Memorandum submitted by energywatch (CIT
13)
Quality information is a necessary
precursor to change people's understanding and use of energy.
Consumption information currently
provided to households is inaccurate, unappealing, arcane and
outdated.
We are all differentunderstanding
the information requirements of all segments of society will allow
potential benefits to be realised.
People should be aware of the
obligations they are, and will continue, to pay for.
1. SETTING THE
SCENE
1.1 A consumer's view
Virtually all 25 million households in Great
Britain have access to mains electricity, with approximately 21
million having access to mains gas. Since market liberalisation
in the late 1990s licensed energy suppliers have competed for
46 million gas and electricity accounts.
Gas and electricity supplied to the home is
so commonplace that most of us take it for granted that a flick
of a switch will instantly provide us with energy, without any
thought of where it comes from or if it is being used efficiently
and effectively.
For the majority of people conscious engagement
with their energy needs occurs when they are billed and have to
pay for their energy use. For customers who have prepayment meters
(PPMs), this engagement is often more frequent. Often these customers
have low incomes and prefer to budget on a regular basis, and
therefore purchase regular "top-ups".
1.2 Note on pricesa blunderbuss?
Prices rises alone cannot be relied on to deliver
the desired change in lifestyle. Since 2003 the average household
bill has nearly doubled, yet energy demand continues to increase
(although current energy efficiency measures are restraining this
rate) and over half of households have never opted to switch away
from their incumbent suppliers. Even the most price-sensitive
vulnerable households continue to prioritise energy and heating
spending (as has been shown by energywatch research) [13]and
the number of fuel poor households is now on the increaseby
Government estimates, rising prices put an extra 1m households
into fuel poverty between 2004 and 2006, bringing the UK total
to over 3 million households. [14]
In short relying on price alone to mitigate
climate change impacts would need an increase of a magnitude which
would result in unacceptable social and economic detriment.
1.3 Tariff structureupside down?
Indications are that the price of energy will
continue to rise over the next few years. Most energy tariffs
are structured in a way which runs counter to sustainability ambitions.
Unit charges for the initial amount of energy is higher than subsequent
units (the exact level depends on each tariff) effectively rewarding
higher consumption as the average unit cost will decrease the
more energy is used.
2. WHAT IS
STOPPING US?
In general consumers do not understand the complexities
which underpin energy markets, and it is unfair to expect effective
participation to require a detailed knowledge of market mechanics.
2.1 Bad billsbad for so many reasons
Last year energywatch received 62,000 complaints
and 160,000 enquiries from energy consumers. Two-thirds of the
complaints received were about billing. This problem should not
be underestimated: for every consumer who doggedly tries to resolve
their billing problems, there are likely to be othersparticularly
the poor and vulnerablewho may have fallen by the wayside.
The problems caused as a result of this are manifold. Bad billing
can lead to unexpected debt. This is turn has knock-on effects
on peoples willingness to engage with the market and puts pressure
on other household expenditure. Any bill which isn't accurate
is a bad bill, including estimated bills. In the liberalised energy
market consumers rely on price signals to inform them whether
or not it would be in their economic interests to switch to another
energy supplier or different tariff. energywatch maintains that
until consumers receive accurate, timely, well presented information
about their household consumption people will be unable to make
fully informed (ie not solely on price) decisions about their
household energy needs.
Provision of better energy consumption information
to households, through the introduction of smart metering systems,
will be a significant step towards giving people the necessary
information to seek out carbon abatement and energy efficiency
opportunities [see below].
2.2 Government strategywhen will it
become action?
The Governments' own sustainable development
strategy focuses on the need to enable, encourage and engage people
and communities in the move toward sustainability; recognising
that Government needs to lead by example. While these elements
are all necessary for change to take place they may not be sufficient
to bring about the changes needed when behaviour is entrenched.
In these circumstances, there may be a need to go further and
think about how policies can be designed to catalyse people to
behave differently.
