Survey Confirms that the Adoption of Dynamic Electricity Prices Faces Challenges

Washington, DC … DEFG, a management consulting firm specializing in energy, worked with energy utilities through the Demand and Energy Technology Research Consortium in late 2012 to survey 1,000 consumers. The national survey examined consumer interest in electricity prices that change during the day (time-of-day pricing). Utility operators have long known that retail consumer response to real-time costs and critical events faced by the utility would result in lower prices and higher reliability. However, after decades of experimentation, many electric utilities have been unable to design “dynamic” prices that would appeal to residential consumers.

There is a balance that a utility must achieve between offering more consumer choices and offering too much complexity. Electricity rates must be simple and targeted to address preferences and needs specific to each customer segment.

Jamie Wimberly, CEO

“People are highly sophisticated in many purchase decisions,” stated Nat Treadway, DEFG Managing Partner and author of the report. “That is, consumers buy products and services in other industries—such as airline tickets or seats at sporting events—that are priced in a complex and dynamic manner. But regulated electric service has offered consumers a century of experience with prices that are stable.” Analysis of time-of-day pricing communications in the electric industry confirms there is a learning curve for new pricing approaches. Consumers make personal assessments regarding the tradeoffs between the effort required and the anticipated savings. “Education about pricing is essential as consumers need to understand their baseline and the rationale for savings claims,” said Treadway.

The top line findings from EcoPinion No. 17 include:

  • Electricity consumers are most concerned with managing the utility bill, and will show interest in a new program if it reduces the bill:
    • 44% of consumers would like the utility bill to be “as low as possible”
    • 17% would like the utility bill to be “predictable”
    • 15% would like “a secure and reliable supply of electricity”
    • 12% would like electricity to be “as environmentally responsible as possible”
  • Significant savings is required to enroll:
    • Four out of ten felt they would be likely to enroll in a time-of-day pricing program if their electric bill could be lowered by 5-15% by shifting some electricity use to nights and weekends
    • Younger adults (44%) versus older adults (36%), and renters (46%) versus homeowners (39%) were most likely to feel they would enroll
  • The most useful type of information to consumers would be an analysis of their usage displaying the impact of time-of-day pricing on monthly bills:
    • An analysis of past usage to see the impact of the program on their monthly bills was selected by 40%
    • Analysis and graphs of daily and weekly use information to help them control costs was selected by 29%

“There is a balance that a utility must achieve between offering more consumer choices and offering too much complexity,” stated Jamie Wimberly, CEO of DEFG. “Electricity rates must be simple and targeted to address preferences and needs specific to each customer segment.”

The EcoPinion survey instrument was designed to better understand consumer preferences with regard to electricity prices that vary throughout the day. The full report presents the survey findings, including charts and tables, and an analysis and recommendations.

EcoPinion consumer survey report: Download

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