Finding Energy Efficiency’s Next Purpose: Leveraging Energy Efficiency to Enhance Customer Satisfaction

Nov 25, 2014

Across the US, the historic relationship between GDP and electricity demand growth is projected to drastically change.  At the same time, utilities’ average capital and operational and maintenance (O&M) expenses are increasing due to aging infrastructure, integration of smart grid technologies and increased need for cyber security. Conflicting market forces such as these can be a strong indicator of increasing energy costs for end-use customers in the years ahead.


Decoupling of US Economic Growth versus Electricity Demand Growth

In an industry which is highly regulated where customer choice is not widely available, it is now more important than ever for utilities to value customer satisfaction as a critical priority as two other market forces are poised to meet to form a perfect storm for the utilities– a trend of increasing energy costs and an increasing trend of cost-competitive distributed generation possibilities.

Energy Efficiency can be an effective resource to mitigate the customer satisfaction issues that will likely arise from these market changes.

Energy efficiency has long been a key consideration in many utilities’ resource acquisition modeling.  However, it also has strong potential to evolve as a primary vehicle to influence customer satisfaction and help utilities thrive in an increasingly competitive market place.  Below are three areas of concerns utilities can face to which energy efficiency initiatives can be applied as an influencing solution. 

Transforming Complaints into Opportunities

While billing complaints can constitute a diverse set in itself, high bill complaints form a significant portion of customer complaints received by utilities.  Energy efficiency solutions tailored to meet complaining customers’ unique needs can serve as timely tools to help utilities address high bill complaints ahead of rate change discussions.


A Snapshot of typical customer complaints

Tailored solutions utilities can offer customers through leveraging energy efficiency include:

For Residential Customers

  • Direct customers to a one-stop energy efficiency engagement portal to perform self-assessments that determine the root causes of high bills and identify necessary actions to mitigate applicable issues
  • Leverage data from smart meters to identify high bill customers and proactively market targeted solutions that may be applicable to qualifying customers
  • Help customers find qualified contractors to address energy efficiency needs (such as replacing an AC unit or repairing leaky ducts) and integrate information on qualifying contractors to enable engaged and seamless decision making 

For Commercial Customers

  • For small business customers, utilities can offer a brief Q&A process to identify root causes of high bill complaints and provide resources like on-site reviews to remedy complex issues
  • Help customers participate in a direct install program to retrofit lighting, program thermostats and address other “low-hanging” measures
  • Facilitate a no-cost/low-cost audit to key accounts customers that may be coupled with an in-depth retrocommissioning study
  • Offer technical support services to help large commercial customers identify, plan and prioritize capital, O&M funding and spending strategy for multiple years

For Industrial Customers

  • Offer a self-directed energy efficiency program that provides bill credits for energy efficiency improvements
  • Offer technical support services to help industrial customers achieve maximum reduction in $/unit production costs through optimization of plant-air and process-air systems 

Adapting to Future Regulatory Challenges

Energy efficiency programs have evolved into a comprehensive mechanism by which utilities are able to obtain a deeper understanding of their customers’ needs and priorities.  With energy rates projected to increase by about 50% in the next 25 years (source: EIA), and codes and standards defining minimum efficiency requirements becoming more stringent, receiving regulatory approval of adequate energy efficiency program funding will likely become more challenging. Utilities that have achieved consistently positive customer experience and market buy-in of energy and non-energy benefits resulting from energy efficiency will likely have to budget and spend less on promoting enrollment in future energy efficiency programs, potentially alleviating the pain of obtaining regulatory approval on future investments.

Centralized tracking of key program metrics such as customer participation, initiative costs (program administrative costs and incentive costs) and historic cost effectiveness test results will not only help in preparing custom analytics to balance customer expectations and meet regulatory expectations during filings, but it will also aid in resource planning and future program evaluations.

Customer, Load and Revenue Retention

According to recent studies conducted by the EIA, total U.S household spending on energy relative to disposable incomes has generally declined since 1959. In a parallel trend―due to several factors such as slowing population growth, market saturation of major electricity-using appliances, improving efficiency of residential, commercial and industrial equipment due to changes in codes and standards, and a general shift in the economy toward a less energy intensive industry―the rate of electric load-growth per capita is projected to be slower than rates experienced in the previous decades. The combination of these two trends puts immense pressure on utilities to retain revenue growth to sustain existing infrastructures.

Energy use per capita and per capita dollar of GDP

As possibly the highest contributing segment of the utilities’ retail revenue stream, satisfaction of industrial customers is poised to take increased priority for many utilities to retain revenue. However, many industrial customers opt-out of energy efficiency programs since they typically implement energy efficiency as an internal continuous improvement mechanism to reduce operating costs and remain competitive. 

Since energy efficiency funds cannot be diverted to support opt-out customers, utilities can investigate diverting a portion of sales or economic development budgets in offering energy efficiency based “retention incentives.” These retention incentives can take the form of third-party studies that outline new energy efficiency initiatives to further reduce waste through low payback means (such as leak reduction in compressed air systems or data center air-conditioning optimization) or reduce peak usage through the installation of higher efficiency equipment (such as high efficiency compressors or compressor controls).

Conclusion

Energy efficiency will continue to evolve and advance in the years ahead.  Beyond the perception of energy efficiency as merely a vehicle steered by political or environmental drivers, there is significant value in employing it to elevate customer satisfaction.

Bibliography
1.    Can Efficiency Keep the Rustlers Out? Energy Efficiency as a Customer Retention Tool, William R. Pindle, ACEEE, 1997
2.    Today in Energy, October 21, 2014, EIA
3.    Today in Energy, March 22, 2013, EIA
4.    How Customer Satisfaction Drives Return on Equity for Regulated Electric Utilities, J.D. Power and Associates, May 2012
5.    Rates, reliability and region – customer satisfaction and electric utilities, Public Utilities Fortnightly, January 2013
6.    Aligning customer satisfaction and utility regulation, white paper by West Monroe, 2013