Therefore when examining how the "ordinary
citizen" can change his or her lifestyle to minimise the
impact of climate change and to mitigate its effects energywatch
argues that one obvious issue to reassess is the relationship
between energy consumers and their energy supply. We recognise
that providing households with more relevant, accurate, timely,
well presented information about their household consumption will
not be sufficient to deliver the desired scale of lifestyle change
on its own.
Within the context of the liberalised market
if other strategies, such as media campaigns, fiscal incentives,
community action and Government leading by example through sustainable
procurement strategies are to succeed then it is necessary to
provide households with a degree of information substantially
more useful than is currently provided.
For example households are not sufficiently
enabled to make informed decisions about the value of fiscal incentives
or grants (the Engagement part of sustainable development strategy)
and are presently unable to engage with forums, community action
and campaigns in any way which is significant to their personal
circumstances. The Government should also make it clear to people
their intention to lead by example.
2.3 Who pays and who knows?
There is generally very low awareness of the
environmental obligations placed on energy companies by Government,
such as the Energy Efficiency Commitment and the Renewables Obligation.
This lack of awareness stifles moves by the market, consumers
and the Government to meet low carbon energy policy goals because
it removes the very people (consumers and constituents) who ultimately
fund the measures from any meaningful debate on how they, as individuals,
can make a difference.
In 2004 it was estimated that these two measures
accounted for about 3% of a customer's bill. [15]It
is likely that the Energy Efficiency Commitment target will double
from 2008 (which will double the cost of the programme, and be
passed straight through to consumers) and in the same year the
Renewable Obligation target will be double that of 2004, and continue
to increase until at least 2015. Yet because people are unaware
of this, mis-trust of Government and energy companies' intentions
is likely to increase.
3. NEW APPROACHES
3.1 Point of use informationthe necessary
precursor
energywatch recently commissioned Ipsos MORI
to undertake a review of the latest research on the impact of
information provision on behaviour change to find out: why information
provision is important; why choosing the effective communication
mechanism is important for people to understand and engage with
the information and finally why it is also necessary to consider
who is doing the communicating.
Unlike measures to promote energy efficiency
(such as increasing the thermal efficiency of a dwelling with
insulation or installing energy efficient appliances) provision
of accurate, timely, well presented consumption information can
engage and inform people about their consumption at the point-of-use.
Giving people point-of-use feedback information has three main
functions: [16]
1. Learningpeople can better understand
how their behaviour influences the amount of energy they use.
2. Forming habitspeople can use their
new knowledge to alter their activities which may result in a
change in routine.
3. Internalisation of behaviournew
habits can change attitudes to suit the new behaviour.
Therefore substantially improved information
is a necessary precursor to enable energy consumers to begin to
alter lifestyles and habits to mitigate impacts on climate change.
3.2 Appealing to real peoplethe importance
of presentation
How this information is presented is the second
consideration to ensure that the potential carbon savings from
behaviour change can be realised.
Effectiveness is measured by the following factors:
consumer relevance (potential for individualised information);
raising awareness of an issue; enabling understanding; translating
into action (conscious) and sustainable action (unconscious action).
Advertisers and marketers have a wealth of experience
in which communication methods are most effective in getting people
to buy products or use services. Evidence and experience from
this field is relevant when trying to understand how people interpret
and react to communications about using energy more efficientlyand
in particular, what types of communications lead to behavioural
change.
3.3 No such thing as an "ordinary"
citizenwhy segmentation is necessary
Consumers are not homogenous and will react
to various methods of presentation differently. energywatch published
a paper in January 2006 which summarises the crucial importance
of providing energy consumption information in a manner which
engages people (there is little point in providing accurate and
timely information to consumers if it is presented poorly, uses
arcane units such as BTUs and kWhs etc and tries to offer more
information than is necessary). Consideration is also given to
the needs of vulnerable members of society. [17]
Segmenting energy consumers is important because
consumers have different characteristics which affect the way
we should communicate with them. While it would be unfeasible
and possibly ineffective, in most cases, to communicate with each
consumer on a one-to-one basis, segmentation enables an organisation
to cluster groups of consumers with similar characteristics. The
clusters need to be specific and of interest to the organisation
as a target market, as well as realistic communication targetsie
the organisation can reach them and provide a valid product/service/idea.
