Selling Consumers on Meters, Money

By Kathleen Davis, Senior Editor

In the days of vertically integrated monopolies—when utilities still referred to customers by emotionally distant names such as “end users” and “end points”—utilities needn’t worry much about people and their money. Customers didn’t have choices, and utilities didn’t need to care about customers, their choices, their money or how they felt. Power wasn’t an emotional business.

Along with the push toward the smart grid and the influx of smart meter data comes a shift in utility focus. Today utilities must address customers and their emotional choices, especially about money, because in customers’ minds utilities are touching a lot of it—in some cases taking it, in some cases offering it back, but always with their fingers in it. That makes for a nervous end point.

Countering Emotions

A benefit of the numerous smart grid or smart metering pilot programs revving up across the U.S. and Canada is all that data—consumption data, especially. With all that data and timely information—sometimes down to 15-minute intervals—comes an opportunity for utilities: changing the traditional flat-rate pricing most work with to something dynamic that works fluidly with a demand-oriented cost structure.

But now utilities are touching people’s money, and people take that personally. They get scared, weepy, excited or mad about it, which can spell trouble.

“You cannot fight an emotional argument with a logical one,” said Suzanne Shelton, president and CEO of the Shelton Group, an advertising agency focused on sustainable choices.

She warned utility professionals March 15 at Elster’s EnergyAxis conference in Bonita Springs, Fla., that the average customer starts with an emotional decision then develops reasons to rationalize it. The traditional, logical approach utilities often use to sell smart metering pilots, meter changes, pricing programs and the smart grid mighty not be effective, she said. Advertising messages that work best often balance an emotional and rational promise.

When it comes to the smart grid and smart metering programs, utilities traditionally have used a handful of rational arguments to sell their programs to consumers:

  • It helps the environment,
  • It will help with energy efficiency, and
  • Bills will be more accurate.

The problem with these arguments, Shelton said, is that the average utility sending these messages doesn’t recognize consumers’ emotional side that isn’t rational and is freaked out about their own money.

Using the three examples, Shelton showed studies that debunk how effective these campaigns could be. According to her numbers, 3 percent of the population knows that coal-fired plants affect climate change. They don’t understand the connection between energy and the environment, she said.

Utilities were deemed “trusted” with efficiency programs in the survey. Customers surveyed said utilities are working to make things more efficient on the utility end, but customers do not know why utilities are trying to sell them efficiency on their end. Seventy-two percent of customers said they are not using more power than they were five years ago, and half of homeowners said their homes already are efficient.

Customers said utilities are making things more efficient on the utility side to benefit utilities and to take more of their money. When utilities tell customers their bills will be more accurate, customers hear, “We’re making things so much easier for us to tack on fees and hide costs.” Customers trust utilities to save utilities money through energy efficiency, but customers think utilities are ripping off consumers on billing.

Shelton showed a video of a customer control group that revealed distrust and anger, including a consumer who said, “You ask us to conserve, and we conserve, but the bill keeps going up.”

The utility’s rational response to that customer would be that she’s consuming more, not less. Shelton returned to the emotional vs. rational argument. Consumers don’t take ownership of their consumption, she said.

Realizing the Problem

While the utility industry plans on consumers’ being better partners and on realizing the benefits of smart metering, the smart grid and new pricing, consumers aren’t gaga over the idea and might be the biggest hurdle.

It will be difficult to involve customers, said Accenture consultant Rob Hartway during another conference session on the smart grid vision of the future.

More regulation is coming, especially with rate programs, and utilities must know from where data is coming and to where it is going, panelists said. What will drive that final smart grid vision isn’t about regulation, the utilities, efficiency or the environment; it’s whether consumers accept the smart grid and smart metering as a good thing that saves them money.

“One of the biggest pain points will be customer acceptance,” Hartway said. “They will be our energy partners.”

The average consumer will require education and will be the center of the smart grid argument for years, he said.

Panelist Wes Sylvester works in smart grid business development at Cisco.

“Reaching all the consumers will be key,” he said.

Hartway said customer communication will be especially central to rolling out time-of-use (TOU) and other variable pricing programs. Without customer acceptance that these programs are positive for them and their wallets, utilities will have a hard time moving beyond flat-rate pricing, despite having the data and mining options to do so, he said.

Starting From Scratch

One key to rolling out pricing programs will be initiating customer communication before the pricing concept is even a gleam in the eye, before money evokes emotion.

