Communications and Customer Care
Smart Energy Use

Could you keep your customers on an energy diet?

As people set resolutions for the new year, they’re wondering how to make new routines stick. Those of us who have resolved to eat healthier or exercise more know that keeping these resolutions can be difficult. Behavior change is not easy.

For a person to change a behavior, they first need to see and understand that behavior and its related actions, agree with the reason for changing the behavior, and be motivated to act at the right time.

Public power utilities often commit to encouraging customers to use less of their product, or to go on an energy diet. To get customers to stick with the diet, engage with their utility, and sign up for other programs, public power utilities turn to behavioral science. Here are a few tips for nudging customers in the right direction.

 

Knowing when and how to change

Most often, people don’t think about when they are or are not using electricity.

According to K. Carrie Armel, a researcher at Stanford’s Precourt Energy Efficiency Center, the most successful energy efficiency studies were those that provided more frequent feedback, and also feedback about specific behaviors. This feedback could include showing customers how much standby power devices use with Kill-A-Watt meters or displaying total consumption on an in-home meter. Visual displays, such as lights or smartphone apps that indicate change in the demand price, or personalized charts that show which factors contribute to use are also helpful. In a presentation, Armel noted that close to 40 studies between 1975 and 2000 showed that having a meter in a central location inside a home can reduce energy use by an average of 10 to 14 percent.

Automating new behaviors makes it easier to switch to them. But that requires making sure customers first know how to use any associated technology, such as programmable thermostats, and understand when and why to make changes.

“Utility marketing is more education than anything — we are trying to get the average utility consumer to become interested in our complex topics,” said Cynthia Clemmons, utility marketing manager at Lakeland Electric in Florida.

For example, Clemmons said, “we look at how we decrease our operational costs so we don’t have to raise rates. One way to do that is by getting more customers to [pay their bill online]; which means we first have to educate people on how to do it.”

 

Use opt-out wisely

Utilities often hear that to encourage customer participation, they should make a program opt-out instead of opt-in. While opt-out programs might boost participation, utilities should consider the overall impact on customer relationships.

In a study funded by the Department of Energy, Lakeland Electric tested customers’ adoption of time-of-use rates through voluntary and assigned enrollment in the rate program. Although both groups had high retention across the two-year study, it was only the voluntary group that was able to significantly reduce load – an average of 7 percent. The assigned group actually had a slight increase in use. 

The voluntary enrollees were already more educated about energy use, and therefore willing to change their consumption.

Lakeland also found that the opt-out approach made some customers angry or confused about why they were being placed on a different rate plan. “You definitely don’t want to do something to irritate your customers. Our impression was that we went out of our way to irritate our customers, and we don’t want to do that,” said Dave Kus, assistant general manager, customer service, at Lakeland.

 

Identify why a customer would want to change

A customer might be motivated to change a behavior if it saves them money and time, is an easy change to make, aligns with what others are doing, reflects a personal value, or for another reason altogether.

Utilities promoting energy efficiency are attempting to change behavior for all or a large group of customers. Yet, these customers might have differing motivations and abilities to change.

Julia Lundin, director of product marketing and strategy at Oracle Utilities (formerly Opower), recommends that utilities think carefully about how to segment customers.

“We have 95 attributes for customer segmentation; this is helpful to identify the customers who have highest potential to save, may be harder to reach, may need more hand holding, may use more on-peak or more off-peak energy ... and plenty of other things like if they are an owner or renter, so that you are promoting the most relevant options only,” said Lundin.

A report from Lawrence Berkeley National Laboratory suggests that utilities first determine what behaviors drive the biggest change, such as using less heating or air conditioning during the day, and then determine which customers can benefit from the change, such as those customers with adjustable thermostats who aren’t at home during the hottest or coldest part of the day.

Lundin encourages utilities to connect with customers in a way that “gives them the impression that they are a segment of one.” And being able to do that, added Lundin, requires a lot of technology.

 

Normalizing the change

Another effective motivator for change is simply to fit in.

According to Lundin, a key finding that started Opower’s focus on behavioral science was evidence that telling someone how they were doing compared with their neighbors had a bigger impact than messaging about saving the environment, saving money, or corporate responsibility. Lundin noted that one of their features, which compares customers’ use to that of their neighbors, remains a good way to motivate customers to reduce their energy use.

A study from the Pacific Northwest in the late 1980s showed a similar influence from peers. Participation in a voluntary weatherization project jumped from less than 10 percent to more than 95 percent after the sign-ups switched to relying on local residents, such as citizen advisory councils and speakers at schools and churches.[1]

Utilities might want to increase interpersonal connections by engaging community influencers to help spread messages about smart energy use, or conducting focus groups on energy efficiency practices that work for the customer.

 

Tapping into valuable data

“[Utilities have] a really valuable set of data that often goes under looked,” said Lundin. “When you think about other industries, they don’t have nearly as much information on how a customer interacts with their product.”

Lundin said that a utility’s ability to give customers timely notifications, such as that a bill is forecast to be higher for the month, can drive energy savings. How that information is conveyed has an impact on behavior as well. For a home energy analysis chart that shows which devices and appliances are using the most energy in a customer’s home, Oracle Utilities learned that customers didn’t trust a pie chart that appeared immediately after entering the necessary data. Now, the chart takes a few seconds to load, and a notification indicates that the data is “calculating” during this time, which helps customers trust the data is customized to their own home.

