load impacts and marketing effectiveness from the countrys largest dynamic pricing program load...
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Load Impacts And Marketing Load Impacts And Marketing Effectiveness from The Effectiveness from The
Country’s Largest Dynamic Country’s Largest Dynamic Pricing Program Pricing Program
National Town Meeting on Demand Response and Smart Grid
Stephen S. GeorgeFreeman, Sullivan & Co.
June 23-24, 2010
PG&E’s SmartRate tariff has the highest enrollment of any dynamic tariff in the country There were roughly 25,000 active customers at end of
summer 2009
A time varying rate on event days only
Overlay of surcharges and credits on top of the standard five-tier, increasing block tariff (E-1) E-1 prices vary with usage and block sizes vary by climate zone
SmartRate has a 60 ¢/kWh adder from 2 to 7 pm on up to 15 event days each summer
Price ratio varies depending on what rate tier you are in
SmartRate customers also enrolled in load control program (SmartAC) can have air conditioner cycled on SmartRate days
Page 2
PG&E’s residential tariffs are complex
Usage Tier % of
Baseline Usage
E-1 Price for Tier
Average E-1 Price Based on Mid-Tier Usage
CARE (Low Income) Price for Tier
Average CARE Price
Based on Mid-Tier Usage
(¢/kWh) (¢/kWh) (¢/kWh) (¢/kWh) 1 100% 11.5 11.5 8.3 8.3
2 130% 13.1 11.7 9.6 8.5
3 200% 26.0 14.9 9.6 8.8
4 300% 37.9 21.0 9.6 9.1
5 >300% 44.1 26.7 9.6 9.2
CARE stands for California Alternative
Rates for Energy
CARE provides lower rates for qualifying low
income customers
Tier E-1
¢/kWh)
SmartRate Peak
Period Price
Peak Period
Price Ratio (SR/E1)
1 11.5 61.5 5.4 2 11.7 61.7 5.3 3 14.9 64.9 4.4 4 21.0 81.0 3.9 5 26.7 86.7 3.3
Page 3
Average SmartRate Load Impact for 2009
Average Impact Per Customer
0.31 kW
14.9%
Average Reference Load and Load Impact Across 15 SmartRate Days
Page 4
A relatively small % of customers provide large load reductions
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Load R
educt
ion (
kW)
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
Proportion of Accounts
(by Customer)Cummulative Distribution of Average Event Load Reduction
11.7% of participants provide load
reductions greater than 1.0 kW
36.3% of participants provide load
reductions greater than 0.2 kW
44.2% provide no load reductions, but about half of them do not
get notified
Page 5
PG&E tried a variety of marketing strategies for SmartRate which allowed us to determine the relative effectiveness of various marketing options
Marketing Attribute Description
Wave7 initial mailings to different customer groups, at different times
between February and September 2009
Touches Follow-up mailings (2) to subsets of customers in waves 1 and 2
#10 letter with business reply envelopeFolded brochure with tear-off reply postcard
“using less energy isn’t the only way to shrink your bill”“shrink your bill and save more for your family”
“a smaller impact on the planet. A smaller bill for you.”
