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Keeping up with the Joneses' electric bills

Utilities find that peer comparison helps cut residential energy use.

October 25, 2009|Susan Carpenter

Psychologists call it the norm to conform. A well-known behavioral phenomenon that prompts people to mimic the actions of their peers, this subtle psychological trick is being used by utilities to cut their customers' electricity use.

Providing customers with information on how their energy use compares with their neighbors', along with specific energy-saving tips, has delivered dramatic results for the Sacramento Municipal Utility District, which launched the program in April 2008. Of the 35,000 homes receiving Home Energy Reports from the utility, 75% are taking action to cut their energy use, resulting in average annual savings of $40 per household and $20 to $30 per customer.

"Most people say they try to save energy in their homes, yet next to none of us have any idea whether we're doing a good job. The utility bill we get in the mail is inscrutable," said Alex Laskey, president and co-founder of Opower, an energy efficiency software firm in Arlington, Va., that works with utilities to engage consumers and encourage conservation. "We thought there might be some opportunity to provide people with a better context for understanding their consumption and, in doing so, motivate people to take action."

The results Opower saw with Sacramento and other utilities formed the basis of a new state bill. Signed into law by Gov. Arnold Schwarzenegger this month, SB 488 encourages California utilities to create pilot programs that use energy information-sharing by July 2010. It requires the California Public Utilities Commission and California Energy Commission to study the effectiveness of those programs.

"These programs have been shown to be extraordinarily cheap and remarkably effective ways to increase conservation. . . . If such programs were instituted statewide, [they] could have the effect of removing 300,000 homes from the electricity grid, and 4.5 million metric tons of carbon dioxide from the air annually," said the bill's author, Sen. Fran Pavley (D-Agoura Hills).

About 20% of greenhouse gas emissions come from residential electricity use. If a nationwide home energy reporting system were implemented, it would be the equivalent of taking 6 million cars off the road, according to Laskey.

In addition to Sacramento, which will be expanding its program in early 2010, San Diego Gas & Electric, Southern California Edison and Southern California Gas have pilot programs up and running. In November, Glendale Water & Power will start a program for 25,000 of its 83,000 metered households; early next year, Pasadena Water & Power will join the roster of utilities that have partnered with Opower, bringing the total to 21 nationwide.

Currently, 1 million homes across the country are receiving the firm's Home Energy Reports. The recipients are randomly selected by their utilities and targeted with personalized mailings that are separate from their regular bills. Comparisons are based on homes' square footage, age and heating type. Customers who want to receive more accurate comparisons and targeted tips can provide additional information about themselves, their lifestyles and their homes on the Opower website.

Opower's program draws heavily on behavioral science research pioneered by Robert Cialdini, who is an investor in the company. Specifically, the program draws on two psychological concepts: "the norm to conform to what most other people do and the desire for social approval," said Yale Law professor Ian Ayres, who researched the effectiveness of two Opower utilities and outlined the results in a study on how peer comparison feedback can cut residential energy use.

The norm to conform drives high energy users to reduce their use, Ayres said, and the desire for social approval, in the form of a simple smiley face, keeps low energy users from increasing their power consumption.

Ayres noted that comparative information yielded the greatest conservation gains in low-value houses and households that used the most energy. It also found that many low energy users conserve even more when presented with the Home Energy Reports.

"If I said that relative to people in your neighborhood in similarly sized houses, you're using 50% more water, you'd think, 'I probably have a leak in my house' or 'I'm doing something wrong.' It conveys powerful information about what's possible," Ayres said. "It's really the psychology and the informational economics that's driving this behavior."

A water conservation component will be added to Opower's Home Energy Reports in 2010.


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