Westar Energy, a utility serving 684,000 Kansas customers, has regulated rates. It hasn’t stopped them from introducing a smart grid pilot called SmartStar in the Lawrence area. Some 45,000 meters are slated for installation with completion in the fall. It’s a $40 million program, and the company sees potential benefits, including a future TOU rate program. Now the company is focused on gathering happy customers, said Kevin Heimiller, Westar smart grid director.

“We’re taking a meaningful, yet cautious, approach,” Heimiller said. “We need to gauge customer participation and results or this project could be in trouble.”

The full pilot program will be in place by summer 2012, complete with an online customer energy portal to track use and cost. Westar started with communities from the beginning, Heimiller said.

The utility pushed the program using positive, grassroots efforts: explaining projects before application, updating local media, speaking regularly with the city and organizations, being active in community events (including a sidewalk sale, where they were the only people not selling anything) and collaborating with locals as much as possible.

“We’ll go anywhere and talk to anyone,” Heimiller said.

The opinion of SmartStar was 64 percent positive, a Westar survey revealed. The utility eventually will apply that cautious, positive, consumer grassroots approach to TOU rates.

“TOU is a large room of opportunities,” Heimiller said, “but we must engage the customer to make sure they like what we do with that.”

Dominion is another utility cautiously approaching the pricing programs smart metering can offer, said Mike Gurganus, Dominion’s manager of advanced metering solutions.

Dominion has 2.4 million electric customers in the Central South, with a primarily residential and commercial base. Dominion has three meter demo areas, including a 7,000-meter program in Richmond, Va., a 50,000-meter program in Charlottesville, Va., and another 35,000-meter program in northern Virginia (near major Washington, D.C, suburbs).

The program’s major benefit is about consumer cash. Dominion is working to enhance pricing signals and is examining flexible bill-pay options, making the emotional side of cash positive.

“Communications are key to buy in from stakeholders,” Gurganus said.

Dominion worked hard early to demystify smart meters. Next includes a dynamic-rate pilot, which is approved and is expected to be in place by late summer. The goal is to test customers’ responses to dynamic-pricing signals, he said.

“We haven’t offered customers a whole lot yet,” Gurganus said. “We’re testing out options.”

Pricing Now

U.S.-based Salt River Project (SRP) and Canadian distribution utility Veridian Connections are involved in smart meter pricing programs. SRP’s program is voluntary. Veridian’s is mandated by the Ontario government.

Kevin Myers, manager of wholesale settlements at Veridian Connections, said Canada fosters a “cult of conservation” and money isn’t as large of a factor as it might be to the average U.S. consumer. In this case, Ontario is trying to shift load from peak times. The price signals aren’t so much about change in the cash sense but more in the sense of saving energy for the right reason, he said.

Communication becomes more important when change is forced, Myers said.

Veridian initiated much pre-program communication, including mailers and door hangers. They often gave customers explanations and directions to access online price and data information. The communication effort involved repetition at each stage.

The company even redesigned its first TOU bill so the charge would grab customers’ attention.

As of March, the impact has been minimal, Myers said. Veridian encountered neither angry customers nor many complaints that overwhelmed its call center. Customers who made no consumption changes saw only small cost increases or decreases in a month. The utility has seen no perceptible change in load shape, either. In addition, less than 10 percent of Veridian’s eligible customers have registered for the portal, and less than 1 percent accesses that data monthly, he said.

“We don’t see people logging on to analyze their data and consumption patterns,” Myers said. “We’re a little disappointed that we haven’t seen a lot of changes, but change takes a long time to establish.”

SRP’s TOU pilot is one of the biggest in the country with 630,000 installed smart meters in Arizona, said Ritesh Patel, SRP advanced metering infrastructure (AMI) manager. The project began in 2003 and expanded in 2004 and 2009.

SRP customers must call and request to be added in, unlike Veridian’s program. This reduces the potential number of angry consumers because only customers who are program-educated and program-positive make the calls.

Some 20 percent of SRP customers—about 195,000—participate in the TOU pilot, which includes Web access to hourly data and e-notifications that can be sent to cell phones.

SRP has made things simple, communicating well with customers via a link on its home page that asks, “Are you on the right price plan?” From there, customers can examine four options served side-by-side with four or five bullet points each that explain the TOU plan, the EZ-3 plan, the basic plan and the M-Power plan.

Whether a utility’s pricing programs are real or theoretical, customer communication is a must for a successful, emotionally positive choice for consumers.

As Shelton said, to get to that happy positive, utilities must ask, “When we’ve got smart meters totally deployed, what will we have? What are consumers getting?”

If a utility can answer those questions positively for consumers and show them the savings, the emotional reaction of electricity consumers will be a positive one that can benefit the smart grid and the industry.

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