As a result, the organisation is then able to:
Understand and differentiate
between the characteristics of each segment.
Target them with tailored products
or services that best meet their needs.
Communicate with them in the
most relevant way according to their different characteristics
(demographics, lifestyle, attitudes and behaviour).
Build loyalty and engagement
(eg Customer Relationship Management).
Experience shows that unlike private sector
campaignsand also many well-known social marketing campaigns
such as encouraging people to stop smokingcampaigns to
encourage sustainability face the additional challenge of striking
a balance between having a compelling call to action while simultaneously
not encouraging energy saving to the detriment of the health and
well-being of at-risk groups. For example, some vulnerable groups
who may already be efficient in their use of energy may still
feel obliged to cut their usage with potentially detrimental impact
on the living conditions in their homes.
Additional challenges faced by those developing
social marketing strategiesin the energy sector and beyondinclude:
the knowledge that traditional
marketing methods appear to be increasingly ineffective: evaluation
of traditional mass media campaigns suggests that in general,
whilst these have raised awareness, this awareness is rarely translated
into action; and
evidence shows that the general
public find it difficult to understand and relate to concepts
of energy efficiency and sustainable development: it is argued
that this is at least partially because they have limited understanding
of how these concepts relate to them as individuals. [18]
3.4 Who to trust...
To encourage the greatest number of people to
alter their lifestyle the issue of who delivers complementary
information and advice on how new found knowledge can be utilised
to mitigate their impact on climate change.
A number of studies conclude that people are
generally mistrustful of environmental messages communicated by
Government and energy suppliers. In 2003 the Audit Commission
commissioned Ipsos MORI to quantify the levels of trust people
have in public institutions. [19]Of
the 16 institutions people were asked to consider the three which
were least trusted were "big companies", the press and
political parties. The Powergen Energy Monitor 2004[20]
concluded that consumers were least likely to trust energy efficiency
advice given by in store sales staff, whilst energy suppliers
and Government agencies were mid table, with energywatch and independent
consumer organisations topping the list of trusted advice providers.
Therefore it is essential to accept that people's
perceptions of various institutions' intentions may differ from
actual intentions. Instead, future strategies should identify
and support those agencies and people who are most trusted.
4. ACTIONS
Until people become more energy literate by
substantially improving the information they receive about their
personal energy consumption all other measures, policies and strategies
will cost more have their objectives frustratedas can be
seen from today's energy lifestyles.
4.1 Potential for "smart metering"
energywatch believes that smarter metering systems
are a means to many ends. Most importantly they will end estimated
bills and the damaging impact these have on consumers' finances.
An industry that can effectively bill its customers will enjoy
a better and more trusting relationship.
They will also enable consumers to access the
information necessary to understand their household energy needs
and make energy efficiency more visible, relevant and attainable.
They may also be the ideal mode for communicating the most relevant,
bespoke message to the private household. Other possibilities
from such technologies are the introduction of time of day tariffs
or utilisation of dynamic demand appliances.
Updating metering infrastructure for the 21st
century will undoubtedly have a cost. However consideration should
be given to the wider social, economic and environmental costs
if the present metering infrastructure remains in-situ for the
foreseeable futuregiven that replacing the current stock
with smarter systems could reasonably take a decade. In 2003 Ofgem
stated that metering installation, servicing and reading costs
were £800 million a year. [21]
The forthcoming smart meter pilot is an ideal
opportunity for lessons to be learned which can be used to improve
energy literacy to ensure that the potential carbon savings from
behaviour change can be realised.
