Gas Networks Ireland
Customer Performance
Indicators
Consultation Paper
Reference:
CER/16243
Date Published:
22/08/2016
Closing Date:
19/09/2016
0
Executive Summary
The Commission for Energy Regulation (CER) is the independent regulator of Gas Networks
Ireland (GNI). As GNI is a regulated network operator responsible for building and maintaining
the natural gas network in Ireland, the revenues it is allowed to recover and the tariffs it is
allowed to charge are subject to regulatory oversight.
Network companies such as GNI or ESB Networks are subject to revenue control periods
which set out the amount of revenue they can recover over a certain period of time, which is
five years in the case of electricity and gas. These revenues are recovered via network
charges which form part of all energy customers’ bills. These revenue setting periods are
known as Price Controls in gas and Price Reviews in electricity.
GNI is in its third Price Control (PC3) which will finish in September 2017. At that time a new
Price Control (PC4) will take affect which will set out the revenues that GNI will require to
maintain and operate the natural gas network for over 660,000 gas customers1,
To date, the CER has received customer performance data on an annual basis from GNI and
has reviewed this to ensure that GNI are in compliance with their licence conditions. The CER
also monitors the performance of GNI with regards to safety on the basis of a set of key
performance indicators (KPIs) submitted quarterly to the CER. The outputs from this data are
included in the CER’s Energy Safety Report that is published each year. As part of the next
Price Control, the CER is proposing that some of the revenues that GNI obtain will be
specifically linked to how well it performs against certain customer performance data. The
introduction of such an incentive mechanism whereby GNI are encouraged to achieve higher
standards of customer performance will be new to GNI.
The purpose of this Consultation Paper is to outline the proposed data that the CER intends
to use as part of the incentive mechanism. This follows a review of customer performance
incentives currently in place across regulated utilities in both Ireland and the United Kingdom.
As a result of this review, the CER is proposing three indicators against which GNI will be
assessed and incentivised. These indicators will include incentives around the following:
(1) GNI’s Call Centre
(2) Complaints
(3) Customer Survey
These indicators include a mixture of both quantitative2 and qualitative3 analysis.
1
GNI’s customers include residential customers, businesses and power plants.
Quantitative indicators – deal with numbers or quantity i.e. the number of complaints.
Qualitative indicators – deal with the quality or characteristics of what is being discussed i.e. “Overall how
satisfied were you with the outcome of your complaint?”
2
3
1
The quantitative indicators are focused on three key touch points that GNI has with natural
gas customers; (1) GNI Call Centre, (2) On Site Visits and (3) Complaints.
The GNI Call Centre is the point where the most gas customer’s interaction with GNI currently
takes place. In addition, the GNI complaints process requires direct GNI interaction. The CER
is proposing that the processes used are quantitatively assessed to see how GNI is
performing. On site visits are another element of interaction between GNI and its customers.
The customer survey would qualitatively assess GNI’s performance in this area.4
As part of the Price Control process it is envisaged that there will be a financial weighting
applied to these indicators. This paper does not provide detail on the proposed amount the
CER is proposing for these weightings, but does outline the financial principles that could
underpin such an approach. The financial element will be consulted and decided upon as
part of a wider consultation that will be undertaken for the Price Control project in 2017.
The indicators proposed by the CER in this paper are those based on an analysis of indicators
that are currently in place across other regulated utilities. The CER welcomes feedback from
respondents on its proposals.
4
In addition to these customer performance indicators, the CER proposes to incentivise GNI in terms of new
connections to the gas network. This will be consulted on as part of the PC4 Consultation Paper in Q2 2017.
2
Public Impact Statement
In 2017 a new Price Control (PC4) will take affect which will set out the revenues that GNI will
require to maintain and operate the natural gas network for over 660,000 gas customers. As
part of that process the CER intends to measure on an annual basis how effectively GNI deals
with its customers. There will be an incentivised approach to GNI’s customer performance. To
date, the CER has received customer performance data on an annual basis from GNI and has
reviewed this to ensure that GNI is in compliance with their licence conditions i.e. GNI may
earn more or less revenues depending on how well or poorly they perform. The CER will now
measure and incentivise GNI’s performance in line with the best interests of consumers. We
will do this through the following:
 Require GNI to monitor and collect specified customer performance indicators which will
measure how effectively the company deals with its customers;

