Do state regulators stand to learn more from their electric choice information programs than the customers they aim to reach?
What does it cost to educate an energy consumer about electric choice? Between $1.60 and $2.26, to judge by the public education campaigns in California, Pennsylvania and New Jersey.
In the first year of their information programs, these states spent a combined $103 million, funded through consumer rates. Though an impressive total budget for three public initiatives, that amount pales in comparison to the ad dollars spent by General Motors. The leading national advertiser spent $8.06 million per day in 1998. That averages out to $10.74 annually per American, compared with the $2.26, $2.16 and $1.60 per person spent in a year by California, Pennsylvania and New Jersey, respectively. Yet all of these states have reported high levels of awareness among customers that energy choice was coming.
The impact of these public information campaigns on residential and small business consumers, however, may be far outweighed by their long-term effect on state regulators.
"We learned so much from what people were saying [through the program's feedback mechanisms]," noted Commissioner Nora Mead Brownell of the Pennsylvania Public Utility Commission. "The role of commissions is changing and what we're going to be when we grow up is communicators and mediators. It's important that we begin to think that way and staff that way."
Brownell's observations are backed up by signs of ongoing change at the PUCs. Their regulatory approach appears to be shifting to a focus on customer service.
For instance, the California PUC has developed a set of "responsive government" initiatives for improving the quality of its responsiveness to consumers. The CPUC website details programs for educating consumers about how the CPUC can assist them, and working to put customers in touch with live assistance rather than a maze of voicemail messages.
The Pennsylvania PUC, too, appears to be working to better meet customer needs. A Consumer Advisory Council has been appointed to advise commissioners in matters relating to customer protection. Meetings of the CAC are posted on the commission's website for consumers to access. According to postings of recent meetings, the PUC plans to launch a more low-key consumer education program for gas restructuring than the electric campaign, with a smaller budget. As noted on the site, "The projected savings resulting from gas competition are not as great with electric, and the Commission wants to be careful not to oversell the benefits of such."
The New Jersey law for restructuring the electric and gas industries signals the new focus on customers as well. As other state restructuring laws have done, it orders state regulators to "promulgate standards for the recovery of [education program] costs from customers which include reasonable measures and criteria to judge the success of the program in enhancing customer understanding of retail choice."
All of these changes reflect a new recognition of the PUC as a service organization for customers.
"Increasingly I talk to colleagues who are saying, 'Geez, we've gotta change the way we do business,'" said Brownell. "And you know what? The customers are going to start speaking up. If you don't give them what they want, whether you're a commission or a company, you're going to hear about it.
"Customers might not understand the language, but they understand that they've been promised something and they want people to deliver."
California: How to Judge Success
in Selling Change?
When it started on the untraveled road to electric deregulation in 1996, California anticipated that residential customers could be confused or even respond negatively to the change unless they were properly prepared. For this reason, the state's electric restructuring legislation had mandated that utilities educate consumers about the coming change and retail choice. Developing a campaign designed not to elicit a response from customers-no purchase, no switching-but to communicate only coming change and choice presented unusual challenges, not the least of which was measuring its success.
"The message was never geared to kick-start the competitive market," explained Valerie Beck, electric restructuring consumer education project manager at the CPUC. "So some of the criticism we've received about the program is that not that many residential customers in California have changed, [but] that was never the goal, that was never the purpose of the program and that wasn't the message."
Establishing what groups would be involved in developing California's education program was an evolving process. Early on the state's three largest investor-owned utilities-Pacific Gas & Electric, San Diego Gas & Electric (now Sempra Energy) and Southern California Edison Co.-successfully petitioned the CPUC to be allowed to combine their education programs in the interest of reducing advertising outlays.
A working group of 19 stakeholders called the Electric Restructuring Education Group had been established to oversee program development. EREG hired the program's prime consultant, DDB Worldwide Communications Group, to create a comprehensive media campaign. The program was submitted to the PUC, whose advisory committee made recommendations before approving it.
The commission's involvement increased substantially in August 1997, however. At that time, the CPUC disbanded the EREG and authorized the three utilities to implement the program under its own oversight.
"The commission said that any materials developed by the utilities or its advertising agency also had to be sent to the commission for approval, so there was not one word, one ad, one visual that went out that the commission didn't review and approve," said Beck. "The purpose of that was to alleviate some of the stakeholders' concerns about the message being neutral."
