deregulated. According to news reports, the $200 billion U.S. electric market is three times the size of the telecommunications industry.! Deregulation may produce an increase in marketing abuses similar to what happened in the telecommunications industry, such as the practice of slamming (changing customer service without the customer s knowledge). In addition, other kinds of abuses, such as sale of customer account information, sale of unwanted services, and taking advantage of people who do not speak English. The Department s consumer services function could vary potentially from no involvement in consumer complaints, to its current role, or to an expanded role. Department officials stated that they intend to continue the Division s role in resolving consumer complaints as the energy industry transitions to competition. Electric transmission and distributions will remain monopolies and will continue to be regulated. Accordingly, the Division will perform its traditional role of dispute resolution regarding service and billing complaints involving these services. While the Division has not formalized its plans to address the deregulated portion of the market, Division officials told us that they expect to continue to assist customers with problems in the generation portion of the industry, where it is expected that many new service providers will arise. They also expect the Division to expand information and education efforts to help consumers choose service providers. We believe that the Division needs to formalize its strategic plan on how it will deal with the electric industry under deregulation. Division officials need to determine what their staffing and other resource needs will be when electric utilities are deregulated and scores of new electricity providers emerge in the marketplace. When the telecommunications industry was deregulated, there was a short-term increase in telephone complaints, followed by a general downward trend in complaints in the industry. Using lessons learned from the telecommunications deregulation 6

12 experience, the Department should take steps necessary to ensure customer complaints are handled swiftly and efficiently when a customer calls. In the final analysis, a customer has a basic question: Whom do I call when electric service is disrupted or when there are other problems? Recommendation 1. Formalize the Consumer Services Division s strategic plan by defining its future role in deregulation, its goals and objectives, and performance measurements. 7

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14 Customer Satisfaction In an effort to improve efficiency and measure performance, in 1995 the Division began sending, on a monthly basis, a questionnaire to a sample of customers who filed complaints with the Department. The Division s goal is to have a customer satisfaction rate of at least 85 percent with the Department s complaint resolution process. However, because the Division s survey process is not done using a statistical sampling methodology, the sample results cannot be reliably projected to determine the overall customer satisfaction rate with the Department s complaint resolution process. The surveys are intended to give the Division a general indication of overall customer satisfaction. During our audit, the Division reported a customer satisfaction rate of about 80 percent. Overall customer satisfaction responses did not attain the 85 percent performance standard in any of seven reporting quarters in our review. However, the reported satisfaction rate may be skewed or misleading because several factors, such as a one-third response rate and removing some commercial customers from the sample, have not been considered in analyzing the results. Existing procedures do not provide adequate assurance that results were determined in an objective manner. As a possible solution, the Division could make customer satisfaction surveys routine for each complaint case. Division officials are satisfied that their current system provides them with a general indication of customer satisfaction and believe any changes would likely cost more than the benefits derived. Nevertheless, we encourage the Division to seek ways to enhance the process and provide more meaningful results which would be used continually to improve customer services. We found that there were a number of features that other call center operations use which, if the Division implemented them, might further improve customer service and related customer satisfaction. Although Division officials suggests that their system currently addresses customer needs, and they have investigated several improvement options, we encourage them to consider adding additional features such as the following: Multilingual options Recording calls for supervisory monitoring and identifying training and other improvement opportunities, Extended service hours, Establishing call center quality standards relating to areas such as timeliness, knowledge, and courtesy, and 9

15 Better tracking of lost calls (callers who hang up after waiting for a representative). Employee training programs are an integral way to maintain and improve employee proficiency. Although the Division provides periodic training to its call center representative on various topics, the Division has not formalized its training plan and does not document what training was given or who attended the training. Recommendations 2. Evaluate the customer satisfaction survey process and results to determine if it receives the intended benefits from the survey. Consider revising the process by mailing a questionnaire to everyone who had a closed complaint, as well as periodically to those whose cases have been open for extended periods. 3. Continue to study other call center operations and consider modifying the Department s call center operation to take advantage of best industry practices. 4. Develop a formal training program for call center representatives and document the training they receive. Efficiency and Effectiveness of Customer Services 10

