Background
PJM Economics, in partnership with Accent, were commissioned by Western Power Distribution (WPD) to design and implement a programme of research focused on obtaining customer willingness-to-pay (WTP) values for potential service initiatives and certain service enhancements. The first phase of research provided an initial view on preferences to inform the early development of WPD’s ED2 business plan. Subsequent phases of the research then explored refined sets of service improvements to help refine the company’s business plan.
Approach
The approach across each of the three phases used stated preference methods to measure customers' values for service enhancements and initiatives. The questionnaires were administered using a combination of telephone interviews and an online approach using commercial panel samples. Quotas were set by age, gender, socioeconomic grade, urban/ rural, and WPD network region to ensure representative samples.
One of the key stated preference methods used was MaxDiff, wherein participants were asked to identify which initiatives they would value the most and which they would value the least among a set of service initiatives. A balanced design approach was used to create the choice situations faced by each participant from the set of all combinations of initiative. The outcomes from these exercises were quantitative indices of relative value across the full ranges of service initiatives included in the surveys.
Contingent valuation exercises were also used obtain the values for service improvement packages where all initiatives were implemented. These values wre used in conjunction with the MaxDiff results to obtain monetary values for every service initiative.
Results
Economic analysis of the data provided key insights to the company on the values to customers of a wide range of service initaitives, covering network enhancement, customer service, and iniatives associated with the Net Zero objective. A range of evidence was obtained to support the validity and reliability of the WTP results, meaning that WPD could have confidence that the surveys had produced meaningful and reliable estimates of customers’ WTP for RIIO-ED2 service initiatives which could therefore play an important role in the development and documentation of WPD's ED2 business plan..