How prepaying for energy could change consumer behavior

Speaking Sustainably

How prepaying for energy could change consumer behavior

Image by Travis Limon via Flickr

When it comes to energy efficiency, it's apparent that one size does not fit all. Shelton Group's recent Energy Pulse study finds that different groups respond best to different messages about saving energy. A message crafted for a True Believer won't resonate with a Cautious Conservative, for instance, even though both consumers may be interested in saving energy. They tend to participate in different types of energy efficiency activities, as well.

But there has been a particularly tough segment to crack when it comes to energy efficiency: Working Class Realists. This group is least active when it comes to energy efficiency activities, in part due to its demographic profile: younger, often single, not as educated as other groups and often struggling with less income. Exacerbating the problem is that Working Class Realists are often renters unwilling or unable to invest in energy-efficient upgrades, yet many live in older buildings that have higher relative energy costs. So the question is, "How do we get them more engaged in their energy consumption?"

The answer may be prepaid energy service. When we think of prepaid services, often the first thing that comes to mind is cellular phones. Prepaid energy service works in a similar fashion: You pay up front for the energy you will use during the coming month.

Prepaid cellular phone plans initially were directed toward those with lower income who had a credit history that prevented them from qualifying for a two-year contract — a profile similar to Working Class Realists. While the appeal for prepaid cellular phone service has grown beyond that segment, it still offers a sense of financial control to those with erratic incomes.

It's already working on a small scale

Prepaid electric isn't new to utilities. While offered most frequently by cooperatives, some larger, investor-owned utilities such as Westar seek to implement this payment option.

A recent study may have some bearing on the increased interest in such programs. Prepared by Distributed Energy Financial Group for the Northwest Energy Efficiency Alliance, it suggests that participation in prepaid energy services may reduce energy usage. By analyzing data through regression analysis, the authors found that energy consumption at two electric cooperatives dropped (-5.5 percent for Peninsula Light's pilot program and -14 percent for Glacier Electric). A telephone survey with a sample of participants indicated an increased number of self-reported efficiency activities.

These programs offer huge potential to help meet the needs of a struggling segment of the population. But it's important to market and support them properly. You must laser-target and use the right messaging, emphasizing the potential for more financial control and better bill management. Communicating tips or suggestions for energy-saving behaviors is vital as well.

This kind of program needs to be developed holistically. It's not just a billing option — it should be thought of as an engagement program. You must educate participants and give them the tools they need to help them succeed on the plan. For example, the right incentives both could encourage participation and help ensure success. You could offer free CFLs for enrollment, or provide participants with a programmable thermostat to help them better control their usage.

With the right messaging, tips and incentives, prepay could be a way to get the toughest segment of customers on board with energy efficiency.

Top image of light switches by Travis Limon via Flickr. This article first appeared at Shelton Group.