16 The Division has offices located in Albany, New York City and Buffalo. The Division has telephone call centers in Albany and New York City to handle and resolve consumer complaints and inquiries for the entire State; the Buffalo staff work on complaint resolution. Nearly all consumer complaints are made via the telephone. We believe there are opportunities for the Department to improve the efficiency and effectiveness of customer service operations. The areas involve possible consolidation of customer service operations, an analysis of staff resource needs, monitoring utility customer service, data reliability, and resolution of complaints. Consolidation of Customer Service Operations Previously, Division staff in New York City handled consumer complaints regarding downstate utilities while Albany office staff handled upstate utility complaints. Department studies had shown that there were significant productivity variances between the two offices. While consultants retained by the Department suggested consolidating call center operations in 1992, the Department designed its call center system to consider all three Division offices and to take into consideration where the existing staff were already working: in Albany, New York City and Buffalo. This call center system, installed in the Albany and New York City offices, routes incoming phone calls to the next available operator, regardless of their work location. Division officials added that one advantage of multiple offices in Albany, New York City and Buffalo was that it gives them a resource to deal with people who come to the Department in person with utility complaints and it provides the Division with a backup system if one location has equipment failure or inclement weather. We believe that some cost-savings and efficiency opportunities may be available to the Department by evaluating options and alternatives including consolidating, all or some aspect of, the call center and other customer service operations, particularly in regards to the Buffalo office which does not handle intake of consumer complaints. The Department has not assessed the cost-effectiveness of alternative structures for its customer service operations. In addition, it does not account for Division expenditures by location but rather combines expenditures for all three locations into one expenditure category. In addition to enabling potential cost savings in areas such as rent, utilities, and travel, an option such as centralized customer service operation could improve supervision, help to standardize training, and improve overall efficiency of operations. Public service agencies in some other large states such as Massachusetts and New Jersey have centralized their customer service call center operations. 11

17 Recommendation 5. Compile cost and service information by office and perform an analysis of the cost benefits of alternative configurations including consolidating all or part of the customer service operations. Staff Resource Needs Division staff for complaint intake and analysis has been reduced by 3.5 employees, from 38.5 in 1993 to 35 in However, this staff reduction was not due to improved efficiencies, such as those resulting from the new technology used by the call center, but rather through attrition, as the Division did not replace staff who resigned, transferred or retired. During our audit, Department officials acknowledged that they did not know what is the current optimum number of telephone customer service representatives it needed. They have not established any useful trends in telephone calls either by hour of the day, day of the week, or season of the year. They maintain that staffing levels must be sufficient to handle the volume of customer complaints which occur without predictability. Without a formal analysis, however, Department officials have less assurance that the call center is properly staffed. Division officials told us that they had recently evaluated the staffing level needed to run the call center; however, they were reluctant to provide us with the results of this study until the results were approved by senior management. Subsequent to our field work, Division officials told us that they had been authorized to add three staff for complaint intake and analysis. In 1995, there were about 144,000 complaint calls of all types to the Division, of which about 35,000 calls needed further staff action. In 1997, there were about 154,000 complaint calls of all types to the Division, of which about 28,000 calls needed further staff action. Furthermore, there has been a decline of approximately 6 percent in electric utility complaints from 8,133 in 1994 to 7,676 in 1997, while total complaints for all regulated industries has dropped by 37 percent from 33,487 in 1989 to 21,226 in The average number of complaints against electric utilities per staff has been reduced by 29 percent since

