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This article was originally published in the May/June 1997 issue of Home Energy Magazine. Some formatting inconsistencies may be evident in older archive content.

 

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Home Energy Magazine Online May/June 1997



 
 

Can Better Utility Bills 
Save Energy?

 
 
by Kevin Bengtson
Customer surveys by the University of Delaware show how various methods of displaying energy usage information get the message across.

Bills are often the only communication link between a utility and its customers. As the utility industry moves into a more competitive environment, it will be more important for utilities to maintain contact with their customers and provide additional services. Making minor changes to the bill, such as adding comparative energy consump tion information, can help both the utility and customer by providing information that the customer wants and needs. Research by the University of Delaware (UD) has provided a better understanding of how to best display information so that customers will understand and use it.

EPA's Energy Star Billing

Energy Star Billing, a voluntary program offered by the U.S. Environmental Protection Agency, is a method for utilities to provide improved billing information. The program establishes guidelines and offers resources for including comparative billing data to residential gas and electric customers. To participate, utilities agree to provide graphic displays comparing each individual customer's energy consumption with other residential customers in a designated comparison group (for example, the same house size, meter reading route, or neighborhood). The utility can use a display that has already been developed by UD, or can propose a different display, to be approved by Energy Star. The comparative displays can be added to the present billing statement or sent as a separate report on a quarterly or annual basis.

The program is based on the idea that consumers will use the comparative billing data to see if they consume a high, average, or low amount of energy. Customers with high consumption may be motivated to investigate conservation measures, whereas customers with low consumption receive some positive reinforcement from the utility.

UD is currently working with three utilities that have signed up to participate in the program: Traer Municipal Utilities (TMU) in Iowa, Endicott Municipal Light in New York, and Portland General Electric in Oregon. TMU has been sending out Energy Star bills since March 1996. The other two utilities are currently working with UD to implement the program.
 

Researchers at the University of Delaware showed customers several graphs to see how well they could interpret each type.

New Software

NMPP Energy of Lincoln, Nebraska, is the first software company to release utility billing software--Power Manager Plus--with Energy Star Billing options built in. Released in February 1997, the software allows utilities to select from three different comparison groups. A grouping of similar house types uses the floor area of the home and the fuel type used by its major appliances (furnaces, water heater, air conditioner, clothes dryer, and oven) to determine the comparison group. Geographical or neighborhood comparisons can be grouped using zip+4 postal codes, or the utility's meter reading route.

The software prints a comparative bar graph, which can be compact enough to fit on a postcard-sized bill. The graphs are character oriented for printing on an impact printer. NMPP has just begun to sell the new software.
 

Switching to the Energy Star Billing program requires only a simple programming change to existing utility billing software.

How Customers Use Bills

Customers glean much more information from the monthly utility bill than one might think. Most customers use and value the energy information that the bills provide. A 1994 study of New Jersey utility customers, conducted by Willett Kempton and Linda Layne, found that 41% look at energy units used on the bill, 70% have discussed their bills with a neighbor, and 39% use the monthly bill to compute an annual total. Overall, 91% of customers save their bills. Two of the most popular reasons for saving the bill are to compare energy use or cost from previous years (34%) and keep a receipt of the transaction (21%).

Unfortunately, much of the information currently provided with bills is not used or confuses the customer. Utility mailings and bill inserts, for example, typically have response rates of under 5% (see Can We Transform the Market without Transforming the Customer?'' HE Jan/Feb '94, p. 17). Line items on the bill that tabulate charges to the exact cent are generally ignored; as only 4% of customers report looking at the arithmetic on the bill. Line items can also be confusing. For example, customers often assume the fuel cost adjustment charge is a charge based on what they consumed. In fact, the customer has no control over the fuel adjustment, and this information may obscure the more relevant information on the bill, such as the cost of energy and the monthly charge.

Beyond making monthly payment, customers most often use their utility bills to check for unusual consumption or to evaluate the effect of conservation measures. Customers want billing information that allows them to answer such questions as, How much money did I save this year? or Is my new energy-efficient water heater really saving energy? Answering these questions can help to change consumer behavior and reduce energy use.

