few residential customers want dynamic...
TRANSCRIPT
FEW RESIDENTIAL CUSTOMERS WANT DYNAMIC PRICES YET
by DAVID C. LINEWEBER, Ph.D | JANUARY 2013
Table of Contents
3 Few Residential Customers Want Dynamic Prices, and Offering More Choices Does Not
Increase the Number of Dynamic Price “Takers”
4 Most Customers Prefer a Flat-Pricing Program Compared to Two Dynamic Pricing Options
5 About the Authors
5 Contact Us
YouGov | Residential Customers Prefer Flat Prices | 3
1 Results are based on a survey of 600 residential energy decision-makers who are directly billed for electricity service. Surveys were completed online and selected from among a sample of online survey panel members.
Few Residential Customers Want Dynamic Prices, and Offering More Choices Does Not Increase the Number of Dynamic Price “Takers”
Summary 1:
While there may be many good reasons — from a utility’s perspective — to encourage residential customers to adopt dynamic prices, the reality is that most customers are still not enamored of these options. It is still the case that two-thirds of all customers say they would prefer a flat electricity pricing option, compared to a TOU option. Even more importantly, adding a CPP option to the mix does not appreciably change this overall perspective — 61% still prefer the flat price option even when multiple dynamic pricing options are offered. The critical barriers to overcome in marketing these rates will be to address deep-seated customer preferences for predictability and consistency.
Implication:
Encouraging residential customers to opt-in to dynamic pricing options will continue to be a difficult challenge. Initial resistance to these rates is common and deep seated (resting on fundamental preferences for consistency and predictability). Finding the appropriate mix of benefits that can be linked to dynamic rate options, and which will be attractive to this population, will not be easy.
YouGov | Residential Customers Prefer Flat Prices | 4
Given the option of a flat pricing rate option (in which customers pay approximately the same amount for each unit of electricity used) and a time-of-use option (under which the price customers would pay is higher on summer afternoons but lower at all other times2 ), a substantial majority of residential customers prefer the flat price option.
The groups most preferring flat prices include men, older customers, lower income customers, those residing in the South, and political conservatives, primarily because they value predict-ability, simply do not want to change, or simply do not trust their local electric utility. Those who prefer the TOU option do so because they think they can save money on the rate, or because they believe that it will generate societal benefits by increasing awareness on the issue of controlling energy use.
When a third dynamic pricing option is added to the mix (critical peak pricing, in which off peak prices would be lower, and on-peak prices would be higher on certain summer days3), the share of customers who choose flat prices remains almost constant (at 62%, compared to the 66% when only TOU was offered). Adding dynamic pricing options, in other words, does not increase the total share for dynamic pricing. Not surprisingly, it is the same subgroups of customers who dominate the flat pricing preference share under this second scenario.
Most Customers Prefer a Flat-Pricing Program Compared to Two Dynamic Pricing Options
Would You Prefer a Flat Price for Electricity or a TOU Option?
Would You Prefer Flat Rate, TOU, or CPP Pricing?
Prefer TOU option
Prefer flat price
Prefer CPP option
Prefer TOU option
Prefer flat price
2 Customers were told that they could save up to 10% on their monthly electric bill on this plan, or see their electricity costs rise by 10%, depending on how they responded to the TOU periods. 3 Customers were told that they could save up to 20% on their monthly electric bill on this plan, or see their electricity costs rise by 20%, depending on how they responded to the CPP periods.
10%
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34%
66%
18%
21%
62%
YouGov | Residential Customers Prefer Flat Prices | 5
Contact Us
About the Author
David Lineweber, PhD Managing Director, National Energy Practice Leader
David Lineweber has more than 25 years research experience including roles as Head of Research at Cambridge Reports and Lead Energy Practice at National Analysts - Booz Allen. He was previously President at Primen & Momentum Market Intelligence.
David earned his B.A. from University of Delaware and his Ph.D is from Stanford University.
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David Lineweberemail: [email protected] phone: 503-575-7839