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Direct Energy Study Shows That Energy Efficiency Savings From Customer Behavior On Prepay Plan With Daily Usage Info Would Save Texans $800 Million Annually If All Customers Served By Plan

March 21, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Direct Energy announced the results of a recently commissioned study to quantify energy savings from customers enrolled in First Choice Power’s Power-To-Go plan, a prepaid plan which notifies customers of their account balance on a daily basis.

First Choice Power is part of the Direct Energy family of brands.

Direct Energy said that the study showed that, when compared to customers on plans which bill monthly, an average Power-To-Go customer reduced their energy use by around 10%.

Direct Energy said that this translates to $162 a year in savings for a household, assuming an average-sized household that uses 14 megawatt-hours of electricity a year and pays a rate of 12 cents per kilowatt-hour.

Under the prepaid energy plan, Power-To-Go customers receive a daily notification of their energy usage and account balance via email and text, and are also notified when their account balance requires more funds. The customer experience is designed to be efficient and engaging, with account status updates sent five days a week via text or email, Direct said

"This proves that a daily energy 'bill' can fundamentally change people’s relationship with electricity. Our product can help change consumer behavior through simple, daily communication of useful information," said Jim Steffes, Direct Energy’s executive vice president of Corporate & Regulatory Affairs. "The results are significant because if all Texas households realized this efficiency, total savings would top $800 million per year."

The study, done by NERA Economic Consulting, used 15-minute smart meter interval usage data from 2014 to 2016. A regression analysis compared daily-notified customer populations to monthly-billed control groups while controlling for known factors, such as weather, seasonality, and disconnections.

The study also examined savings seen by low-income customers specifically, and confirmed that such customers on average also experienced energy efficiency savings from the prepaid plan. Specifically, efficiency savings for non-low-income customers on the prepay product were 10.75%, and efficiency savings for low-income customers on the prepaid product were 3.5%. Direct used the LIDA status of a customer to group the customer into the low-income or non-low-income group for the purposes of the study

As noted above, the study controlled for a customer's disconnection status, and non-usage during times of disconnection were not used in calculating the efficiency savings

The study of customers in the Texas market calculated the efficiency savings by comparing, using statistical analysis, the average historical daily usage of prepaid customers to the average historical daily usage of non-prepaid, monthly billed customers. The set of prepaid customers included all of the company's prepaid customers, while the comparison of monthly billed postpay customers was a statistical sampling of such group. As noted, the study controlled for known factors, such as weather, seasonality, and disconnections.

Speaking with EnergyChoiceMatters.com, Sam Gafford, Manager, Policy Analysis, Corporate & Regulatory Affairs at Direct Energy, credited the different way that prepay customers engage with their energy usage, via daily usage alerts and other information, as making customers more cognizant of their energy usage and leading to more efficienct usage

Under the traditional model of billing 45 days after usage, customers can't see and can't understand how their micro-choices each day, such as when they turn appliances on and off, affect their bill, Gafford said

While usage alerts can be provided to postpay customers, Gafford said that the impact on customers from providing such information is greater for customers who make a purchase decision associated with the provision of such information and, as such, are engaged and actively thinking about their energy.

Gafford said that the prepay product makes customers think much more actively about their energy consumption, much like when customers purchase gasoline and fill a tank, and then manage their fuel consumption until the next fill-up

Direct said that the study is expected to be published later this year.

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