“The entire relationship with the customer [used to be] ‘We give you the power bill, you pay it once a month.’ Smart grid changed that,” recalled Kus. “Now we know what the customer is using every hour. The challenge is making customers engage with this information.”

Lakeland is tracking how customers engage through an energy toolset from Apogee. The digital tool is on Lakeland’s website and gives customers the ability to see what their next bill will be plus other data about their home and energy behaviors.

“We’re trying to figure out which pieces of data [customers] do and don’t want to use,” said Kus. “Early predictions show that customers want to know in advance what their bill is going to be.”

In the first year of rolling out the toolset, Lakeland is focused on getting customers to sign up on the site. In the next year, they will focus on advanced analytics about how customers navigate the toolset.

“We thought we’d be successful if we got 5 percent of our customer base to use the toolset. In the first year, we doubled that – 10 percent are actively engaged with looking at their energy consumption,” said Kus.

 

Engaging customers

“It’s a long-term effort to get customers interested, to understand, and then get to the point of how do you want to help us bring the bill down,” said Kus. “In the [investor-owned utility] world, it is a given that you have a marketing and communications department, that you put time and money into connecting with your customer. In the municipal world, that is not always true.”

Lakeland formed the marketing and communications team — which Clemmons now leads — a few years ago. Before then, the public power utility did not have employees who focused on engaging the utility’s 120,000 customers.

“We have a good story to tell as a municipal utility, and we weren’t telling it,” said Kus. “You want to be able to express to your customers, here’s why we think we bring value to you as your local power company.” 

Part of this connection can be in explaining different rate plans so that customers can clearly see and understand why they might want to make a change in energy use. Part of Lakeland’s new online toolset is a feature that shows customers exactly how much they could save with each rate plan. An interactive tool allows customers to see how certain adjustments, such as lowering or raising their thermostat, can impact their bill.

Through this feature, Lakeland’s time of use rate continues to be a popular choice. Clemmons notes that the time of use rate program is easier to explain to customers than other rate designs, which is why many customers opt for the program.

“Customers want to save money, they want simplicity, they want a couple of clicks,” said Kus. “Whatever option we give a customer has to be simple and fast. We saw that the dollar savings have to be near $20 per month for the customer before they’ll make changes.”

Kus said that since the rate comparison tool went live, about 1,000 Lakeland customers have changed their rate plan.

“A customer who is self-served is a happier customer. In general, they are happier to be able to do what they want to do online and less happy if they have to call in,” said Lundin. She cited a utility’s website as a major area for improvement — and recommended utilities look at how well their site enables transactions like bill pay. Once these transactions are more seamless, then a utility can more easily drive customers to take the next action, such as signing up for paperless billing.

“This is about a foundation for a future relationship that could be more than what it is today. Certainly the baseline is around the better customer experience, more proactively giving advice,” said Lundin. Lundin gave the example of a product for call center representatives that developed out of customer service representatives using another tool to gain customer insights.

Now, Lundin said, representatives can quickly answer a customer’s bill question with an insight, such as why their bill was higher the previous month, which means the representative can spend most of the call offering a solution or educating the customer instead of searching for the information.

 

Be part of the feedback loop

Cleveland Public Power in Ohio is in a unique competitive environment where customers can “pick and choose which utility they want,” said Ivan Henderson, commissioner at Cleveland Public Power. “We do not have a monopoly. On any given street, we could be on the front yard of a pole line, and a competitor could be on the back yard.”

This competitive environment is why Cleveland Public Power launched a pilot program, called myCPP, to encourage customer feedback and evaluate engagement.

The program, funded in part through an American Public Power Association DEED research and development grant, gives customers who log in to their website points for completing certain activities, such as visiting a certain part of their website or going to a community event. Customers with a certain level of points can earn incentives from the utility.

“Customers love it. We have some regulars that have racked up some pretty good points. Overall, the feedback is positive and customers are interested.”

Henderson said that the program is a good way to measure the effectiveness of the time and money the utility spends to be part of community events, in addition to being a simple way to get feedback from customers about what they are interested in.

The utility still promotes events and provides information through other channels, such as bill stuffers or advertisements. Henderson notes that the myCPP program is unique because it is a simple online tool, customers can participate at any time of the day. He noted the importance of establishing two-way communication with customers. 

“If you are on social media, they will respond to you. And if you invite them to an event, they can tell you they were there and what they thought of it. It is an awesome way to build relationships with customers,” Henderson said.   

The utility just launched the program for small commercial customers, which Henderson says is more focused on giving commercial customers additional insights to Cleveland’s energy efficiency programs. 

“What we’re looking for is — will customers follow our lead?” explained Henderson. 

Cleveland Public Power is first interested in seeing how the program will impact engagement. As the program moves beyond a pilot phase, the utility will measure whether increased engagement and incentives help customers to use energy efficiently.

“We’re public power. We focus on the things that our community is interested in. That’s why most of our customers rate us higher than our competitor,” said Henderson.   

 

[1] Cavanagh and Hirst, 1987; Engels, Kaplan and Peach, 1987