1. slide 1 Expectations of DNOs & Willingness to Pay for Improvements in Service May 2008

2. slide 2 Agenda Survey objectives Fieldwork Methodology Background findings Stated preference design & analysis Stated preference findings

3. slide 3 The objectives were… To determine: consumers’ experience and satisfaction with the quality of service they receive areas of quality of service, environmental and social outputs that consumers value and their relative priorities amongst these consumers’ awareness of the guaranteed standards, their views on improvements or extensions to the guaranteed standards, their relative priorities for improvements and their willingness to pay for such changes consumers’ expectations regarding planned and unplanned interruptions to their electricity supply consumers’ expectations regarding notification of planned interruptions and of when they can expect to be restored after unplanned interruptions to their electricity supply consumers’ expectations regarding the resilience of their power supply to bad weather or other exceptional events and willingness to pay for improvements in this area the extent of consumer contact with DNOs and their satisfaction with this contact consumers’ views on variations in quality of service delivered in different geographical areas and their willingness to pay for improvements in service to worst-served consumers or consumers in rural areas consumers’ views on the benefits of undergrounding parts of DNOs’ networks and their willingness to pay for a programme of selective undergrounding how expectations and willingness to pay for service improvements vary: –for different consumer groups such as domestic consumers, business consumers and consumers in rural areas –for consumers within the different distribution service areas of each DNO –according to the quality of supply customers have experienced

4. slide 4 Undertaken through A Comprehensive Research Programme Stage Two Quantitative Research Quantification of experiences & attitudes Determining relative service priorities Identifying WTP Stage One Qualitative Research Exploring relevant issues Understanding how consumers think and feel Providing necessary context for quant stage Informing the design of the stated preference

5. slide 5 The methodology consisted of… 16 Discussion Groups: 8 with Domestics 8 with Small Businesses 16 Face-to-Face Depth Interviews: 8 with Large Medium Business 8 with Vulnerable Customers 2154 in-home CAPI interviews: average duration 27 mins (weighted to target 2100, 150 per DNO) Broad quotas on: age, SEG & experience of cuts Specific quotas on rural versus urban Random quota sampling by postcodes used to gain as representative a spread of consumers by DNO as possible 1052 CATI interviews: average duration 25 mins (75 per DNO) Broad quotas on: company size & experience of cuts Random sampling approach used to gain as representative a spread of businesses by DNO as possible Fieldwork dates: 27 February 2008 to 18 April 2008Fieldwork dates: 27 February 2008 to 6 April 2008

6. slide 6 The questionnaire covered… electricity consumption experience of cuts attitudinal questions about consumers’ expectations of quality of service and service standards (including voltage fluctuations for businesses) awareness of GS2, GS2A & GS4 stated preference exercises

7. slide 7 Background Findings Domestic Consumers

8. slide 8 Average Bill Sizes

9. slide 9 Experience of Unplanned Cuts

10. slide 10 Frequency & Duration of Unplanned Cuts FREQUENCYDURATION MEAN = 1.9MEAN = 92 MINUTES

11. slide 11 Experience of Planned Cuts

12. slide 12 Frequency & Duration of Planned Cuts FREQUENCY MEAN = 1.2 DURATION MEAN = 99 MINUTES

13. slide 13 Distributor Contact 4% had been contacted or called back by their distributor during an unplanned power cut

14. slide 14 Do you believe it is reasonable for a power cut to occur in severe weather, ie a major storm or flooding?

15. slide 15 Service Expectations On average, the maximum number of cuts lasting more than 3 hours that they felt a DNO should be allowed in any one year before paying compensation was 2 (excluding 1% of extremes of 10+) Most (79%) felt that power should be restored within 3 hours following an unplanned cut (43% said within 1 hour) In normal conditions it was felt that a distributor should be required to pay compensation to a consumer after an average of 12 hours without power following an unplanned cut After a major storm affecting 100,000 customers most expected power to be restored in 6 hours or less (44%); although a further two fifths (40%) felt within 24 hours was acceptable

16. slide 16 Do you think that distribution companies should be doing more to reduce the impact of severe weather on their networks? 45% felt that DNOs should be doing more to reduce the impact of severe weather on their networks

17. slide 17 Do you think that your distribution company should be taking any steps to reduce their company’s impact on the environment? 56% felt that DNOs should be taking steps to reduce their company’s impact on the environment

