How utilities can increase participation in EE programs
- October 1, 2014
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By Jason Hanleybrown
It may be the most perplexing problem facing utilities that implement residential energy efficiency programs: Why don’t more homeowners take advantage of what is essentially a free pot of money?
The win-win nature of these rebate programs seems obvious. Utilities want to hit goals set by regulators. Customers, meanwhile, can use utility-provided rebates to upgrade their homes, increase property values, and cut down on monthly expenses.
But all too often, utilities are disappointed when relatively few homeowners participate.
One key reason for those unfortunate results, I believe, is uneven customer service---not by utilities themselves, but rather by some of the independent contractors who might actually install energy-efficient upgrades like water heaters and furnaces in people’s homes.
Utilities can see much better outcomes when they use past performance as a guide to partnering with contractors---and guide homeowners toward high-performing contractors who understand available rebate programs and are motivated to install energy-efficient products.
That’s certainly the clear conclusion of an analysis my company recently conducted of two very different utility-run energy efficiency programs.
Our case study looked at two utilities that offered very similar rebates for an almost identical product over a similar time period. To protect the identity of the companies, I won’t name them, but the numbers in our study are based on actual utility-provided data.
The big distinction between the two programs was a major difference in how they approached the utility-contractor partnership. The result was dramatically different participation rates.
The first utility, which serves about 5 million customers, used a common strategy: a partner-neutral approach with few provisions for measuring the success of contractors or holding them accountable. Reporting requirements were limited to the number of rebates filed, and there were a limited number of site inspections. The utility tried to build awareness of the rebate through a third-party program.
The second utility, which serves some 700,000 customers, actively partnered with contractors on a rebate-promotion program. Participating contractors were evaluated based on call volumes, sell-through rates, and code-compliant installations.
The second utility’s marketing efforts included co-branded bill inserts directing the utility’s customers to participating contractors. Calls to the utility were passed directly to a network of preferred, high-performing contractors.
The difference in results could hardly be more striking.
The utility using the partner approach achieved a greater number of installations of efficient products, despite having a much smaller customer base. Passing phone calls from customers needing immediate service to a participating contractor, for example, led to a five-times-greater likelihood of the customer taking action on the energy-efficient product.
Ultimately, the utility using the partnership model achieved a 63% penetration rate, in contrast to the 8% penetration rate in the program relying on the traditional “market neutral” approach.
There are, of course, reasons why contractor neutrality is an attractive concept to utilities. There’s a sense that neutrality will better serve homeowners by providing more competition and better pricing. And out of a sense of fairness, utilities themselves want to offer a level playing field open to all contractors.
But there’s a better approach. Fairness does not require failing to evaluate contractors’ performance.
In fact, our case study demonstrates that performance indifference and inactive neutrality is actually unfair to both contractors and homeowners. It leads to more customers who don’t get rebates they deserve, lower rates of program success, and higher utility staffing requirements. Those adverse outcomes are clearly caused by a lack of incentive for contractors to drive efficiency measures.
In the active partnership model used by the second utility in our case study, neutrality was guided by a set of objective performance standards. From a contractor’s perspective, living up to these standards offered rewards like the support of the utility’s brand in promoting the contractor’s services. And without bias or preference toward contractors, the utility delivered better customer service and achieved dramatically higher rebate uptake by homeowners.
Measurement and accountability aren’t new concepts, of course. But our case study suggests that it’s high time they were applied to utility-contractor partnerships. By embracing this approach, utilities can give homeowners the information they need to make the best choices for the long-run and the solid customer service they need to make full use of energy-efficiency programs.
Jason Hanleybrown is CEO of Demand Management Installation Services and of its parent company, Fast Water Heater Company. To read the white paper that served as the basis for this article, go to http://www.fastwaterheater.com/water-heaters/articles/approaches-utility-contractor-partnership/.