What do customers want from improved residential electricity services? Evidence from a choice experiment

Abstract

Improvements in customer satisfaction as well as product/service quality represent a common objective of all businesses, and electricity services are no exception. Using choice experiments and a mixed logit model, this study quantitatively analyzes customers' preferences and their marginal willingness to pay for improved residential electricity services. The study provides an ex ante evaluation of customers' acceptance of hypothetical electricity services. According to the results, customers consider the electricity bill and the electricity mix as the two most important attributes when choosing their electricity services. Customers are willing to pay 2.2% more in the average electricity bill (an additional monthly electricity bill of KRW 1,064; USD 0.96) for a significant increase in the share of renewable energy, which is far less than the actual cost of achieving this renewable target. Therefore, it is better to maintain the current electricity mix in principle, and the renewable share should be gradually expanded instead of making a sudden change in the electricity mix. In addition, customers are willing to pay KRW 6,793 (USD 6.15) more to reduce blackouts once in a year and KRW 64/year (USD 0.06/year) to reduce a minute of each blackout. (C) 2015 Elsevier Ltd. All rights reserved.