Ensure GNI strives for continuous improvements in how quickly and efficiently they deal
with customer queries;

Motivate GNI to deal effectively with the overall number of complaints they receive; and

Allow customers and suppliers to have a role in determining how GNI are incentivised as
part of its Price Control.
As the financial element of the incentive mechanism is not being consulted on in this paper,
the financial impact on customers is not yet quantified. The financial element will be consulted
on as part of the main Price Control.
3
Table of Contents
1
Introduction ................................................................................................................. 1
1.1
Commission for Energy Regulation .................................................................. 1
1.2
Context ............................................................................................................ 1
1.3
Related documents .......................................................................................... 2
1.4
Structure of this paper ...................................................................................... 2
2
Comparators – Other Sectors Regulated by the CER ............................................... 3
2.1
Introduction ...................................................................................................... 3
2.2
Customer Satisfaction ESB Networks .............................................................. 4
2.3
Proposed Irish Water Customer Service Indicators .......................................... 5
3
Comparators – Regulatory Precedent in Great Britain ............................................. 7
3.1
Introduction ...................................................................................................... 7
3.2
Ofwat Service Incentive Mechanism ................................................................ 7
3.3
Ofgem – Customer Performance Indicators ................................................... 10
4
Structure of the Customer Service Indicators for PC4 ........................................... 12
4.1
Introduction .................................................................................................... 12
4.2
Points of contact between GNI and the gas customer .................................... 13
5
Proposed Customer Performance Indicators for PC4 ............................................ 14
5.1
Introduction .................................................................................................... 14
5.2
Proposed Indicators using the SMART Criteria .............................................. 15
6
Proposed Structure of the Financial Incentive ........................................................ 20
6.1
Introduction .................................................................................................... 20
7
Conclusion & Next Steps .......................................................................................... 23
iv
Glossary of Terms and Abbreviations
Abbreviation or Term
Definition or Meaning
SEM
Single Electricity Market
GNI
Gas Networks Ireland
PC
Price Control
PR
Price Review
IRV
Interactive Voice Response
KPI
Key Performance Indicator
IRC
Interim Revenue Control
SIM
Service Incentive Mechanism
CRM
Customer Relationship Management
SMART
Specific, Measurable, Assignable,
Realistic, Time Related
v
1 Introduction
1.1 Commission for Energy Regulation
The CER is Ireland’s independent energy and water regulator. The CER was established in 1999
and now has a wide range of economic, customer protection and safety responsibilities in energy.
The CER is also the regulator of Ireland’s public water and wastewater system.
The CER’s primary economic responsibilities in energy cover electricity generation, electricity and
gas networks, and electricity and gas supply activities. As part of its role, the CER jointly regulates
the all-island wholesale Single Electricity Market (SEM) with the Utility Regulator in Belfast. The
SEM is governed by a decision-making body known as the SEM Committee, consisting of the
CER, the Utility Regulator and an independent member. The overall aim of the CER’s economic
role is to protect the interests of energy customers. The CER has an important related function in
customer protection by resolving complaints that customers have with energy companies.
The CER’s core focus in safety is to protect lives and property across a range of areas in the
energy sector. This includes safety regulation of electrical contractors, gas installers and gas
pipelines. In addition the CER is the safety regulator of upstream petroleum safety extraction and
exploration activities, including on-shore and off-shore gas and oil.
In 2014, the CER was appointed as Ireland's economic regulator of the Irish public water and
wastewater sector.
Further information on the CER’s role and relevant legislation can be found on the CER’s website
at www.cer.ie.
1.2 Context
GNI is the network operator for gas and therefore when a new customer connects to the gas
network, interaction with GNI will be the first that an energy customer will have with the gas market.
As part of PC4, the CER is aiming to deliver an increased focus on GNI’s performance by
evaluating customer indicators that may be used to incentivise GNI’s performance.
A Price Control sets out the revenues that GNI can recover over a five year period. This includes
the operating expenditure required to run the gas network, the capital expenditure required for
new assets built on the network and the rate of return that GNI can earn on capital projects. Each
price control contains incentives for GNI to improve efficiency which benefits customers.
1
To date, the CER has received customer performance data on an annual basis from GNI and has
reviewed this to ensure that GNI are in compliance with their licence conditions. The CER also
monitors the performance of GNI with regards to safety on the basis of a set of key performance
indicators (KPIs) submitted quarterly. These data are included in the CER’s Energy Safety Report
that is published each year. As part of the next Price Control, the CER is proposing that some of
the revenues that GNI obtain will be specifically linked to how well it performs against certain
customer performance data. The introduction of such an incentive mechanism whereby GNI are
encouraged to achieve higher standards of customer performance will be new to GNI.
The indicators decided in this consultation process will be captured annually in GNI’s Customer
Performance Report, allowing gas customers to see how GNI are performing year-on-year. In
2016, the CER worked with GNI to review the annual report structure to make it more accessible
for GNI customers and the public. This included dividing the reporting structure to include a standalone Customer Performance Report.
1.3 Related documents

