Understanding the Impact of Consumer Awareness of Utility Regulatory Framework on Energy Efficiency Program Participation

Abstract

It is not often that we come across an advertisement that asks us to spend less. As consumers, we are accustomed to being pressured into using, buying, and spending more. So, when a utility advertises a program to reduce electricity consumption, a reasonable reaction is “where’s the catch?” The underlying assumption is that utilities achieve higher profits when they sell more electricity. However, this is not the case in a growing number of states. State regulators have been changing incentive structures to remove disincentives for utilities to develop, promote, and execute energy efficiency programs. This research explores the relationship between customer awareness of the utility regulatory framework and their likelihood to participate in such energy efficiency programs. The key research question is: Is a lack of awareness of the utility regulation framework a significant barrier to participation in utility-driven energy efficiency programs? The key hypothesis tested is: Residential customers who are aware of utility regulatory framework are more likely to participate in utility-driven energy efficiency programs than similar customers who are not aware. To test this hypothesis, existing survey data were used. These survey responses were collected by a large investor-owned utility with operations in New York, Massachusetts, and Rhode Island. The survey data included a battery of questions related to respondent awareness of utility regulation framework as well as a series of questions about customer satisfaction, their attitudes towards the utility and energy efficiency communications, and general demographics. Based on this survey data, respondents were categorized as either aware or not aware of the regulatory framework. These data were combined with energy efficiency program participation data for those same customers, allowing calculation of the percentage of energy efficiency program participation among customers who are aware of the utility regulatory framework as well as those who are not aware. Tabular analysis was the primary methodology. Utility customers who were aware of the regulatory framework had 29% lower levels of distrust, 11% higher levels of trust, 38% higher recollection rate for energy efficiency advertising, and, ultimately, a participation rate 22% higher than customers who were not aware. Higher participation was observed in each of the three states included in the analysis. This thesis also reviewed the utility regulatory frameworks in the three aforementioned states and identified differences that may influence the differing levels of program participation observed in the data analysis. Based on this analysis, a list of recommendations is presented to optimize energy efficiency marketing and the regulatory framework that would encourage higher energy efficiency program participation rates. The findings from this research will be useful to regulators interested in modifying the regulatory framework in their jurisdictions, regulators and utilities that are seeking to improve energy efficiency program participation rates, organizations that advise utility regulation policy, and companies who provide products and services associated with the execution of energy efficiency programs. Clearly, electricity not consumed is electricity that does not pollute, and managing electricity demand to avoid building new production capacity can save significant money.