Connexus Energy explores a twist on customer engagement to meet Minnesota's energy reduction targets.
The expression “keeping up with the Joneses” usually means consuming more of something. Through an innovative effort, Connexus Energy has tapped into its customers' desire to emulate their neighbors so that they consume less electricity. In doing so, customers have saved money on their electric bills, and Connexus Energy has benefitted by meeting a state goal to reduce power use — and in a cost-effective manner.
Connexus Energy is the largest member-owned cooperative in the state of Minnesota, providing electric service to 125,000 customers in seven counties near Minneapolis-St. Paul. The utility has long offered a host of conservation improvement programs (CIP) to meet goals, including high-efficiency appliance rebates, compact fluorescent and light-emitting diode (LED) lighting rebates and air conditioner cycling programs.
Connexus was presented with a new challenge in 2007 when the Minnesota legislature passed the Next Generation Energy Act requiring all utilities operating in the state to reduce their energy sales by 1.5% per year. Although the requirement was not set to take effect until January 2010, Connexus officials realized early on that traditional demand-side-management (DSM) programs were only going to go so far in meeting the 1.5% target. Clearly, a new approach was needed, so the officials started working with the Minnesota Office of Energy Security (OES) to develop some ideas.
For assistance, OES staff brought in OPOWER, an energy-efficiency software company. During the meetings, Connexus learned about OPOWER's Home Energy Report program, which combines advanced analytics with behavioral science techniques to drive energy savings by providing customers graphs on household energy use by month, quarter and year, and then comparing energy use against peers.
A Novel Approach
This novel approach is based on work by Robert Cialdini, OPOWER's chief scientist and a professor and social psychologist at Arizona State University who has long studied what motivates people to take environmentally responsible action. Cialdini's studies indicate that facts alone often do not prompt people to change their habits and save energy. Instead, his studies show that consumers are more likely to respond to normative messaging — motivating consumers by letting them know what others are doing through meaningful messages that get their attention and spur them to action.
For example, telling customers something like “you used 10% more electricity than your efficient neighbors” or “most people in your area keep their air conditioning at 78°F” is more likely to change their behavior than simply asking them to save energy for the environment. It also helps to give consumers customized information on how they can reduce energy use.
Today, OPOWER works with about four dozen utilities around the United States. But at the time Connexus contacted them, only two other utilities — Sacramento Municipal Utility District and Puget Sound Energy — were using Home Energy Reports. Thus, it was a little scary to get on board. However, Connexus has always considered itself innovative, and the possibility of achieving significant energy savings at a relatively low cost to the utility (compared with traditional DSM programs) was tempting. Connexus signed on to conduct a 12-month pilot program with its residential customers — becoming only the third utility in the country and the first in the Midwest — to use Home Energy Reports.
The pilot began in March 2009 with 40,000 customers in a test group and another 40,000 in a control group. Home Energy Reports were mailed monthly to some customers in the test group and quarterly to the others. The control group received no reports, but their energy use was monitored.
The Home Energy Reports, which were mailed separately from bills and made available online with a secure login, rated customers' energy use against nearby neighbors in approximately 100 homes of similar size that used the same heating fuel. The reports compared a household's kilowatt-hour use in the previous month or quarter with “all neighbors” (the nearby 100) as well as “efficient neighbors” (the top 20% energy savers among all neighbors).
Those on par or doing better than all neighbors saw a smiley face on their bills, while those on par or performing better than efficient neighbors saw two smiley faces. Along with the monthly or quarterly comparisons, the reports also charted kilowatt-hour use over the previous 12 months versus all neighbors and efficient neighbors — citing (as a percentage) more or less electricity use and extra cost or savings, as applicable.
Equally important, the reports provided personalized action steps to reduce electricity consumption based on a customer's past use and housing profile. Typical tips featured smart purchases, such as buying efficient lightbulbs and occupancy sensors, and quick fixes, such as turning off lights when not needed and running appliances off peak.
Charts and statistics in the Connexus Home Energy Reports reflected analysis of customers' energy-use patterns. OPOWER looked at monthly billing data, program-specific characteristics, customer demographics and climatic data. In turn, Connexus Energy provided data to Power System Engineering Inc. (PSE), an independent third-party evaluator hired to validate the methods and estimates of energy savings attributed to the pilot program.