CER/16/173 Consultation on the Irish Water Performance Assessment

CER/10/198 Decision on 2011 to 2015 Distribution Revenue for ESB Networks Ltd

CER/12/196 Decision on October 2012 to September 2017 Transmission Revenue for
Bord Gáis Networks

CER/12/194 Decision on October 2012 to September 2017 Distribution Revenue for Bord
Gáis Networks
1.4 Structure of this paper
This consultation paper is structured as follows:

Section 1, reviews the customer service indicators in place for other utilities regulated by
the CER.

Section 2, analyses the customer service indicators in place in Great Britain by the
energy regulator (Ofgem) and water regulator (Ofwat).

Section 3, provides proposals on what types of indicators could be used for customer
centric regulation and discusses the financial principles that could underpin the incentive.

Section 4, outlines conclusions and next steps.
2
2 Comparators – Other Sectors Regulated
by the CER
2.1 Introduction
As part of this Consultation Paper, the CER has considered the customer service indicators used
for ESB Networks (CER/10/198) and those proposed for Irish Water (CER/16/173).
There are currently five customer performance indicators associated with financial incentives in
place for ESB Networks. The weightings referenced in Table 1 indicate what percentage of the
overall financial incentive each indicator carries.
3
2.2 Customer Satisfaction ESB Networks
Incentive
Description
Weighting
Two separate Telephone Service Factor (TSF) Indicators
are in place for this element.
Speed of
Telephone
Response
Call
Abandonment
Rate
TSF Method 1 measures the number of calls picked up
within 20 seconds as a percentage of the total number of
calls.
25%
TSF Method 2 measures the number of calls picked up by
IVR5 that do not progress to queue and those picked up by
an agent within 20 secs in queue as a percentage of the total
number of calls.
Percentage of abandoned calls
Calls waiting for an agent that have not been dealt with
through the IVR
25%
Call Back
Survey
The call-backs are carried out by an independent research
company. The calls are selected randomly and customers
are asked to score their call experience on a scale of 1 (very
disappointed) to 5 (very satisfied).
Mystery
Caller
This measure involves a third party making calls to assess
the agent’s performance.
20%
First Contact
Referral
The percentage of calls that are dealt with in one phone call.
15%
15%
Table 1 Customer Service Indicators for ESB Networks
5
Interactive Voice Response is an automatic phone-call answering system i.e. press 1 for this, press 2 for that. It
redirects the customers to where they want to go within the call centre.
4
2.3 Proposed Irish Water Customer Service Indicators
The CER has recently consulted on seven key indicators relating to Irish Water’s customer service,
as outlined below. As Irish Water is still in the very early stages of development, no financial
incentive or weightings have been put in place for these indicators. Rather, the purpose of these
indicators is to gauge in the first instance how Irish Water is performing vis-à-vis its customers.The
CER may propose financial incentives/penalties, are put in place against specific indicators as
part of the next revenue control for Irish Water (IRC2) in Q3 2016.
Incentive
Description
No. of billing contacts closed out within 5 days
Response to
Billing
Contacts
Response to
Complaints
Total billing contacts
The CER proposes to monitor the number of complaints:
 Responded to within 5 working days, with a resolution or resolution