18 The call center technology contributed to the reduction of incoming calls that needed the involvement of customer service representatives. Customers are now informed by a prerecorded message to first contact their utilities to address problems or complaints. Also, the call center technology no longer needs a person to answer all telephone calls; the initial call is screened by a recording with menu options. Recommendation 6. Using a historical trend analysis of customer service calls, and anticipation of future demand develop an optimum staffing pattern, which could include alternative work shifts and the use of non-call center Division staff to handle unexpected peak periods. Periodically reassess these staffing needs. Monitoring Utility Customer Service The Department has negotiated incentive clauses in the rates of most of the State s electric utilities. A utility s revenues can be reduced if the utility fails to deliver adequate customer service. This penalty is based on a number of factors, including the rate of Department-received complaints regarding the utility and a number of service-related performance indicators. It was the Department s intention that such penalties would serve as a means to motivate the utilities to improve service to their customers. We believe that the incentive clauses alone may not provide sufficient encouragement for utilities to improve customer service. Except for the bad publicity the utility may receive (especially in the advent of deregulation), the monetary penalty alone may not serve to improve customer service, especially if the cost of improved service exceeds the amount of the penalty. A utility could view the penalty as just the cost of doing business. For example, in 1995 a utility was penalized $5.65 million for poor customer service. Although the penalty may appear significant, it averaged less than $4 for each residential and commercial customer. The Department s August 1995 evaluation of incentive clauses concluded that they helped utilities manage the transition to deregulation. However, the utilities stressed that, while the incentive clauses were helpful, the driving force to improve service is the need to remain competitive under deregulation. Particularly with the advent of deregulation, the Department needs to introduce alternative methods and techniques to ensure existing utilities and new electricity providers have good customer service. 13

19 Recommendations 7. Evaluate whether the penalties for poor customer service need to be revised and strengthened. 8. Develop guidance or standards for customer service and monitor that utilities meet the criteria. Data Reliability CAP staff enter each complaint/inquiry onto the Complaint Tracking System. The system tracks the location and progress of the complaints and accumulates complaint data for a variety of uses. Some of the system users told us that they use the information to help identify problems at the utilities which might warrant further review. In addition, the data is used to ascertain if utilities should be penalized for high customer complaint levels. Therefore, it is important for the system to contain complete, accurate data. However, there are no documented procedures to monitor the information entered into the system to ensure its accuracy. The data entry verification is limited to spot checks by Division staff of the weekly and monthly reports and to follows-up on significant variances. Although we did not identify errors in the complaint data maintained on the system, there is an inherent risk that the information may not be completely reliable. Management maintains that a shortage of staff is the reason why they do not have a person dedicated to verify data entered on the system. As a result, management essentially relies on the utilities to ascertain the accuracy of the data. We also found that a utility s performance data is reported to the Department without subsequent validation by Department staff. The Department s Management Audit unit has reduced its audit presence at the utilities over the years, and generally no longer reviews utility customer service issues or validates the performance data. There is an inherent risk that utilities may incorrectly report their performance data to the Department to avoid penalties and resulting bad publicity. 14

20 Recommendation 9. Review data on the complaint tracking system for completeness and accuracy. Resolution of Complaints The Division established a goal of having 900 or less unresolved cases over 60 days old. We found that the Division has not met this goal and had about 2,300 open cases over 60 days old as of December In regard to electric utility complaints, the Division had reduced the older cases by only 8 percent between 1994 and 1996 from 1,157 cases to 1,066 cases. Department officials attribute the backlog to staff reductions resulting from early retirement and layoffs. However, as noted previously, the Division has lost only about three of its complaint intake and analysis staff over this period and has gained efficiencies through new technology. For many of these backlogged cases, the Department has received information from the utility and other sources but has not performed a final review to determine whether the case should be closed or whether additional action is necessary. Because management has not provided the necessary staff for review and follow-up of these unresolved cases, cases that could be closed remain open. Department regulations require that each customer class (residential or commercial) be treated equitably. Therefore, each complaint follows the same process to resolve. If a customer is not satisfied with the outcome after it goes through the entire process, the customer has the option to take the matter to court. We found that there are widely different types of complaints, depending on the customer class. For example, residential customers generally file relatively small-dollar complaints against electric utilities dealing with rates or service issues. Most of these issues are eventually resolved satisfactorily. On the contrary, a large portion of complicated, high dollar value cases are initiated by commercial customers. Many of these commercial customers are represented by outside consultants who specialize in these types of cases. These complaints generally take long periods of time to resolve because of the nature of the issues and the time needed for each party to compile and submit documentation. Most of the time, one side is not satisfied with the resolution of the matter and these cases are often eventually fought in the 15

