Hit the grand slam with time-of-use pricing, smart marketing

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Hit the grand slam with time-of-use pricing, smart marketing

Using smart marketing to show customers how to cut their bills, OG&E scored a ratepayer-utility-environment triple win.

The Edison Electric Institute recently awarded Oklahoma Gas & Electric the 2013 Edison Award for its comprehensive energy efficiency initiative. Combining advanced metering technology, in-home displays and renewable energy enabled OG&E, which serves approximately 801,000 customers in Oklahoma and western Arkansas, to dramatically reduce its peak and off-peak loads.

Since most of our nation’s electricity comes from coal-fired plants, the leading contributor to greenhouse gases, reducing the load in general is good for the environment. Less energy use means less coal burned, which means less CO2 in the atmosphere.

Reducing peak load is also crucial for the bottom line.

Most summer days, power use rises between 2 pm and 7 pm. During those 90 degree days, the peaks get higher. On those 95 or 100 degree afternoons, utilities set records for peak demand.

To meet those peaks, utilities either use units that are more expensive to operate – a natural-gas combustion turbine, for example – or buy the power on the open market, precisely when prices are the highest.

As peak demand goes up, utilities have to build the costly generating plants to meet it and avoid outages, as well as generate the reserve capacity required by law.

The business case for OG&E’s aptly named SmartHours program was pretty straightforward: encourage customers to use less energy and avoid gigantic capital expenditures.

Enrolling customers in SmartHours required good marketing – creating a value-proposition that customers could understand and engage with simply.

The focus of the messaging was around saving money, not the environment, which we know is a more universal driver for consumers.

OG&E also provided two key tools: 1) a programmable thermostat to make savings easier, and 2) time-of-use pricing, which essentially varies the price of electricity based on the time of day.

Helping customers understand that washing their clothes during a weekday morning is 50 percent less expensive than washing them during “prime time” (2–7 pm) put the opportunity for savings directly in their hands.

The last and most important part of the program was engagement.

Every day via text, phone, email or all three, customers were notified of the next day’s peak hours and pricing. This ongoing engagement – driven by the customer’s choice of medium – kept SmartHours at the top of mind.

And all the offers were bundled in an irresistible guarantee: If a customer doesn’t see any savings after one year on the SmartHours program, OG&E will provide a refund of the full difference between SmartHours and the traditional pricing program.

By creating an easy-to-understand and easy-to-engage program, and by removing virtually every barrier to trial, OG&E delivered a program through which 99 percent of customers saved money and the utility avoided enormous peaking and capital costs, as well as emissions to the atmosphere.

A win-win-win, for sure.

Skills

Posted on

August 28, 2013

About the Author

Adam Kustin

Adam is a former contributor to Shelton Insights.

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