plan
 Total complaints resolved within 2 months
It is intended that the utility will monitor the number of complaints broken
down by channel (phone, post, email and social media).
Billing of
Metered
Customers
Call Back
Survey
Call
Abandonment
Rate
No. of bills based on a meter reading
No. of bills based on a metered account
The call-backs are carried out by an independent research company. The
calls are selected randomly and customers are asked to score their call
experience on a scale of 1 (very disappointed) to 5 (very satisfied).
Percentage of abandoned calls
Calls waiting for an agent that have not been dealt with through the IVR
Two separate Telephone Service Factor (TSF) Indicators are in place for
this element.
5
Speed of
Telephone
Response
TSF Method 1
Calls picked up by an agent within 20 secs in queue
Total number of calls
TSF Method 2
Picked up by IVR and do not progress to queue + Picked up by agent
within 20 secs in queue
Total number
6
First Contact
Referral
The percentage of calls that are dealt with in one phone call.
Table 2 Proposed Customer Service Indicators for Irish Water
IVR – Interactive Voice Response is a computerised telephone system that allows a caller to respond to a menu of
choices (spoken by an ‘electronic voice’) by pressing the appropriate button on the phone. For example, “press one to
input your meter reading”.
6
6
3 Comparators – Regulatory Precedent in
Great Britain
3.1 Introduction
This section considers the customer performance indicators used in Great Britain by Ofwat (the
water regulator) and Ofgem (the energy regulator). Similar to the utilities that the CER regulates,
utilities such as the regional water utilities (Thames Water, Severn Water etc.) and gas distribution
companies (National Grid, Northern Gas Networks etc.), which are subject to revenues set by a
regulator, have service requirements which are linked to their revenue allowances. Analysis
undertaken by CER of the British water and energy regulators suggests that there are different
approaches taken to achieve quantitative and qualitative measures.
3.2 Ofwat Service Incentive Mechanism
Ofwat’s Service Incentive Mechanism (SIM) is divided between a quantitative measure and a
qualitative measure. The quantitative measure comprises 25% of the total incentive mechanism
and is heavily focused on complaints both in terms of the numbers of complaints and the speed
of resolution. Each element of the quantitative measure carries a weight which reflects the
increasing impact on consumers and the cost of failing to deal with a complaint effectively the first
time.
As can be seen from the diagram below, the qualitative measure is worth 75% and is measured
via a customer survey, which indicates that Ofwat place a heavier emphasis on the quality of water
utilities dealings with customers and the satisfaction of customers rather than on how quickly a
customer query has been dealt with. Ofwat applies a financial incentive which includes both
positive (+0.5) and negative (-1.0) financial adjustments to total revenues.
7
Ofwat
25%
Qualitative
Quantitative
75%
Figure 1 Ofwat Overall Weighting
The table below sets out the customer indicators and the weightings that are used to measure
customer satisfaction.
Incentive
Qualitative
Customer
Survey
Description
The survey captures calls relating to items such as billing issues (50%
weighting) and operational matters (50% weighting).
The survey seeks to establish consumers’ views on the:
 Utility’s handling of their contract or service issue

