Illustration of residential time-of-use rates for energy utility communications

How to Communicate Time-of-Use Rates to Residential Customers

Alternative rate plans are becoming commonplace as energy utilities make efforts to improve grid stability and reach sustainability goals.

Energy providers across the country are implementing residential time-of-use (TOU) rates to help reduce demand on the grid and give customers more control over their energy use. However, encouraging customers to switch to a new rate plan is no easy task.

Most utility customers are accustomed to a flat rate where they are billed based on how much energy they use each month. With residential time-of-use rates, the amount they pay is based on when they use their energy, not just how much energy they use.

Communicating about TOU starts with understanding customer perceptions about alternative rate plans. What do customers think about their current rate? How can a TOU rate help them? What benefits do they care about most? Equipped with this knowledge, customers can make an informed decision on a rate plan that suits their needs and lifestyle.

Barriers to Adoption of Residential Time-of-Use Rates

A significant barrier is getting customers to understand they have rate plan options in the first place. According to the Smart Energy Consumer Collaborative’s (SECC) report “Electric Bills and Rate Plans: Consumer Awareness and Understanding,” a majority of consumers are unaware they have rate plan options. In fact, only 28% knew they could choose between rate plans, illustrating what a new concept this is for utility customers.

“There is definitely a lack of customer understanding around rate plans,” says Nathan Shannon, SECC President and CEO. “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.”

Before energy utilities can promote time-of-use rates, they first need to build customer awareness. While TOU is the third most-known plan (following a traditional flat rate and equal pay-type plans), less than one-third of consumers are familiar with it. Before customers can make the switch, they should clearly understand:

  • What a TOU rate plan is
  • How the rate plan works
  • Key benefits to customers
  • Potential savings (monthly or yearly)
  • Impact on the community and electric grid
  • Recommended energy usage behaviors

The good news is that once customers know they have rate plan options, nearly 70% said they would be interested in signing up for one of them, Shannon notes. That’s why awareness and education are key to garnering customer interest in TOU.

“The hardest part is starting the conversation about TOU and getting customers used to something other than the traditional flat rates,” says Brian Lambert, Manager of Customer Programs & Customer Experience at We Energies. “Once you start having those in-depth conversations about TOU, such as options for shifting load, customers start thinking through what changes they could make in their home or business.”

Residential Customers Care About Savings

Many customers are experiencing financial hardship, especially when it comes to their housing-related expenses. According to SECC’s new survey, “Alleviating Americans’ Energy Burdens,” one-quarter of Americans — and 34% of those earning less than $50,000 per year — report they struggled to pay their electric bills over the past 12 months. Residential time-of-use rate plans can be an opportunity to help utility customers save money on their monthly energy usage.

According to Lambert, customers care most about how a rate plan will save them money. Since the average consumer isn’t familiar with demand charges, they need education on the importance of energy usage behaviors. For example, many customers don’t realize how much they will save by running their dishwasher at night or doing a load of laundry in the morning.

“I think the biggest benefit is the bill savings and that’s our focus area when communicating with customers,” Lambert says. “When we hear from customers regarding their priorities, whether the residential or commercial side, they are looking to maximize bill savings. We help them understand that, in many cases, TOU is going to require a little more attention to when they are using certain appliances versus the traditional flat rate.”

Shannon notes that consumers value concrete benefits that are relevant to their specific situation, such as their lifestyle (renter versus homeowner) or monthly energy usage. Energy utilities should take advantage of bill calculators (with a customer’s usage data included) to show an accurate estimate of how much they can save. He also recommends offering bill protection for the first six months or year when customers switch to residential time-of-use rates. This ensures customers can try the rate plan with nothing to lose.

“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?’”

Customers Also Value Control and Comfort

While saving money is important to utility customers, it’s not the only thing they care about. SECC research finds that utility customers value the “3 C’s”: cost, control and comfort.

“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 customers also want control over their energy usage and to be comfortable in their home.”

Residential time-of-use rates can give customers the opportunity to control when they use energy. By making small tweaks in their behaviors, customers can lower their monthly energy bill. Energy utilities should communicate the “control” benefit of TOU — something not possible with a traditional flat rate.

Comfort is another factor for customers. Saving money is not a big motivator if they can’t be comfortable in their homes. When communicating about residential time-of-use rates, energy utilities should highlight how they will save money while maintaining comfort.

For example, customers might be worried they will need to turn off their air conditioning on hot summer days. But with an educational campaign, you can demonstrate how a smart thermostat and a few behavioral changes can reduce their A/C usage without impacting home comfort.

“I would say keep it simple for most consumers,” Shannon says. “Consumers are really interested more in the benefits specific to them and their communities. Since this is a new area for many customers, communications should focus on what actions they need to take and what benefits they’ll receive.”

The Best Channels to Communicate About TOU Rates

For We Energies, building customer awareness about residential time-of-use rates is key. The utility communicates with customers via the website, emails, newsletters and traditional means like bill inserts. Since customers view their energy utility as a trusted energy advisor, it’s imperative that utility websites, portals and other channels have intuitive and consumer-friendly TOU information.

We Energies ensures vital residential time-of-use information is readily available to customers, including how the rate works, peak and off-peak times and the general strategy around TOU. The utility also shares an extensive list of high- and moderate-impact appliances for customers to consider when making changes to their energy usage.

“We provide as much guidance as we can on how customers can effectively shift their energy usage,” Lambert says. “For instance, we let them know what the time periods are and what percentage of a week’s hours are off-peak. This provides customers with some additional certainty if they choose to go down this path.”

Make Personalization a Priority for Reaching Customers

Shannon emphasizes the importance of personalized communications about residential time-of-use rates. Since every customer is unique, a one-size-fits-all message is less effective, prompting customers to simply tune it out. Smart meter data can help energy utilities to better understand how TOU will benefit a specific customer. For example, a utility can tell if a customer is an EV owner if they have consistent energy usage at night when they are charging.

“With smart meter data, you could send customers information on TOU rates for nights and weekends,” Shannon explains. “The most crucial thing utilities can do is use the data they do have to better understand customers.”

Perhaps the most important TOU communications for We Energies, Lambert notes, is individual customer conversations. This includes email or phone conversations with the utility’s customer service representatives and business key account managers.

“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.”

Only the Beginning for Residential Time-of-Use Rate Plans

As the need for alternative rate plans continues to grow, now is the time for energy utilities to refine their residential time-of-use communication strategy. By serving as a trusted energy advisor, utilities can guide customers on their TOU journey, helping them to make the most of the rate plan to save energy and reduce their monthly bill.

“As transportation transitions to electric options and smart devices allow more appliances to be programmed with time elements, customers are going to be more open to TOU,” Lambert says. “As it becomes more accessible, TOU will become an even more vital part of our conversations with customers.”

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