Do Your Customers Understand Time-of-Use Rates?
Grid modernization and advanced metering infrastructure (AMI) are making the U.S. energy supply cleaner and more reliable. These efforts are now taking a huge step forward as more utilities prepare to roll out time-of-use (TOU) rate options.
The industry has been preparing for these initiatives for years. But are customers ready? It will be a big change, not just to the rates they pay but in how they use energy in their everyday lives. In order to succeed, it is critical for utilities to educate customers about time-of-use rates, explaining why these programs are important and showing how customers can save by taking control of their energy use.
Do Customers Care About Time-of-Use Rates?
It shouldn’t surprise any of us to learn that customers don’t spend a lot of time thinking about energy rates or billing options. In fact, a study by the Smart Energy Consumer Collaborative (SECC) found that nearly half of residential consumers do not know what type of electricity rate plan they have. Of those who are aware, nearly all of them said they have a flat-rate plan with static kWh pricing.
On the one hand, this lack of awareness is an opportunity to educate customers about the benefits of alternative rates. At least we’re starting with a clean slate. On the other hand, it may be a challenge to get customers to switch from “simple” (in their minds) flat-rate pricing to more complicated rate structures.
Do you remember what your telephone bill looked like before the early 2000s? Local and long-distance phone rates were extremely complicated, with different per-minute charges depending on the time of day, day of the week, and which cities or states you were calling. It was a lot to keep track of.
Now, thanks to the unlimited talk mobile plans that most of us enjoy, we no longer have to wait until 5 p.m. on Sunday to call Grandma. We can use the phone anytime for the same price without having to think about it.
Customers have that same mindset when it comes to energy use. They can run the dishwasher anytime for the same price without having to think about it. They can be incentivized to change, of course, just as we used to schedule out-of-state calls around the phone company’s rates. But it will require effective outreach and education from their energy providers.
Show Customers How to Take Control of Their Energy Use
What will convince customers to accept time-of-use rates? Marketers should focus on the benefits from customers’ point of view — how they can save money while also supporting a clean and stable energy supply. More than anything, TOU rate options allow customers to take control of their energy use for the first time and decide how much they will pay for energy.
In the past, customers could save energy through behavioral changes or home improvements and reduce their overall consumption, but they paid the same for energy no matter when they used it. There was no financial benefit for, say, running the dishwasher overnight instead of during the day.
With TOU, customers can save money by simply shifting the same energy use to a different time of day — or benefit even more when their efficiency efforts reduce energy use during peak hours. Customers can control when and how they save, making a real impact on their bill.
Even better, with smart home technology, these savings become automatic — customers can set their thermostat to save during peak hours and never think about it again. SECC’s research found this was a key motivation for customers. Nearly half (44%) of residential respondents said they would be willing to participate in a time-based pricing program if automation technologies were deployed in their home.
New Technology Can Help Customers Save With TOU Rates
Technology has changed so much about daily life in the last few decades, including how we use and pay for phone calls. Soon, it will change how customers use and pay for energy. Technology will also make that change easier, as smart home devices automate savings and allow customers to take control of their energy use. By educating customers, energy utility marketers can help customers understand these benefits and adopt new time-of-use rates.