Time-of-use (TOU) rate plans are taking center stage as utilities look to improve grid resilience and customers seek more affordable and clean energy options.
However, encouraging customers to switch to TOU is a challenge for energy providers. Most customers are accustomed to traditional flat rate plans and their understanding of alternative rate plans is limited. That’s why education is vital for successful TOU enrollment.
“There is definitely a lack of customer understanding around rate plans,” says Nathan Shannon, President and CEO of the Smart Energy Consumer Collaborative (SECC). “Only 49% of customers even know what type of rate they have. Energy utilities need to make consumer education about rate plans and how to decode their bill a priority.”
Starting the TOU conversation
Before encouraging enrollment, energy utilities first need to understand how customers feel about TOU as well as common questions they may have. Since this is a brand-new concept, customers need to know the basics, including how the rate plan works, recommended energy usage behaviors and potential savings (monthly or yearly).
SECC’s “Electric Bills and Rate Plans: Consumer Awareness and Understanding” report finds that only 28% of customers are aware they can choose between different rate plans. The good news for utilities? Once customers know they have options, nearly 70% said they would be interested in signing up for an alternative rate plan.
According to Shannon, most customers will be motivated by a monthly savings of at least $10 per month. Keep in mind, a lower savings amount will still resonate with low-income customers, as their utility bill is typically their third-highest monthly expense.
“Consumers are very literal — they want to know a tangible savings amount,” Shannon says. “If utilities can do more shadow billing or bill predictions, this will encourage rate plan participation even more. Consumers simply want to know, ‘If I take these actions, how much will I save? If I don’t take these actions, how much will it cost me?’”
We Energies, an energy utility serving Wisconsin and Michigan’s Upper Peninsula, found that customers’ number-one priority was saving money. When communicating TOU to customers, the utility focuses marketing messages on the savings benefit.
“I think the biggest benefit is the bill savings and that’s our focus area when communicating with customers,” says Brian Lambert, Manager of Customer Programs & Customer Experience at We Energies. “When we hear from customers regarding their priorities, whether the residential or commercial side, they are looking to maximize bill savings.”
Fayetteville Public Works Commission, a community-owned utility located in North Carolina, focused on educating customers through a variety of community outreach events prior to introducing TOU. The utility had the opportunity to meet customers in person to answer questions and receive feedback on the changes.
“We didn’t want to stay behind a desk or at a keyboard sending out our messages or just sending out mailers. We knew we had to have boots to the ground,” says Lamont Hinson, Communications/Community Relations Associate at Fayetteville PWC, in a recent Questline Digital webinar. “So, with the events that we lined up in the community, we used those outreach efforts to also educate, take on questions and get information. We took advantage of those opportunities.”
Control and comfort matter
While saving money is extremely important for customers, it’s not the only thing that matters to them. With the growing popularity of smart meters and smart home technology, customers are also looking to take control of their energy usage. Unlike flat rate plans, TOU gives customers this flexibility.
Instead of energy costs based on how much energy they use, TOU rate plans are based on when they use energy. Marketing messages should communicate this “control” benefit and how TOU puts customers in the driver’s seat.
“Control, cost and comfort are the three words that resonate very well with customers,” Shannon says. “Saving money and being a good steward of energy is important, but there are times when customers want to have that control to be comfortable in their home.”
Additionally, communications should emphasize how home comfort will not be negatively impacted by a TOU rate. Customers may need to change some energy usage behaviors, but they won’t need to take extreme measures (like turning off their air conditioning on a hot summer day).
We Energies provides customers with guidance on how to effectively shift their energy usage. The utility educates them about peak time periods and recommends which behaviors to shift to off-peak times. With this helpful information, customers can be assured that TOU is easy to implement and won’t affect their lifestyle.
“When engaging with customers, TOU can be an effective part of the conversation about ways to save on their electric bill,” Lambert says. “Customers might think their only option to save is reducing their electric usage. But with TOU, they can save, not by using less, but moving their electric usage around over the course of a day.”
Segmentation for successful outreach
Segmenting TOU communications ensures your message will resonate with customers. According to Shannon, it behooves utilities to use customer data to target different groups with unique messages. For example, sending a TOU email campaign to electric vehicle owners who would benefit from an alternative rate plan (and likely charge their EV during off-peak hours).
“One of the most crucial things utilities can do is use smart meter data to better understand customers,” Shannon says. “For example, you can tell someone has an EV if they consistently have a peak in demand at night when they are charging their vehicle. With smart meter data, you could send customers information on TOU rates for nights and weekends.”
To promote their TOU rate plan, Fayetteville Public Works Commission took advantage of targeted messaging to reach customers who were EV owners or potential adopters. The utility used analytics to identify residential customers who showed a propensity for EV adoption. Additionally, Fayetteville PWC connected with EV clubs and car dealerships to reach more customers in its service territory.
“Keep it simple. Try to keep it as simple as possible,” Hinson says. “We try to break down those ‘journalistic W’s’ so explaining what’s happening, why it’s happening, when it’s happening, and how the customer could potentially benefit from it.”
Segments that show TOU interest
SECC created customer segments based on their awareness and interest in alternative rate plans. A relatively small segment, Green Pioneers (21% of the U.S. general population) are always looking to sign up for the latest utility program. These customers are passionate about environmental issues, and therefore, would switch to TOU to make a positive difference. The largest segment (28% of the U.S. general population) is known as Simply Sustainable. While these customers are looking to save energy, they would prefer to use simple lifestyle approaches to reach their energy goals. This group will participate in new rate plans if they are given the right information and receive a tangible return on investment.
“Simply Sustainable is really the land of opportunity for energy utilities,” Shannon says. “Those customers fall in the middle and are easily motivated to participate in new rate plans — they just need the right messaging and information to be motivated.”
Despite utilities’ best efforts, there will still be customers who are not interested in alternative rate plans. Known as the “Energy Indifferent,” these customers tend to be older, have lower energy bills and care less about environmental concerns.
“I don’t know if there is a silver bullet to reach these customers,” Shannon says. “It’s a shrinking segment that makes up about 16% of utility customers. My advice is to focus your efforts on the segments who will take advantage of TOU rate plans.”
The future of rate plans is here
This is only the beginning for TOU rate plan communications. By helping customers understand the pricing structure and key benefits, utilities can reduce peak demand, improve grid resilience and help customers save money. Education and targeted communications go a long way to making time-of-use rate plans as easy and accessible as possible.