Keeping Up Appearances

Operating in remote areas, ComEd’s responsibilities to its customers amount to far more than energy supply. In an interview with Power and Energy, Vice President of Marketing and Environmental Programs Val Jensen explains the future of customer relationships and how the company has adopted a sociological approach to understanding its customers’ behavior.

“Keeping up with the Joneses is a pretty powerful behavioral motivator”
-Val Jensen, ComEd

Exelon’s goal is to reduce more than million metric tons of greenhouse gas emissions by 2020. What is ComEd’s strategy to participate in this target?
Val Jensen. The Commonwealth Edison energy efficiency portfolio represents a fairly significant wedge in that overall Exelon carbon reduction goal, so our responsibility is to be able to execute on the customer programs to ensure that those carbon reductions are realized. It’s not a set of reductions that the company is claiming for its own account, but it is part of the overall strategy to help our customers reduce their carbon footprint. The energy efficiency programs represents approximately a quarter of the total Exelon carbon wedge, and so we play a relatively important part, along with our sister company, PECO, in Philadelphia.

We offer a pretty broad portfolio of energy efficiency programs consistent with what you will tend to see across the US from utilities. We’ve tried to bundle all of these programs under the moniker Smart Ideas, and our ultimate intent is to simply offer a range of prescriptive and customized solutions, whatever the customer’s energy management needs might be. But in the short term, we break our portfolio into two pieces. One is the commercial industrial offering and under that offering we have four principal program elements. The first is a set of what we call ‘prescriptive incentive programs’, so we will offer fixed financial incentives for a wide range of standard commercial industrial technology – motors, lighting, refrigeration systems and so on.

We also offer a custom rebate element, so for any energy efficiency project, so long as we can establish that it is cost effective, we will provide a customized incentive which is calculated based on the energy savings. We are also offering a building retro-commissioning program where we will fund a building professional to go into an existing building and help the building managers tune up existing energy systems to achieve their specified performance. Finally, we’ve just begun to offer a commercial industrial new construction program where we provide design assistance and some design incentives to try and encourage customers to design and build buildings that exceed the building codes.

On the residential side, we have a number of programs. One is the ubiquitous compact fluorescent light bulb buy-down program. We work with a variety of manufacturers and retailers to buy down the cost of CFLs at retail and that program is the single largest program in terms of energy savings that we have in the portfolio, which is consistent with every other utility.

Secondly, we have a program to collect and recycle second refrigerators. We also have a direct installation program for all electric multifamily buildings, so we send crews into these buildings and go through each unit and do the low-cost, no-cost energy efficiency measures.

We have also just begun a residential central air conditioning program that has a couple of different elements, including incentives for the purchase of new, very high efficiency units, and we also subsidize an advanced air conditioner diagnostic and tune-up program. We put switches on people’s central air conditioners and in exchange for either $20 or $40 per summer season; we are able to control the customer’s air conditioner on really hot or high-demand days.

We also offer a residential real time electricity-pricing program, which is still the only program of its kind in the country. For customers who wish to join the program, we put them on a tariff that flows through the wholesale hourly market price and allows customers to make their own decisions about how to alter their load shape to try and benefit from that price profile.

How are your residential customers reacting to these programs? Is ComEd playing a role in in educating them in terms of energy efficiency?
VJ. That’s the critical issue for us, and it’s extremely difficult for us, at least early in the program, to feel like we’re accomplishing that broader market transformation objective to get customers to think differently about energy use. We have a service territory of 3.8 million customers in one of the most expensive and dense media markets in the country, so it’s very difficult to reach individual residential customers without spending a lot of money. So the strategy that we’ve taken early on is a more direct marketing approach where we try and get information out to our customers to get them to act on specific energy efficiency incentives, such as the lighting program or the refrigeration program. We do have a limited advertising budget that we’re using to try and start to build awareness among our customers of what we offer and what their general energy efficiency opportunities are, but it’s very difficult for us to work in the mass market in this area because it’s so large and so expensive, so we’re continuing to look for solutions that would help us get more traction there.