21 courts. We believe that a different process by customer class would help improve the efficiency and effectiveness of the Department s complaint resolution process. For example, if it is determined early in the process that the case will be protracted, it could go through a different process which would help ensure quicker resolution. This could also free up staff time to resolve other consumer complaints. We reviewed the Department s computerized complaint database for 1994, 1995 and At the end of each of those years, there was an average of 1,584 open complaints. We sampled 32 of these complaint cases to review the history of each complaint and to determine the reasons why some complaint cases were open for long periods of time. Because the Division closes cases as each stage is completed, it reopens complaint cases one or more times when they proceed to the next level in the process. Because some of the 32 cases were reopened, there were a total of 71 complaints related to these 32 cases. On average, these 32 cases were open for more than 1½ years and were in either the pre-hearing, hearing/review or appeal stage. We noted that while most of the cases related to residential customers, most of the oldest cases related to commercial customers. We also noted that most of the older cases related to billing and rate disputes. As of our review, one of these commercial complaints was more than four years old. In addition, we noted that the complaints for commercial customers spend considerably more time in the pre-hearing, hearing and appeal phases of the process than do complaints for residential customers. This may be due to the dollar amount of the complaint or the complexity of the complaint issues. We also found that complaints which involved consultants generally took protracted amounts of time to resolve. Although commercial customers had a fewer number of complaints in our sample, they used consultants or legal services twice as often, and these complaints take about twice as long to resolve than if a consultant is not involved in the process. Consultants represented customers in 92 percent of the rate-related cases in our sample and most were from commercial accounts. We understand that these consultants are usually paid by the complainant on a commission basis and usually receive as much as 50 percent of the rate refund that their client receives from the utility. Under these circumstances, it may not be to the benefit of the parties to settle disputed complaints quickly because the dollar value disputed is high, the complainant may have little to lose, the size of the consultant s reimbursement is directly related to the size of the settlement, and, in our opinion, either losing party will likely contest the determination. 16

22 The following is an example of a consultant-represented case. When an apartment complex was built, the appliances and furnace were installed in such a way that the cheapest rates could not be used. The customer said that it is the utility s fault because it should not have approved the plan. The utility claimed it made the suggestion to the contractor, but it cannot mandate how a system is built; the utility s responsibility is to make sure the plan follows proper engineering and safety regulations. The amount of refund in question was about $100,000. The complaint case was still open as of August 1997, and was originally opened more than 5½ years earlier. Although this case represents an extreme, it demonstrates the potential for lengthy delays. Since many commercial complaint cases (especially where a consultant is involved) are generally protracted, there is question as to whether requiring the Department to take the complaint through the entire common complaint resolution process speeds up the ultimate resolution or whether it delays the process. We believe that different processes are warranted to handle different types of customer complaints. With deregulation, new laws and regulations will be written. The Department suggests that it will not be involved in rate-related cases concerned with the correctness of rates charged after the electric industry is deregulated. However, Department officials still see involvement for complaints related to transmission and distribution charges. Department officials informed us that it will take several years for the industry to be deregulated (these complaints will be handled initially through the individual companies and, if unresolved, through consumer protection entities). There is a six-year statute of limitations for filing complaints and the cases take several years to resolve. Therefore, unless there are changes to the way the Department handles these complaints, the Department will be working on them well after electric deregulation is finalized. 17

23 Recommendations 10. Analyze the backlog of open complaint cases and apply the necessary resources to close them in a timely manner. 11. Study the current complaint handling process to determine whether there are ways to help expedite the resolution of complaints, and modify the regulations over the process accordingly. A two-tiered process could be considered, possibly one for handling complaints from residential customers and one for handling complaints from commercial customers. 18

24 Major Contributors to This Report William Challice Carmen Maldonado Gerald Tysiak Roger Mazula Charles Krahula Kenneth Cox Judith Middelkoop Mark Radley Jorges Vazquez Paul Bachman Appendix A

25 Appendix B

26 B-2

27 B-3

28 B-4

29 B-5

30 B-6

31 B-7

32 B-8