Outcome of the contact or service issue

Level of satisfaction with the overall experience; and, reasons for
Quantitative
dissatisfaction or satisfaction
Incentive
Description
All lines
busy/calls
abandoned
Total number of callers who abandon their call before it is answered by the
utility.
8
Number of
complaints
received by
telephone
This is where a caller has experienced an issue which has prompted them
to make contact.
Number of
written
complaints
This is any written communication from a customer or their representative
alleging that a service or lack of service by the utility has fallen short of
their expectations.
Number of
escalated
written
complaints
This is defined as a second complaint from a customer relating to the same
issue that, in accordance with the utility’s approved complaints procedure
is reviewed by a person or persons not involved in providing the response
to the customers first complaint.
Number of
This is the number of complaints that remain unresolved and are referred
complaints
to CC Water, which is the arm of the Consumer Council that deals with
escalated to
water issues. This is the severest form of complaint.
the Consumer
Council for
Water7
Table 3 Ofwat Customer Service Indicators
7
CCWater (Consumer Council for Water) is a non-departmental public body that represents water and sewerage
consumers in England and Wales.See link for further detail: http://www.ccwater.org.uk/
9
3.3 Ofgem – Customer Performance Indicators
The incentive mechanism for Ofgem is made up of three components as outlined in the diagram
below. Similar to Ofwat, a financial incentive is also applied. The overall reward/penalty for the
broad measure of customer service is of between +/- 1% of the revenues that a gas utility may
collect. Whereas Ofwat has chosen to focus on the qualitative element, Ofgem has equal
weightings for complaints, customer surveys and an element focused on stakeholder
engagement.
Each of the elements included within the indicators have different weightings, which are indicated
below. The complaints indicators used have different weightings attached which reflect the
severity of the issue. For example, repeat complaints have a weighting of 50% of the overall
indicator.
Ofgem
33%
33%
Customer Survey ( Qualitative )
Complaints ( Quantitative)
Stakeholder Engagement ( Qualitative)
33%
Figure 1 Ofgem Overall Weightings
10
Customer Survey
Complaints
Stakeholder
Engagement
Indicator
Weighting
Unplanned Interruptions
33.33%
Planned Interruptions
33.33%
Connection Satisfaction
33.33%
Percentage unresolved after 1
day
10%
Percentage unresolved after 31
days
30%
Percentage of repeat complaints
50%
Energy Ombudsman8 decisions
10%
This metric is to reward gas utilities 100%
for high quality outcomes resulting
from a stakeholder engagement
process which it is expected to
have in place. A certain minimum
criteria has to be reached to be
eligible for a reward.9
Table 4 Ofgem Indicators & Weightings
8
9
See link for further details: https://www.ombudsman-services.org/energy.html
See link for further detail: https://www.ofgem.gov.uk/ofgem-publications/48155/2riiogd1fpoutputsincentivesdec12.pdf
11
4 Structure of the Customer Service
Indicators for PC4
4.1 Introduction
This section outlines the initial thinking of the CER in terms of the key indicators which it proposes
to use to monitor the performance of GNI as part of the next Price Control. As part of the process
of review, the CER in association with its economic consultants assessed the indicators which are
in place across a range of utilities.
This assessment was conducted with a view to consulting on indicators which the CER view as
Specific, Measurable, Assignable, Realistic and Time Related (SMART).
Specific
Is the indicator
specific enough
that it is clear
what is being
captured?
Measurable
Can the indicator
be quantified by
the call centre or
GNI staff?
Assignable
Is it clear who
will be
responsible for
collecting the
data?
Realistic
Is the indicator
representing a
realistic target
and balancing
value for money?
Time related
Is the indicator
being collected
within a specific
time period?
Table 5 SMART Objectives
The indicators outlined in this document have been assessed against the SMART criteria (please
refer to Section 5.3). Where indicators demonstrate SMART characteristics, they are suitable to
capture and assess the performance of the utility over the medium and longer term. The CER
strongly encourages feedback on the indicators below, and other indicators which respondents
view as suitable, bearing in mind an assessment against the SMART criteria.
12
4.2 Points of contact between GNI and the gas customer
The proposed choice of indicators are intended to reflect the main touch points that GNI has with
a gas customer. A touch point is any encounter that a customer has with a company and forms
part of Customer Relationship Management (CRM) within GNI.
For GNI the primary CRM touch points are its call centre, on site visits and resolution of complaint
received. Therefore, the focus should be on both dealing efficiently with customers (quantitative
measures) and dealing with them well (qualitative measures) across these touch points.
The CER proposes quantitative and qualitative measures that will capture:
(1) The response rate of GNI’s Call Centre. As GNI interact more digitally in the coming years
e.g. website quotations, social media etc. it is envisaged that these indicators will be
reassessed.
(2) The number of complaints received and how quickly GNI deal with such complaints.
(3) The CER proposes qualitative measures which will utilise customer surveys as a
mechanism to assess how satisfied customers are with GNI’s service across a range of
customer aspects (as outlined in Figure 3).
Call Centre
•Quantitative
•Captures customer
touch point
Customer
Survey
•Qualitative
•Takes account of
customer experience
Complaints
•Quantitative
•Measures the speed
of resolution
Figure 2 CER Proposed Customer Indicators
13
5 Proposed Customer Performance
Indicators for PC4
5.1 Introduction
This section outlines the CER’s proposals for the PC4 period. The incentive mechanism is
comprised of three parts:
(1) Call Centre Response
(2) Complaints
(3) Customer Survey
As can be seen below the Call Centre response rate, complaints and customer survey are already
used extensively for other utilities. The key customer performance indicators and the utilities that
these already apply to are outlined in the table below.
Ofgem
Ofwat
Electricity
Water