We run a summer ad campaign designed to spark customer interest and awareness in some of our basic residential programs. We similarly conduct limited advertising for specific energy efficiency programs to try and boost our uptake on those programs. We offer bill stuffers to our customers on a fairly regular basis, some of which are targeted at specific energy efficiency opportunities and some of which are designed to simply build customer awareness of energy efficiency opportunities generally. Then certainly like everybody else in the world, we have a website which is intended not only to convey information about our programs, but to offer customers a wide variety of tools and tips should they be so inclined to take charge of their energy consumption. So in terms of customer outreach and education, we’re not particularly innovative or successful yet, but we are just entering the second year of our large program portfolio implementation, and we still have a way to go and are certainly hoping we can get a little bit more creative and effective.

Do you think that sort of programs such as the real-time response program attract new customers who are more energy efficiency conscious?
VJ. It’s an interesting phenomenon. We get both ends of the spectrum. We have a group of customers on that particular real time pricing program who are very energy aware and like the challenge of being able to try and beat the price, and so they’ve become very creative in how they manage their energy use.

On the other end of the spectrum is another set of customers who are attracted to the program by the implied promise of being able to save money on their energy bill. These customers tend not to be as sophisticated, and they have an expectation that they can simply save money by doing nothing, which is sometimes the case but not often, and so we find those customers will tend to be more dissatisfied with the program because they’re not really buying into the change and behavior that is necessary.

Overall, the customer satisfaction with that program is very high and when we do customer surveys we find that that program in particular is the one that most intrigues customers. On the other hand, it’s been very, very hard to recruit customers into that program, which is an interesting phenomenon and hard to understand why. Our customer acquisition cost is very high for that real time pricing program, yet at the same time, everyone says they like the idea of it.

There is one other program that we’re about ready to launch that is pretty exciting and actually quite pedestrian in its concept. We’re going to be providing something called a home energy report to a set of 50,000 customers on a quarterly basis which compares that customer’s energy consumption to an average neighbor, and also to the best neighbor in terms of how much energy they use. This is all calibrated to like customers – so same type of housing, same square footage – who generally display the same demographic characteristics. There’s been some interesting behavioral economics research that suggests that simply by providing this comparison of your consumption to your neighbor’s consumption you can drive changes on the order of 3 to 5 percent in overall energy consumption, just through a form of peer pressure. We’re among a handful of utilities in the US that are starting to pilot this program.

In addition to providing this comparative information on a quarterly basis, we couple that with specific energy saving tips given who the customer is, so if the customer’s performing poorly relative to their neighbors, we give them the whole slew of energy efficiency options. If they’re doing better than their neighbors, we give them some tips for how they might do even better than they currently are, and so we’re hoping that this provides the vehicle for reaching customers with our message in a fairly simple way that can motivate behavioral change.

There has been some interesting research that compared a couple of tactics: telling customers how much money they could save, telling them how green they would be if they took a particular action, telling them they would be more energy efficient if they took a particular action and telling them how they compare to their neighbors. The only thing that motivated these customers in this pilot study was the comparison to their neighbors, which was fascinating to us, and it went to the extent of actually putting a little smiley face or frownie face on the information that was sent to the customers, which the research found to be motivating. Some of the early pilots that have been done to test this concept with utilities have found that customers react very badly to the frownie face, but very much like the smiley face; it sounds very elementary, but in fact the keeping up with the Joneses is a pretty powerful behavioral motivator.

Do you think the media surrounding Obama’s Plan for America is having an impact and starting to change the way your residential customers are operating?
VJ. I think it is. The Administration, as well as a number of global leaders, is talking about the importance of climate change which is finally starting to penetrate this mass media consciousness. Our customers haven’t yet completely figured it out, but they understand that energy usage is changing and they know they want to be on the right side of it, and they’re starting to now look for more information about this. So it clearly has had important impact, but it will take a lot more than that to get customers to really understand this on more than a superficial level.