None$25 (Wave 0)
$50 (Wave 1, 3rd touch, Wave 2, 3rd touch, Wave 6)
No TargetingSmartAC Participants (Wave 0 and Wave 1 subset)
Psychometric Personas (Waves 3, 4, and 5)
Format
Message
Incentive
Target Segment
Page 6
A model was developed to determine the likelihood of enrollment as a function of marketing features and customer characteristics
MARKETING FEATURES
Sign up incentive
Number of “touches”
Timing (seasonal)
Message
Format
Enabling technology
CUSTOMER CHARACTERISTICS
Annual energy use
Likelihood of A/C ownership
CARE
Census block group variables
Energy efficiency rebate
When using the features tied to customer characteristics, it’s important to recognize that not all characteristics are independent of each other
Page 7
A modest marketing incentive can make a very significant difference in enrollment rates
% Of Customers Who Enroll
3.67
7.58.58 9.28
6.62
13.86
15.917.21
02468
101214161820
$0 $25 $50 $75
Per
cen
t
Single Touch Cumulative 3 Touches
KEY ASSUMPTIONS
No Enabling Technology
30% CARE
50% Central A/C
Incentive Offered on All Three Touches
1st Touch Pre-summer2nd Touch Early Summer3rd Touch Late Summer
#10 Letter With Business Reply Envelope
Multilingual Letter
Page 8
Sending second and third direct mail pieces to the same customer increases enrollment
% Of Customers Who Enroll
7.5
4.85
2.12
13.86
0
2
4
6
8
10
12
14
16
1st Touch 2nd Touch 3rd Touch Cumulative
Per
cen
t
KEY ASSUMPTIONS
1st Touch Pre-Summer 2nd Touch Mid-Summer3rd Touch Late Summer
No Enabling Technology
30% CARE
50% Central A/C
$25 Incentive on Each Touch
#10 Letter With Business Reply Envelope
Multilingual Letter
The marketing hit rate falls with each “touch” but cumulative enrollment grows
Page 9
The timing of the marketing campaign matters
% Of Customers Who Enroll on First Touch
7.5
5.74
3.34
0
1
2
3
4
5
6
7
8
Pre-Summer Early Summer Late Summer
Per
cen
t
KEY ASSUMPTIONS
Single Touch
No Enabling Technology
30% CARE
50% Central A/C
$25 Incentive
#10 Letter With Business Reply Envelope
Multilingual Letter
Customers are more likely to sign up before the summer begins than in mid- or late summer
Page 10
Offering a dynamic rate to customers that already have a load control device that can be used to automate response has a dramatic impact
% Of Customers Who Enroll on First Touch
3.41
17.08
02
46
810
1214
1618
Not Enrolled In DLC Enrolled in DLC
Per
cen
t
KEY ASSUMPTIONS
Single Touch
Pre-Summer Marketing
25% CARE
73% Likelihood of Owning Central A/C
$25 Incentive
#10 Letter With Business Reply Envelope
Multilingual Letter
Page 11
Whether you use a standard letter or a glossy brochure influences enrollment, with the former more effective than the latter
% Of Customers Who Enroll on First Touch
7.5
5.79
0
12
3
4
56
7
8
#10 Letter Brochure with SelfMailer
Per
cen
t
KEY ASSUMPTIONS
Single Touch
No enabling technology
Pre-Summer Marketing
30% CARE
$25 Incentive
50% Likelihood of Owning Central A/C
Multilingual Letter
Page 12
Customers who own central air conditioning are less likely to enroll in dynamic tariffs
KEY ASSUMPTIONS
No Enabling Technology
Pre-Summer Marketing
$25 Incentive
#10 Letter With Business Reply Envelope
Multilingual Letter
Other Customer Characteristics Vary
Significantly Across A/C Ownership Likelihood
Page 13
% Of Customers Who Enroll
9.38.4
5.74.1
17.315.6
10.4
7.5
0
5
10
15
20
<25% 25 - 50% 50 - 75% >75%
Likelihood of Owning Central A/C
Per
cen
t
Single Touch Cumulative 3 Touches
Key conclusions Marketing matters
Customer enrollment varies significantly with variation in the features, timing and targeting of the marketing offer
A modest incentive dramatically improves enrollment based on direct mail, but doubling or tripling the incentive has a small incremental effect
Take rates for customers that are already enrolled in a load control program are dramatically higher than for customers that are not in a load control program
The timing of your market offer impacts enrollment
Customers that you most want to enroll (those with central air conditioning) are the hardest to attract
Page 14
Page 15
For questions, please contact
Stephen S. GeorgePrincipal Consultant, Director Energy Practice
Freeman, Sullivan & Co.101 Montgomery Street 15th Floor
San Francisco, CA 94104
415 948-2328