Background
As part of Ofgem’s annual Stakeholder Engagement and Consumer Vulnerability (SECV) incentive scheme, electricity distribution network operators (DNO) needed to provide evidence to Ofgem that they had robustly measured the outcomes of their activities and the degree to which customers valued them. Building on previous work for Western Power Distribution and UK Power Networks, the six electricity distribution network operators (DNO) of Great Britain collectively commissioned PJM economics and Accent to design and implement a research study to obtain an industry-wide set of values for relevant SECV service initiatives, thereby avoiding any problems associated with different interpretations of multiple methodologies.
Approach
The study was designed to obtain customer value estimates for use in cost-benefit analysis based on an application of the stated preference methodology. The stated preference approach involves asking survey participants a series of carefully designed questions to explore their preferences in relation to the object of the study. When used for social valuation, stated preference methods invariably involve participants having to make a trade-off between having more or less of the good or service in question and having to make, or receive, a higher or lower payment. It is the trade-off between money and the provision of the good or service that defines the value measure.
The service initiatives included in the survey for valuation were agreed with all DNOs and were all designed to be applicable to every DNO. That is, there were no differences across DNO areas except to refer to the correct DNO name based on the participant’s home location.
The wording of the initiatives was tested via a phase of six cognitive depth interviews, with one interview per DNO area and covering a range of customer types. The survey was also pilot-tested on a sample of 102 interviews.
A mixed-method approach was adopted for the main survey, combining face-to-face and online fieldwork. The target sample was for 1,200 household participants, representatively split by DNO area, and with representative proportions by age, gender, socio-economic grade and rural-urban status within each DNO area. The achieved sample closely matched the target structure, with 1,216 households completing the survey in total. Weights were applied to exactly match the weighted data to the target structure.
Results
Eighteen potential SECV initiatives were tested in this research and monetary valuations were successfully estimated for all. The validity of the WTP results was appraised using content and construct validity indicators, and was found to perform well on all measures. We therefore recommended the willingness-to-pay estimates for use in CBA appraisals kind for incorporation within SECV submissions to Ofgem.