[Editor’s note: This is the second installment of a three-part series on the changing relationships between utility companies and residential and commercial hvacr contractors.]

The buzzword in the world of utilities and hvacr contractors is cooperation. Ideally, one side provides energy and financing and the other side provides installation, maintenance, and service. Each side is very good at what it does and each side needs the other.

Not a bad arrangement.

That’s the type of arrangement that has been evolving for the past few years between contractors and some local utility companies. The spirit of cooperation seems to have taken the upper hand over the spirit of distrust — which still exists, to a degree, in the eyes of some residential contractors.

When two sides get together to form a partnership, there is usually one common goal. In the case of utilities and contractors, there are several. Perhaps the most important, according to one utility company official, is satisfying the customer.

“Our relationship has been extremely beneficial, because it all comes down to two words: customer satisfaction,” said Bill Laub of Southwest Gas Corp., Las Vegas, NV, referring to his company’s customer referral program.

“About 15 years ago, a series of our quarterly customer satisfaction surveys displayed an alarming drop in customer satisfaction in our handling of the hvac product group. To reverse that trend, we began collaborating with the hvac industry. Among other things, our customer referral program was born. These results returned our quarterly satisfaction survey for hvac back into the high 90th percentile during most of the 1990s.”

Worry Free Service

Kansas City Power & Light (KCPL) began its “Worry Free” program in 1996. Worry Free Service, Inc., is a separate, non-regulated subsidiary of KCPL. Worry Free provides customers with a number of different services involving hvac equipment (although the program includes other products, such as appliances and siding). For a monthly fee, customers are guaranteed low financing rates to purchase new equipment, guaranteed warranty repairs on new or existing equipment, and access to a network of approved, qualified hvac contractors.

“KCPL felt that by working with contractors, we could have the whole community working with us,” said KCPL’s Doug Dahl. “The program started with a group of contractors who made up a list of standards which contractors had to meet in order to participate in the Worry Free program.

“For example, contractors were required to offer two-hour callback to the customer to set up an appointment, offer 24/7 service, and maintain a commercial place of business. Every contractor in the Kansas City area was eligible if they met the standards.”

Initially, 40 contractors signed up.

KCPL’s Eraina Aseme said her company and local contractors stress customer service every step of the way.

“Worry Free Service is a ‘quality assurance’ program that strengthens the bond between customers and contractors,” she said. “Any problems can be resolved in a three-way conference call with the customer. If a contractor can’t go any further, the Worry Free technical support personnel and/or the manufacturer is asked to get involved.

“Some contractors have been asked to drop out of the program. They are sent a letter and given 30 days to resolve the problem or drop out of the program.”

Currently there are 118 contractors in the Worry Free program in 18 states. Worry Free has seen a marked increase in competition for financing programs, but participating contractors still get a lot of support.

Bill stuffers in KCPL billings are paid for by Worry Free and contractors are encouraged to co-op to pay for their own advertising on the stuffers. Sales leads generated by these stuffers are given to participating contractors, too.

Heat Pump Program

The Tennessee Valley Authority (TVA) has had a residential heat pump program for over 20 years. It began as a weatherization program and evolved into a complete financing program for heat pumps. The program also spawned the creation of the Quality Contractor Network (QCN), which consisted of contractors from several states who installed heat pumps per the TVA’s specifications.

“Our 158 power distributors [whose primary function is to sell power to the end user], working with contractors, will do over 10,000 heat pump installations this year,” said TVA’s Cindy O’Reilly of the energy right® heat pump program. “The program peaked in 93 and 94 when we had 14,000 heat pump installations. During that period, we replaced window air conditioners, baseboard, wall heaters — and contractors had fewer financing options.”

However, O’Reilly predicts that in the next three years, the program will grow again.

“We’re actually seeing second generation heat pumps come through the program now,” she said. “We’ve been in a ‘push’ mode for several years and now we are in a ‘pull’ mode. Now it is time to educate contractors and customers about heat pumps.”

O’Reilly said that TVA inspects every heat pump installation, which is one way for contractors to guarantee a place in the program. “We require the contractors to do six installations a year, and each installation must pass inspection for them to stay on our list. Right now we have over 800 contractors on the list.”

She conceded that she would like to see changes in the criteria for being a qualified contractor and noted that TVA is planning to make some changes in the program. One criteria that won’t likely change is that all contractors have to have Manual “J” certification training.

When customers call for heat pump information, they are given a list of referral contractors in their area. If the contractor installs the heat pump, they are given a rebate based on tonnage and SEER rating. O’Reilly said that TVA is pushing into the light and large commercial markets, too.