Call Centre Response
First contact referral

Call abandonment rate
Speed of telephone response <20 seconds
Complaints

Total number of complaints
Percentage resolved within 10 days
Percentage resolved within 30 days

Number of complaints referred to the CER (or
comparable body in Great Britain)

Customer Survey
Customer survey


Table 6 Indicators that apply across utilities
14
5.2 Proposed Indicators using the SMART Criteria
The following sets out each of the key performance indicators and their objectives which have
been assessed against SMART criteria.
5.2.1 Call Centre Response
a) First Contact Referral
Objective of the Indicator

Measure level of queries dealt with in one call

Meets the requirements of SMART, but may not be realistic in all cases as some calls
may be more complex

Will also drive efficiency within GNI by reducing repeat callers where possible

Metric is already in place for both ESB Networks and proposed for Irish Water
Specific
Yes
Measurable
Yes
Assignable
Yes
Realistic
Partially
Time Related
Yes
b) Call Abandonment Rate
Objective of the Indicator

Shorten the length of time that a customer is waiting in the queue to speak to an agent

Measured from when customer enters the queue to speak to an agent i.e. after options
are outlined and selected

Used in conjunction with call answering indicators to promote call answering by an agent
in a timely manner

Used across both Ireland and Great Britain
Specific
Yes
Measurable
Yes
Assignable
Yes
Realistic
Yes
Time Related
Yes
15
c) Speed of Telephone Response
Objective of Indicator

Reduce the time customers are waiting to speak to an agent after being placed in the
queue. This is known as the Telephone Speed Factor (TSF)

For GNI the indicator would focus on the number of calls picked up by an agent only
(TSF Method 1) as GNI does not use Integrated Voice Recognition (IVR) to deal with
customers (due to the relatively smaller volume of call throughput when compared with
ESB Networks or Irish Water)

Already in place for ESB Networks and proposed for Irish Water
Specific
Yes
Measurable
Yes
Assignable
Yes
Realistic
Dependent on
Volume
Time Related
Yes
16
5.2.2 Complaints
a) Total Number of Complaints
b) Complaints Resolved within 10 days
c) Complaints Resolved within 30 days
d) Complaints referred to CER where GNI is party to the complaint
Objective of Indicators A, B, C

Measure the overall number of complaints as well as the timely resolution of complaints at 10
days and 30 days

Measure is intended to capture both direct customer complaints as well as those referred to
GNI by shippers

When considering the number of complaints, a target should be considered. For example, this
could be a declining level of complaints from a base year of analysis. Alternatively, the number
of complaints as a percentage of customers could be targeted with an acceptable level
established

The CER proposes that 90% of complaints should be resolved within 10 days, as this
represents a targeted improvement for GNI above current statistics

Used as a key indicator by Ofgem and Ofwat in Great Britain

Indicator is also proposed for Irish Water with similar timeframes for resolution
Specific
Yes
Measurable
Yes
Measurable in total
quantity as well as
resolution in 10
days and 30 days
Assignable
Yes
Realistic
Yes
Time Related
Yes
Objective of Metric D

Indicator would include those complaints which have not been dealt with successfully by GNI

Indicator should incentivise GNI to take ownership of all complaints with the aim of resolving
all complaints from beginning to end where possible
17

Indicator is in place for both Ofwat and Ofgem where such escalations are considered serious
but have a low overall weighting as the level of referrals to CC Water and the Energy
Ombudsman is low
Specific
Partial
Measurable
Yes
Assignable
Yes
Realistic
Partial, in some
cases the
referral to the
CER may be
unreasonable
Time Related
Yes
5.2.3 Customer Survey
Objective of Metric:

Qualitative measure, which focuses on the customer experience with GNI

Interaction between GNI and customer will often be low after initial meter fit as contact will
transfer to supplier. Therefore, the quality of the meter fit interaction is important in terms of the
overall customer experience