4.2 The Energy Efficiency Commitment (EEC)
Energy suppliers have successfully met their
EEC obligations in the past and are likely to meet their targets
for the current round. However consumer awareness of this scheme
is nil. This in practice means that consumers are passive bystanders
who have energy efficiency done to them, and often equate such
measures as improvements to household fabric rather than improvements
in energy efficiency.
If we assume that the target for EEC3 will be
double that of EEC2 then the level of money raised from consumers
bills will be in the order of £500 million-£750 million
a year between 2008 and 2011. This can be justifiably seen as
a stealth tax without representationcompounding consumers'
negative perceptions of energy companies and Government intentions.
4.3 The potential for, and barriers to, microgeneration
When considering lifestyle change perhaps the
most significant potential that microgeneration offers is how
it can engage a household with their own energy needs. The fact
that consumers also become generators has been shown to engender
enthusiasm in their energy needs. Installations have the potential
to become desirable and increase the value of a property.
energywatch represents consumers in work to
develop a framework by which "export" tariffs are made
available and understandable. Parallel work to make the planning
system more sympathetic to microgeneration and resolving contractual
issues between consumers, suppliers and distribution network operators
should enable such technologies to become easy to adopt and therefore
prevalent in the near future.
4.4 Domestic Tradable Quotas
Introducing personal carbon allowances may be
a viable market measure to encourage behavioural change if sufficiently
accurate information was available concerning individuals' "carbon
footprint". Until such information can be obtained though
it is difficult to see how such a measure could begin or be administrated.
Smarter metering systems appear to be the obvious route to quantify
the gas and electricity fraction for an individual's carbon allowance.
5. CONCLUSIONS
AND RECOMMENDATIONS
Affecting lifestyle change is a complex issue
which needs further research, but is obviously something which
cannot be realistically or solely achieved by increasing prices.
However, price signals, and more importantly energy consumption
information, needs to be greatly improved in order for consumers
to engage with, trust and understand the liberalised market within
which many energy efficiency measures are and will continue to
be delivered.
Such action will drastically increase the success
of climate change campaigns, fiscal incentives and provide the
opportunity for "social influencers" or "catalysers"
to break habits and create new lasting behaviours.
energywatch
August 2006
13 "Putting Priorities in Order"-qualitative
research for energywatch. December 2005. Back
14
Government Fuel Poverty Strategy, Fourth Annual Report. June
2006. http://www.dti.gov.uk/files/file29688.pdf Back
15
"Public Affairs Committee: Thirteenth Report-Ofgem: The
Social Action Plan and the Energy Efficiency Commitment".
May 2005. http://www.publications.parliament.uk/pa/cm200405/cmselect/cmpubacc/442/442.pdf Back
16
"The effect of goal setting and daily electronic feedback
on in-home energy use." J T Van Houwelingen, W F Van Raaij,
Journal of Consumer Research 16. 1989. Back
17
"Getting Smarter: Improved energy information for consumers."
January 2006. energywatch http://www.energywatch.org.uk/uploads/Getting_Smarter_Improved_energy_information_for_consumers.pdf Back
18
"Energy Efficiency: Public Attitude, Private Action".
LogicaCMG. May 2006. http://www.logicacmg.com/pSecured/admin/countries/assets/serve_asset.asp?id=4424 Back
19
"Trust In Public Institutions." Audit Commission/Ipsos
MORI. 2003. http://www.ipsos-mori.com/publications/rd/trust.shtml Back
20
"Powergen Energy Monitor 2004." Powergen/UEA Norwich.
2004. pg 23. http://www.eon-uk.com/libraries/uk/downloads/whoweare/Powergen_Energy_Monitor_2004.pdf£search=%22Powergen%20Energy%20Monitor%202004%20%22 Back
21
"Introducing competition in metering". Ofgem fact sheet.
2003. http://www.ofgem.gov.uk/temp/ofgem/cache/cmsattach/2638_factsheet26_meteringmarch03.pdf Back
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