Providing information that allows customers to compare energy use with their neighbors or with past bills to track changes in consumption patterns can be a valuable conservation tool. One study, conducted in the United States, provided daily feedback on whole-house electricity consumption and resulted in a 10% reduction in energy use. Studies in Norway and Finland found that when customers received neighborhood comparisons, together with frequent electric bills and meter readings, they reduced their energy use by 5%-10%.

Figure 1. Test graphics like those shown above were sent to customers in the Delaware survey.

What Information to Provide

Utilities have attempted to make their bills more readable over the past two decades, and many utilities have added some form of energy measurement beyond total kWh for the current month. However, only a handful of utilities have added analytical or comparison data to help residential customers better understand their bills.

Many utility billing comparisons have relied on a table or graph showing the customer's present and past use. For example, some utilities print a table that compares this month's consumption with the same month of the previous year. Other utilities print a bar graph showing a household's monthly consumption over the past year and then compare that with the current month's average consumption for all residential customers.

A mail survey sent to Delaware residents shows that customers prefer a comparison based on their block, neighborhood, or on similar houses. UD developed graphic displays that provide customers with clearer, more meaningful feedback on consumption than those now in use. UD's research is part of the Energy Star Billing program.

Figure 2. An example of a utility bill that includes comparative graphics.

Comparing the Comparisons

UD has researched the best way to design comparison groups and graphical displays so that customers understand them and draw valid conclusions. UD has tested various displays on Delaware utility customers, analyzing customer comprehension through interviews and mail surveys. It has also evaluated reactions of customers who are receiving actual Energy Star bills from TMU.

Display Preference

UD tested customer preferences and comprehension of two types of graphs. Distribution graphs show the actual position of each customer in a comparison group, so the customer knows the exact number of participants in each group. Bar graphs do not show each customer's exact location. Instead, they depict an unknown number of customers distributed across the graph. All of the graphs show how the customer's bill compares to the bills of other customers in similar houses or geographical areas.

In a mail survey, 600 customers received the graphs shown in Figure 1. Graphs A and B are bar graphs; graphs C and D are distribution graphs. The 257 people who responded slightly favored a distribution graph (53%) over a bar graph (47%). Of those who preferred a distribution graph, 66% favored a household type distribution (Graph C), while 33% favored a bell curve distribution (Graph D).

Comprehension

UD research has found two major barriers to interpretation of the graph-ics. The first interviews that UD conducted with Delaware utility customers showed that they had trouble understanding bar graphs. In fact, half of the small initial sample interviewed (four out of eight) could not correctly interpret their energy consumption from the bar graph shown in Figure 2. In all four of these cases, the respondents failed to recognize that the length of the bar represented a range of costs for a given time period. To improve comprehension, UD changed the graphic displays for all types of graphs. For instance, the new bar graph is described in words, end points on the bar are marked Lowest bill and Highest bill and arrows have replaced triangles to denote the position of the customer on the graph, as shown in Figure lB.

UD then tested the revised graphs in a larger mail survey and found that these changes improved comprehension significantly. Since these changes were added, recent studies show that two-thirds of respondents correctly interpret Energy Star graphs like the ones in Figure 1. Distribution graphs were still interpreted slightly more easily than bar graphs.

Bar graphs have another drawback: they do not tell the customer anything about the relative distribution of the other users. The customer can actually see where other users are on a distribution graph, but a bar graph shows only the lowest user, the highest user, and the position of the customer. This can skew the interpretation of the graph. For instance, a customer who uses more energy than 80% of the other customers may appear in the middle of the bar graph because one abnormally high user moves the end point far to the right.

One way to mitigate this problem is to eliminate the outliers from the graph. The utility can create limits, say, to exclude the top and bottom 5% of users. This Energy Star graphic design includes guidelines for handling customers who fall outside the range--for example, by noting that they are well below or well above the average for their group.

All types of graphs can suffer from abnormal distributions, especially with small sample sizes. To improve the validity of the graphs, UD is currently researching the optimal size of comparison groups.