Do you think saving money is the only real motivator?
VJ. I don’t and that’s why this behavioral pilot program that we’re undertaking is so interesting because we’re not providing anybody with any money on our end, and the customers are not motivated so much by saving money as they are by the attitude of not wanting to look worse than their neighbors. Business customers, to a much greater extent, are motivated by money, but that doesn’t seem to be the right motivator for all of our customers. We have to get much more sophisticated in segmenting them and figuring out what messages motivate. Some are motivated entirely by environmental concerns and their neighbors, some by money and some by other forms of moral beliefs about stewardship. It’s been part of our struggle over the past 20 years where previously we tried one message for everyone, and we know that doesn’t work. Toothpaste is sold in many different ways to many different market segments, and we have to start thinking in the same way about how we market energy efficiency.

How are you setting yourself apart from other utilities energy-saving programs?
VJ. Most of the utilities in the US, as part of their energy efficiency portfolio, rely on compact fluorescent light bulbs for anywhere between 30 and 50 percent of the overall portfolio savings. There is federal legislation which by 2012 will set the consumer lighting standard essentially at the level of a CFL, which means that by promoting CFL through a utility program we’re not saving any energy as it would become compulsory for customers to buy these anyway. So we’re going to lose 30 to 50 percent of our energy efficiency portfolio due to the standard, and we need to find other low-cost ways to save energy. By exploring these behavioral methods we’re realizing cost-effective solutions to energy savings, and so we’re both interested from a conceptual basis in seeing how people respond, but we’re also looking for that silver bullet that gives us energy savings that is both sustainable and low cost at the same time.

What are your future plans, both short and long term?
VJ. We have two things that we’re very excited about and they both fall on the behavioral side of the ledger. Like many utilities across the world, we’re embarking on an implementation of smart grid technology and in particular smart metering systems. We have a pilot project that we now have in front of our regulator for approval that will involve 140,000 customers in our service territory, and we believe we’ve designed the most comprehensive study of consumer behavior with respect to the smart meters that anyone has put together.

We’ve designed 24 specific experiments to test how different combinations of behind-the-meter technology, rate structures and education will resonate with customers and our objective is two-fold. One, to see which of these combinations elicits the largest response in terms of demand reduction, but we are also trying to figure out what the combination of those things that resonates most with the customer may be – which product makes the most sense, which is the most likely to be used and embraced by customers and so on – and we’re very excited about that. We see this not so much as a standard utility technology project, but as a project in customer-centric product design where our ultimate objective is to figure out how we can create some additional value for customers, as opposed to just throwing boxes on houses.

The second thing we’re doing, which is related to that, is a relatively small pilot program with a set of low-income customers in Chicago. Operating a smart grid and having the ability to retrieve this real time data pretty much depend on a customer being technologically sophisticated, having a broadband connection and so on. A lot of our customers are not in that position, so we’ve designed a pilot program to place relatively simple devices in up to 300 homes that will show at any given time how much is being consumed and how much the customer has spent that month. We’re also simultaneously providing a home energy audit and some focused but simple instructions on how customers can manage their energy costs. Again, these are quite low-income customers, and our objective is to evaluate that if by providing a customer contemporaneous information on how much they’re spending, relative to what their budget might be, we can influence their level of energy consumption.

Our ultimate objective is two-fold. One is to give some tools to these low-income customers in this new technological age that will allow them to benefit as much as their more well-to-do neighbors, but the second idea is if we can get people to focus on how much they’re spending at any time, we think they’ll be able to better manage their bill, and the hypothesis is that they will be less likely to fall into arrears and defaults, and less likely to be subject to disconnection. That pilot is just rolling out, but from my perspective, that’s one of the most important things because it’s an investigation into how we can deliver these promised benefits of the smart grid to a segment of our population that typically is left behind in such arenas.

Val Jensen is Vice President of Marketing and Environmental Programs. He joined ComEd after eight years at ICF Consulting, where he served as senior vice president. Prior to this, Jensen worked for the US Department of Energy from 1994 to 1999.

“A number of global leaders are talking about the importance of climate change which is finally starting to penetrate this mass media consciousness”
-Val Jensen, ComEd