PSE calculated energy savings in three ways:
The true impact test, which examined the change in the differences of the control and test groups from pre-pilot to post-pilot time periods
An ordinary least squares (OLS) econometric model
A fixed effects econometric model.
All three evaluation techniques are standard methods of measuring energy-efficiency impacts and all three showed similar results, with the true impact test estimating a daily kilowatt-hour reduction of 0.621 for each member of the test group during the post-pilot time period. Similarly, reductions of 0.622 and 0.637 were seen for the OLS and fixed effects models, respectively. Reductions ranged from 2.05% to 2.1%, with an average of 2.07%.
The number crunching was invisible to customers, of course, who saw only a scorecard on whether they were using more or less energy than their neighbors. A few customers did not care for the reports, citing invasion of privacy and concerns about “Big Brother.” The naysayers were in the minority, however.
The vast majority of test group customers liked the reports. One of them was Al Hansen, who said he and his wife, Mary Helen, are more conscientious about turning off lights in their condominium since receiving the reports. Overall, the reports have increased his awareness of how much electricity they use, he said. Adding with a chuckle, “Now I can tell my neighbor how great I am.”
Likewise, Bob and Jean Moffitt appreciate the reports. They have been doing things like buying compact fluorescent and LED lightbulbs and making energy-efficient improvements in their home for years, so they consistently receive smiley faces on their reports. “The reports validate what we are doing and are a regular reminder to try to do more,” said Bob.
Jean said the reports provide a challenge to stay in the top energy-savers group. “If we ever see a dramatic change for the worse, that would set off alarms and make us examine what we were doing,” she said. “It's nice to get the report; otherwise, there's no way to compare ourselves to others. It's good information.”
Did It Work?
As noted, the pilot achieved a 2.07% reduction in energy use in 2009, averaging about US$20 to $30 of annual savings per test group customer. Although it does not sound like much, cumulatively the savings total a little more than $1 million. The drop in energy use also cut Connexus' wholesale costs of purchasing energy, which were passed on to the consumer. So there is a wholesale-cost avoidance benefit for the utility.
Another measure of success, there was a 15% increase in participation in Connexus' other CIP programs by the test group versus the control group. That reflects the educational value of the Home Energy Reports as well as their power to engage customers. The No. 1 call the Connexus call center receives is, “Why is my bill so high?” The next one is, “What can you do to help me?” And the third is, “How much energy should I be using?” The reports educate customers by answering these questions in specific terms that lead to customer action.
Did Customers Like It?
Fewer than 2% of the original test group opted out of the program, leaving an impressive 98.7% continuing. In addition, Connexus' customer satisfaction index increased by 2%, from 85% to 87%, within the first quarter following implementation of the pilot. That speaks to the ability of the reports to educate and engage customers.
Was it Cost Effective?
Contracting with OPOWER costs Connexus $0.03 to $0.04 per annual kWh energy savings. It costs more than $1.50/kWh to achieve first-year energy savings in the Energy Star appliance rebate program. This makes Home Energy Reports the second or third most cost-effective program to meet short-term targets, compared with a selected list of Connexus CIP programs.
Did it work? Did customers like it? Was it cost effective? These three questions were established by Connexus to gauge the program's success. Connexus continues to provide Home Energy Reports to a group of customers to meet their energy savings goals. The hope is to maintain the approximate 2% reduction in energy sales — saving about 10 GWh of power production annually, which is the equivalent of taking 1000 homes off the electric grid.
Connexus sees this as a gateway to the next generation of interaction with customers. This opens the door to the smart grid and similar opportunities, such as communicating real-time interval data through an in-home display and web portal and providing variable-rate plans. Clearly, utilities will look dramatically different a decade from now. Connexus aims to stay on the leading edge of change for the benefit of its customers.
Bruce Sayler (firstname.lastname@example.org) is manager of regulatory and governmental affairs at Connexus Energy. He has been in the energy field for more than 23 years, managing areas from the utility's largest commercial accounts to launching several residential pilot programs focused on behavioral modifications through the use of home energy reports and in-home displays. Sayler has a bachelor's degree in organizational studies and a master's degree in business. He is a commissioner on the City of Elk River Energy City Commission, vice president of the Anoka Technical College Foundation Board and a member of the Minnesota Smart Grid Coalition.
Power System Engineering www.powersystem.org