18. slide 18 Awareness of Standards Standard% Awareness GS2: If your electricity supply fails during normal weather conditions because of a problem on your distribution system, your distributor will restore it within 18 hours of first becoming aware of the problem. If they fail and you make a valid claim within three months of the date the supply is restored, they will arrange for you to receive a compensation payment. You will also receive further compensation for each additional 12 hours you are without supply. 7 GS2A: If your electricity supply fails because of a problem on the distribution system and you are without power for three hours or more, on four or more different occasions in any single year (April to March) you are entitled to a compensation payment. You must make a valid claim for this payment within three months of the end of the year to which the claim applies. 4 GS4: If your distributor needs to switch off your power to work on the network they will give you at least 2 days’ notice. If they fail to give 2 days’ notice or switch your electricity off on a different day, then you can claim (within 1 month of the failure) a compensation payment. 10

19. slide 19 Background Findings Business Consumers

20. slide 20 Size of Organisations: Small = £275,000pa

21. slide 21 Experience of Unplanned Cuts

22. slide 22 Frequency & Duration of Unplanned Cuts FREQUENCYDURATION MEAN = 2.6MEAN = 145 MINUTES

23. slide 23 Experience of Planned Cuts

24. slide 24 Frequency & Duration of Planned Cuts FREQUENCYDURATION MEAN = 1.4MEAN = 138 MINUTES

25. slide 25 Distributor Contact 11% had been contacted or called back by their distributor during an unplanned power cut

26. slide 26 Experience of Voltage Fluctuations

27. slide 27 Experience of Voltage Fluctuations Some claimed to experience them on a daily basis (1%), but most experienced them up to 5 times a year (59%) 35% of businesses had implemented measures, or invested in equipment, to protect the business in the event of a power dip or surge in supply Levels of investment ranged from the odd pound to as much as £25,000,000: –Small: £45K –Medium: £33K –Large: £1.8M Just less than one third of businesses stated that their business’s insurance covered them in the event of a loss of business as a result of a power cut: –large businesses were more likely to be covered than small businesses (39% large, 30% medium and 27% small)

28. slide 28 Do you believe it is reasonable for a power cut to occur in severe weather, ie a major storm or flooding?

29. slide 29 Service Expectations On average, the maximum number of cuts lasting more than 3 hours that they felt a DNO should be allowed in any one year before paying compensation was 1.7 Most (53%) felt that power should be restored within 1 hour following an unplanned cut (a further 30% said within 2-3 hours) In normal conditions it was felt that a distributor should be required to pay compensation to a business after an average of 6 hours without power following an unplanned cut After a major storm affecting 100,000 customers most expected power to be restored in 6 hours or less (34%); although a further two fifths (40%) felt within 24 hours was acceptable: –the proportion expecting restoration within 6 hours was higher amongst larger businesses (44% large, 38% medium and 31% small)

30. slide 30 Do you think that distribution companies should be doing more to reduce the impact of severe weather on their networks? 55% felt that DNOs should be doing more to reduce the impact of severe weather on their networks

31. slide 31 Do you think that your distribution company should be taking any steps to reduce their company’s impact on the environment? 71% felt that DNOs should be taking steps to reduce their company’s impact on the environment 62% would like information to be available from their DNO on how they could be more energy efficient, most via email (37%) or leaflet (25%), although 10% wanted a visit

32. slide 32 Awareness of Standards Large % Medium % Small % Total% If your electricity supply fails during normal weather conditions because of a problem on your distribution system your distributor will restore it within 18 hours of first becoming aware of the problem. If they fail and you make a valid claim within three months of the date the supply is restored, they will arrange for you to receive a compensation payment. You will also receive further compensation for each additional 12 hours you are without supply 11172214 If your electricity supply fails because of a problem on your distribution system and you are without power for three hours or more, on four or more different occasions in any single year (April to March), you are entitled to a compensation payment. You must make a valid claim for this payment within three months of the end of the year to which the claim applies 49157 If your distributor needs to switch off your power to work on the network they will give you at least 2 days’ notice. If they fail to give 2 days’ notice or switch your electricity off on a different day, then you can claim (within 1 month of the failure) a compensation payment 13192415

33. slide 33 Stated Preference