House Vitality Reviews: Nonetheless the ‘greatest, baddest approach’ to drive buyer conduct

As utilities modernize their customer interactions – by adding apps and marketplaces, as well as new payment options – the traditional household energy report can seem a little dated. However, one expert on the demand side says the tool still has a lot to teach utilities about how to optimize customer decisions instead of fading it.

Home Energy Report programs are “the biggest and worst behavioral programs out there,” said Beth Fitzjarrald, senior research manager, customer energy solutions at E Source, speaking to the audience in a webinar hosted last month by the American Council for an Energy Efficiency Economy.

“Utilities are investing more and more in behavioral programs.”

Beth Fitzjarrald

Senior Research Manager for Customer Energy Solutions, E Source

The utility’s customers supply 75% of its electricity and gas in North America, which gives it “a pretty good view of the trends,” said Fitzjarrald. A 2015 survey detailed the effectiveness of behavioral programs for households.

E source

The study found that utility company spending on behavioral programs for households was approximately 2% of their Demand Side Management (DSM) portfolio, but achieved 10% of the average energy savings of the DSM portfolio.

“They’re a cost-effective program,” said Fitzjarrald, adding that trends “have stayed the same” since 2015.

And the programs seem to be improving.

“Utilities are investing more and more in behavior programs,” said Fitzjarrald. “It looks like programs get cheaper over time.”

Is 1% to 2% “really all we can do? Sure there are more out there.”

Beth Fitzjarrald

Senior Research Manager for Customer Energy Solutions, E Source

E-source research shows that home energy reporting programs achieve an average of 1% to 2.5% annual energy savings per customer. And those savings have been confirmed by reports for over a decade.

They are “reliable and excel over time,” and Fitzjarrald said the same principles that apply to household energy reports can be used to create behavioral savings related to other programs.

Is 1% to 2% “really all we can do? Sure there is more out there,” said Fitzjarrald.

Bring multiple strategies to fruition

There are a wide range of strategies for optimizing customer behavior, and Fitzjarrald notes that research by Opower (now Oracle) has helped the industry understand the importance of peer comparison and “closing the loop” along with norms of omission or perceived expected behaviors to understand.

Utilities are now realizing that they need to tell the customer both how they behaved toward their neighbors and what they can do to improve themselves.

“You don’t just have to compare, you have to tell them which direction is the right one,” Fitzjarrald told Utility Dive. Early iterations of household energy reports included peer comparison, but the lack of omission norms to advise customers on how to make additional savings.

“Before adding that ‘should” component, customers who were more efficient than average were using more energy. They tended to get close to that average, “she said. “Adding the omission norm helps everyone move to a more efficient space in the end.”

In addition to developing social norm comparisons, utility companies have a number of behavioral strategies they can employ, including setting up steps for customers to achieve follow-up, offering rewards and solutions, and face-to-face interactions.

“They suck on using energy. Buy a smart thermostat.”

Beth Fitzjarrald

Senior Research Manager for Customer Energy Solutions, E Source

Fitzjarrald said utility companies should look for ways to transfer these strategies to existing programs.

“There is a great opportunity to incorporate some of these strategies into existing programs,” she said. “How can we embed commitments in our rebate programs? How can we add more prompts and follow-up to our home energy audit program?”

Utilities can also be designed to work together. An example: Coupling a utility market, where a customer can buy efficient devices, with energy reports for private households.

Fitzjarrald joked about utility messaging, then said, “You suck on using energy. Buy a smart thermostat.”

But seriously, “It’s a solution that the utility can help the customer with,” she said.

Similarly, E Source sees growing interest in prepayment options for electrical services, partly due to the energy savings associated with these customers. Around two thirds of utility customers have expressed an interest in prepaid options.

Previously generally considered a low-income option due to the lack of connection fees, the flexibility of prepayment has made it popular with college students, infrequent households, and those on daily or weekly budgets.

“Of course there are some things we have yet to figure out about consumer protection … but customers want an upfront payment.”

Beth Fitzjarrald

Senior Research Manager for Customer Energy Solutions, E Source

Consumer advocates have some concerns about pre-pay customer disruption, and Fitzjarrald said this was an area that needs further study. However, modern pre-pay programs with apps that notify a customer when their account balance goes down offer inherent behavior changes that encourage maintenance.

Ultimately, prepaid billing programs result in energy savings of 5% to 14%, and some utility companies have even claimed these savings as a demand-side management program. The Salt River Project has been offering prepayment since the 1990s and, according to E Source, has annual energy savings of 12% per customer.

“There is great potential here,” said Fitzjarrald. “Of course there are some things we have yet to figure out about consumer protection … but customers want an upfront payment.”

By using social and behavioral cues to help customers save energy, “we are going beyond education and creating more effective behavioral changes,” she said.

Behavior vs. Pricing?

There are some studies that cast doubts about the effectiveness of behavioral programs.

Most recently, Dartmouth researcher Praveen Kopalle examined data from the non-profit test bench on Pecan Street, Texas, as part of a study of critical interventions at peak prices. The study found that the interventions reduced electricity consumption by 14% – but did not reveal any similar reductions across behavioral channels.

“In contrast, we find minimal responses to active information provision and appeals for conservation,” wrote Kopalle and the other authors of the study.

The study published last year by the University of Chicago concluded that price-based incentives are the most effective and consistent way of optimizing customers’ energy use. Although this work has found some effectiveness even with non-pricing incentives, Dartmouth’s conclusions are more rigorous.

“We still see home energy reports as a valuable part of this set of solutions … but we can do a lot more with behavioral savings.”

Beth Fitzjarrald

Senior Research Manager for Customer Energy Solutions, E Source

Fitzjarrald says years of savings from utility behavior speak for themselves. The household energy reports target total energy use rather than the peak reduction analyzed in the Dartmouth and University of Chicago studies. In the future, the introduction of Advanced Metering (AMI) will enable even more and targeted savings.

“The introduction of AMI inspires some of the deeper behavioral programs we’ve seen,” Fitzjarrald told Utility Dive. This is partly because the AMI rollout “needs a little more justification” and behavioral programs have “direct consumer benefits”.

Ultimately, E Source sees energy reporting and behavioral strategies becoming increasingly important for utility companies.

“We still see home energy reports as a valuable part of this set of solutions. They are a reliable source of savings and a tool that we believe will stay in the DSM toolbox for a long time,” said Fitzjarrald. “But we can do a lot more with behavior savings.”

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