EEC PERSPECTIVES

Non-Traditional Pricing Coming to a Tradition-Bound Utility Industry

 

 

I had just finished writing an article for a client on electric utilities investigating non-traditional utility pricing options when a notice arrived from my city-owned water utility: Too many people were watering their lawns during the peak period of 3 a.m. to 6 a.m. on Mondays, Wednesdays, and Fridays, it said. 

“These spikes in demand frequently exceed the City’s water treatment capacity and can cause wear and tear on the entire system,” the notice continued. It concluded by asking us to find other days and times to water our lawns.

This may be the first step to instituting a non-traditional pricing system for water here in Lafayette, Colorado, where we are experiencing drought conditions so common in the West.

 

Peak Demand: 100% Understand. Paying For It? Not So Much

Companies that deliver electricity, natural gas or water know all about peak demand. They know when system demand goes up or down, and the incremental cost of procuring resources to meet that demand. 

But that ubiquitous knowledge within the industry has not translated into the widespread use of non-traditional pricing plans that charge customers different prices at different times. Rather, assuming those incremental pricing changes have been manageable, regulators often let them fold it into standard prices. 

That may be changing. The proliferation of electric vehicles, rooftop solar and other strategic forces afoot in the industry are driving a growing number of electricity providers to implement, or investigate, non-traditional pricing options, including time of use (TOU) pricing and prices with a demand component built into them.

Communications tip of the month: Many utilities have non-traditional pricing options. Communicators should learn from those who have gone before them. Use simple messaging and art to convey a concept that most consumers already understand.

Some utilities have had non-traditional pricing options for decades. When I lived in Arizona decades ago, both the utility I worked for and the utility that provided me electricity had TOU plans. 

But as I learned in reporting that article for a client, others are just starting out, launching pilot programs or holding community workshops to discuss the issue with customers.

A utility I once worked with developed a suite of non-traditional pricing options a few years back, but COVID, leadership turnover, and other factors caused it to be shelved. Chances are, it will come back before too long. Non-traditional pricing options make too much sense in most markets to be ignored.  

 

Communicating Non-Traditional Pricing

I have blogged on communicating non-traditional pricing plans before, and my general recommendations have not changed:

  • The most important thing is to create simple, easily understood explanatory materials, such as clock icons to show the best times to use, and not use, electricity.

    Source: Salt River Project
  • Second, position non-traditional pricing options as a potential win-win opportunity: The customer can save money and the utility can avoid buying power when it is most expensive.
  • Third, don’t underestimate the communications challenge! Most customers have been accustomed to paying a flat price for each kilowatt-hour of electricity, therm of natural gas, or hundred cubic feet of water since time immemorial. Start early and message often!
  • Fourth, make sure your customer service representatives are fully prepared to answer customer questions about the new pricing options.
  • Fifth, provide your customers with easy-to-use tools, like a web-based price calculator, so they can see whether going to a non-traditional pricing plan would work for them. This one from the Sacramento Municipal Utility District (SMUD) is a good example. There are many others.

And finally, consider this simple umbrella message: “Call us to see if any of these non-traditional options would work for you.” Utilities love to get in the weeds, but not that many customers are willing to go that deep. Make it easy and customer-centered!

Non-Traditional Pricing: An Opportunity to Get Creative

Intuitively, customers know that some things have different costs at different times:

  • For those who still go out to movies, matinee pricing is a familiar and easily understood concept.
  • Many bars and restaurants have discounted Happy Hour prices for drinks and food.
  • Retailers run sales all the time — why pay full price for those shoes when you can get them on sale?
  • In many places, rides on buses and trains cost more during peak periods and less during off-peak periods. New York State was all set to institute non-traditional pricing to reduce roadway congestion this summer until the governor vetoed it at the last minute.


Utility communicators can build on consumers’ intuitive understanding and acceptance of non-traditional pricing.
The introduction (or relaunch) of non-traditional pricing for electricity, water, or natural gas is an opportunity to get creative and test concepts. Finally, look at the introduction of non-traditional pricing options as an opportunity to learn from your customers and work with them to identify something that creates mutual benefits.

 

Photo credits: iStock unless otherwise noted
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What EEC Does and Why We Are Different

John provides EEC’s clients with a wide range of communications and marketing services, writing stakeholder-driven content for annual reports, newsletters (for customers, employees, and members), news releases, websites, media relations materials, executive speeches, and op-ed articles. He also conducts best-practice research when clients need to know what their peers have learned through experience.

Learn more here.

 


Here’s what some of EEC’s clients are saying…

“When we began working with EEC a couple of years ago on Relay, our quarterly magazine, John adapted quickly to our fast-paced editorial schedule. He consistently meets our deadlines in a timely manner, and he often submits articles ahead of schedule. John’s deep reporting skills and extensive industry expertise both have added a valuable new dimension to our magazine.” 

– Nicole Albers, Director of Public Affairs and Strategic Communications, Florida Municipal Electric Association (FMEA)


“John’s familiarity with public power allows him to make connections across the topics and examples that hit at the core of our members’ interests. His writing pulls from his experiences and network among the utility industry, which results in well-rounded stories that offer value to our readers.”

– Susan Partain, Senior Editor and Content Strategist, American Public Power Association

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