“We have had a pilot program running for the light commercial market, and we would like to roll it out soon, to include heat pumps and water heaters,” she said.

Contractor Alliance Program

Pepco Energy Services recently announced its Contractor Alliance Program, which involves Washing-ton, DC-area hvacr contractors. According to the company, the program “provides Pepco Energy Services and contractors the opportunity to leverage each other’s strengths for the purpose of acquiring and retaining long-term hvac repair and new customers.”

Pepco’s Ed Mayberry said his company, which was established in May 1995, is an unregulated subsidiary of Potomac Electric Power Co.

“We have grown from six employees doing about $100,000 in revenues to 300 employees, and we’ll probably do a half-billion this year,” he added. “We set out about three years ago to provide a bundle of energy-related services to our customers. We saw hvac work as an important add-on to this bundle. Pepco has had experience working with hvac contractors, and we have enjoyed good relations with them.”

The initial criteria for qualified contractors is that they must belong to the Air Conditioning Contractors of America (ACCA) or the Plumbing-Heating-Cooling Contractors (PHCC). Mayberry said Pepco has signed up 20 contractors and will stand pat for the time being. “We think this is an efficient amount to carry on the business right now,” he said. “But we are in discussions with other contractors, too.”

To generate leads for members of the program, Pepco has launched a multimedia advertising campaign, designed to “break through the clutter” and introduce Washington-area homeowners to the many hvac services available through Pepco.

Customer Referrals

Southwest Gas Corp. employs the use of a customer referral program to get Las Vegas-area a/c contractors involved with its programs. Laub said his company referred 6,274 customers to area contractors in 2000.

“We also assisted local trade associations by faxing meeting notices to 250 contractors on a monthly basis, organized meetings, and cosponsored a golf tournament.

“We provided $30,000 worth of co-op advertising to area contractors, provide CitiFinancial as a source of third-party financing for homeowners to use hvac equipment, and notify the industry of problems, i.e., a recall of defective furnaces.”

Commercial Tie-ins

Trigen-Oklahoma City Energy Corporation works with a number of commercial contractors to ensure that its commercial customers get the best service in this mid-Oklahoma community.

“The relationship of our utility and the mechanical contractors in this area will strengthen and grow,” said Trigen’s Todd Lewis. “And I look for new areas, geographical and business, where our expertise could be utilized.”

Lewis said that although his company’s focus is very narrow in the local marketplace, Trigen maintains a number of valued business partnerships.

“We have a good relationship with many of the mechanical contractors in town,” he said. “They are the group we most often deal directly with for the installation phase of our business. We can assist one another and use the expertise of the other.”

Orlando Utilities Commission (OUC) is an example of how a utility company has partnered with an area hvac commercial contractor to form a solid one-to-one relationship, resulting in several successful design-build projects throughout the community. In this case, the S.I. Goldman Co., Inc./Comfort Systems USA of nearby Longwood, FL, has become synonymous with some of the larger OUC projects in the Orlando area.

“We’re trying to offer our customers as many services as we possibly can,” said OUC’s Keith Rice. “Chilled water is a logical progression because of the humidity and heat in Florida. Lockheed-Martin asked us to design, build, own, and operate a chilled-water plant for their facility.

“We picked S.I. Goldman to do the job based on its qualifications. That’s where I first met John,” he said, referring to John Martin, president and ceo of S.I. Goldman.

Rice said OUC and Goldman completed the project in “record time, with few change orders and without a hitch.” After that project was complete, OUC decided to go into “district cooling” for some of the area’s larger buildings.

“I needed another building downtown [Orlando] in order to economically go out and build a chilled-water plant,” he recalled. “Along came the construction of the new CNL Centre. With that, we asked Goldman to come in and partner, doing the design-build. The plant was running within four months, our ‘100-day’ project.”

OUC is now planning more chiller plants, including a massive pump station and pipeline system, which will supply chilled water to buildings in and around the new Orange County convention center.

“It is a huge undertaking,” said Rice.

Rice called Martin and S.I. Goldman because he “has trust in their ability to get the job done right the first time. We have a good relationship with Goldman.”

The utility companies in this article represent a larger number across the U.S. whose goal is to use their marketing power and deep pockets to maintain and enlarge their customer base. Many utilities have found that the best way to do that is to ask hvacr contractors in their markets to provide their customer base with top-notch service and installation work.

Under this scenario, the contractor’s customer base should also increase in proportion to the utility’s — not a bad arrangement.

NEXT WEEK: The relationship between contractors and utilities is explored from the contractors’ perspective.