The CER proposes that the customer survey focuses on the meter installation and connection
process and the complaints process to assess the quality of the process

Ofwat has a high weighting placed on qualitative measures which indicates that the quality of
service rather than the number of meters fitted in a particular timeframe is paramount

Customer surveys are also in place for ESB Networks and proposed for Irish Water
Specific
Yes
Measurable
Partial,
qualitative
judgment is
required
Assignable
Yes
Realistic
Yes
Time Related
Yes
18
Q1. Whilst in Britain Ofwat places a high weighting on the qualitative element, the CER invites
comment on the balance to be attributed to the customer survey element of customer performance
indicators.
19
6 Proposed Structure of the Financial
Incentive
6.1 Introduction
This will be the first Price Control where the CER will set customer centric based financial
incentives. Regulators in Great Britain are linking increasing proportions of allowed revenues to
output measures and specific deliverables from network companies. These incentives have
typically taken a significant period of time to develop and have benefitted from more than one
utility being captured by this incentive process, which facilitates comparative competition between
utilities to drive performance amongst a pool of regulated utilities.
Nonetheless, the CER does propose that there is a financial incentive for each of the indicators
outlined above. The exact parameters of the incentive have not been decided, as this consultation
is focused in the first instance on the choice of indicators.
However, the CER does invite comment on the broad principles that will underpin the financial
aspect of the incentive and the CER’s initial thoughts in this regard are set out below.
20
Principle 1
The level of incentive to be applied
For Electricity, the total incentive is capped as a percentage of the revenues that ESB Networks
can earn within a year. The maximum that ESB Networks can earn a reward of +0.25% and the
penalty element is capped at -1%.
There is no financial incentive in place for Irish Water.
In the case of Ofwat, the reward is +0.5% of revenues whereas the penalty is -1%.
Ofgem apply a more complex incentive system whereby each element carries a different
incentive as outlined in the table below.
ESB Networks
+ or -
All
-1% to +0.25%
Ofwat
+ or -
All
-1%- to 0.5%
Ofgem
+ or –
Survey
-0.5%- to 0.5%
- only
Complaints
0 to -0.5%
+ only
Stakeholder
Engagement
0% to +0.5%
As outlined above, some financial incentives carry a reward only, some a penalty only, some an
equal reward and penalty on both sides whilst others, carry a higher penalty than reward and
vice versa.
Q2. Respondents are invited to give their view on such positive versus negative financial
incentives.
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Principle 2
The balance of quantitative vs. qualitative weightings
This paper outlines three ranges of indicators focused on; (i) complaints, (ii) call centre
response and (iii) customer survey. Two of these indicators can be measured quantitatively
e.g. are complaint numbers up or down? Are calls being answered within 20 seconds?
Qualitative aspects are based on satisfaction and focused on the quality of the service
received rather than how quick the service was. A balance of prompt service and quality
customer service should have positive effects on the number of complaints, thereby quality
and quantity may be said to be linked.
Ofwat and Ofgem apply a heavier weighting to the qualitative element, suggesting that this is
where customer service can be improved the most in Britain. Ofwat for example apply a 75%
weighting to the qualitative element. For ESB Networks the quantitative elements carries a
heavier weighting.
The CER has identified three areas related to GNI activities from which KPIs can be set.
Therefore, it may be simplest to implement an approach where each aspect has equal
weighting as a first step, which may be amended at a later stage.
Q3. Respondents are invited to comment on the proposed weighting of the KPIs. If possible,
respondents should outline whether they are in favour of applying an equal weighting to each of
the KPIs as a first step.
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7 Conclusion & Next Steps
The proposals in this paper form part of the customer service incentive mechanism for GNI that
will prevail from October 2017.
The CER now invites feedback from stakeholders specifically on the proposed customer indicators
outlined in this paper. Submissions on any of the points listed in this paper should be clear and
specific with rationale included to support the views provided.
Reponses to this paper are invited by 19 September 2016 preferably by electronic form to Sarah
Mc Cauley [email protected] . Alternatively, responses can be sent to:
Sarah Mc Cauley,
Commission for Energy Regulation,
The Exchange,
Belgard Square North,
Tallaght,
Dublin 24
D24 PXWO.
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