Bar graphs have one advantage over distribution graphs. With a bar graph, the utility can have as many people in the comparison group as it wants, without sacrificing readability. With a distribution graph, only a limited number of customers can be represented. For example, it would be difficult to squeeze 50 houses into the distribution graphs shown in Figure 1.

Will the Comparisons Save Energy?

When asked to pick the one action they would be most likely to take if they received a high (90th percentile) Energy Star Billing graph, 44% of respondents said that they would most likely make behavioral changes such as turning off the lights or using the dryer less. Another 21% said that they would call the utility to request information. Only 5% of respondents said they would throw away the bill and do nothing, and 4% admitted they would plan to do something but probably would not get to it.

Of course, not all respondents would be in a high-user category, and people do not always act on the good intentions that they state on surveys. However, these responses certainly suggest that the graphic displays could encourage customers to save energy. 

Energy Star Billing is likely to improve customer perception of the utility. Three-quarters of the customers who are actually receiving Energy Star bills from TMU said that the billing information either reinforced their positive impression or improved their perception of the utility.

Utilities that implement Energy Star Billing might expect total customer service calls to increase, but this has not yet been established. As mentioned above, 21% of customers said they would contact the utility for more information if they found themselves in the 90th percentile of energy use. In addition, the introduction of Energy Star Billing could generate an increase in calls from customers with questions about the program. A well-designed introductory letter could reduce these inquiries substantially. UD has developed prototype letters for this purpose. Calls would be expected to drop as the program matures.

On the other hand, Energy Star Billing should reduce some complaints about high bills from certain customers. For instance, some customers who thought their bills were high might find that their consumption was actually average.

Surprisingly, an evaluation of Energy Star Billing at TMU found no discernible increase in customer service calls generated by the program so far. However, Traer is a small town, where people often go into the utility office to pay their bills and speak directly to customer service representatives. These conversations are not tracked as customer service calls.

Cost to the Utility

TMU spent approximately $6,000 to employ a consultant to change the billing software to accommodate the Energy Star Billing graphic. In addition, it took 62 hours of staff time to implement the program. NMPP is currently charging about $600 to upgrade to its new software if a utility already uses NMPP software, and $3,500 flit does not.

Person-to-person interviews of TMU customers found that 10 of 17 interviewees would be willing to pay for the service. The average amount that they would be willing to pay was 42¢ per month. (This average includes the customers who said they would not pay at all.) Surveys of Delaware customers show that recipients of Energy Star Billing graphs are willing to pay an average of 78¢ per month for the service. This is substantially above the cost of the program.

Ongoing Research

UD, through a cooperative agreement with EPA, provides free implementation support to utilities who have agreed to participate in the program.

UD is continuing to research innovative billing options. While studies to date have focused on the graphic itself, continuing research is testing the effect that introductory letters and graphic legends will have on comprehension. UD will also evaluate Energy Star Billing's impacts on customer energy use for some utilities.

For more information about Energy Star Billing or the research performed in conjunction with the program, contact the Innovative Billing Project at UD. Tel: (302) 831-0848. Or look at the Energy Star Billing World Wide Web site at http://eande.lbl.gov/CBS/ESbilling/.



Kevin P Bengtson is a research associate with the Innovative Billing Project at the University of Delaware in Newark.

Sources

Egan, C., et al. How Customers Interpret and Use Comparative Graphics of Their Energy Use. ACEEE 1996 Summer Study on Energy Efficiency in Buildings Proceedings. 8: 39-45.

Kempton, W. Improving Residential Customer Service through Better Utility Bills. E Source Strategic Memo. Boulder, CO: E Source, 1995.

Kempton, W., and L. Layne. The Consumer's Energy Analysis Environment.'' Energy Policy 22, No.10 (1994): 857-66.

Lord, D., et al. Energy Star Billing: Innovative Billing Options for the Residential Sector. ACEEE 1996 Summer Study on Energy Efficiency in Buildings Proceedings. 2: 137-143.

Wilhite, H., et. al. A Nordic Test of the Energy Saving Potential of New Residential Billing Techniques. Copenhagen: The Nordic Council of Ministers, 1993.

 

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