Beck admitted that planning the program, which ran from September 1997 through May 1998, seems like a memory from a lifetime ago. As she explained, objectives for the campaign were gleaned from the restructuring law, but developing the messages to achieve those goals was more difficult. The utilities invested about $1 million in up-front research, primarily through 40 focus groups statewide, to gauge residential customer attitudes about electric restructuring.
"What we found was they really didn't care," remembered Beck, laughing. "Consumers did not care about electric restructuring at all. What they cared about is that when they flipped a switch, their lights went on."
Those customers who were interested in restructuring cared about cost, safety and reliability and who could be counted on when there was a problem. "That's how we developed the key messages," said Beck. "Those [questions raised in the focus groups] ultimately were made into brochures."
From the beginning, the program was targeted at small customers. Explained Beck, "The decision was made early on that large consumers know how to purchase electricity, they know how to protect themselves, but it's really the small commercial and residential consumers that would need information about the new marketplace."
How successful the campaign was in meeting its goals of communicating change and choice was measured through customer recognition. Surveys conducted in summer 1998, immediately following the campaign's run, found 94 percent recognition among residential and small business customers.
Because the three utilities met the legislation's requirement that 60 percent of customers have an aided awareness of the coming change and choice, they are able to recover the program's $74 million cost through their frozen rates. But since the rates are frozen, Beck added, "Clearly, there's going to have to be some cost-cutting somewhere."
Although the main education program ended shortly after retail choice began in California, the community outreach component continues. "California has so many different ethnicities and non-English-speaking communities, we still feel the community-based effort has a lot of merit [for reaching] customers who might not be reached through traditional [means]," said Beck.
In hindsight, she offered some advice for commissions planning education programs: "The one thing I can't recommend highly enough is doing the up-front research."
Beck described how her group's early focus groups revealed that most citizens didn't understand the monopoly utility electric system, much less the competitive market model. "Thank goodness we did that research so we could educate [people on these issues] in tandem."
Pennsylvania: Learn from Retail's Approach
A new arrival in heaven is greeted by an aid who issues him a voucher for angel wings, his choir schedule and electric supplier. But, asks the man, doesn't he get to choose his own electric supplier?
"Where do you think you are?" replies the heavenly bureaucrat. "Pennsylvania?"
Television ads like this one, part of Pennsylvania's Electric Choice consumer education program, use humor in an attempt to make electric choice accessible, while positioning the commonwealth as a leader in deregulation. The other program goal is to use price and environmental benefits to motivate people to take an interest in choice.
In creating a new kind of campaign with little precedence to draw upon, Commissioner Brownell drew upon her experience in marketing in the banking industry.
"I looked at what other companies did to launch a new product," she recalled. "What I wanted to design was a full-blown integrated marketing campaign that would introduce consumers to what was essentially a new product, electricity, that would give them the confidence to go out and shop, and would empower them with enough information that they could make an informed decision," she said.
State PUCs need to approach the task on the same level that Procter & Gamble or Campbell's Soup sells its product, asserted Brownell. After all, they're competing in the same retail world.
While Pennsylvania benefited from California's experience in implementing an education program, there were some aspects that the PPUC chose not to model due to tremendous market differences. In addition to focusing beyond consumer awareness, the PPUC also took a more proactive role in the program development and implementation than did the CPUC. Rather than merely serving as an approval body, the PPUC set program objectives and worked with the utilities and stakeholders to develop the campaign. The program budget flowed through the Pennsylvania Electric Association, which represents the state's IOUs. Brownell noted, however, that the ultimate decision-makers were the PUC and the PUC-appointed Council on Electric Choice, which has representatives from the state's utilities, consumer advocates, minority and other stakeholder groups.
"Ultimately we are accountable to the public for whether they feel their money was well-spent in terms of getting them ready for competition," reasoned Brownell.
In addition to mass media and direct mail, the PUC drew heavily on community outreach efforts, engaging community leaders from throughout the commonwealth. Brownell even traveled around to state fairs and other events distributing "Where do you think you are?" tee- shirts.
"People were getting these messages all of the time from a variety of sources. You had television ¼ but then you had brochures in all the liquor stores and libraries, you had all the cabinet secretaries talking about it, you had all the community leaders talking about it, and then you had reinforcement in radio and in print and a direct mail campaign," listed Brownell. "So it was hard to escape getting messages."
While the advertising campaign was fun and important to the program, said Brownell, a fully integrated campaign also requires message points. "We did press releases, we did events, we did this Community-Based Organization Network, we had minority consultants, we outsourced our phone center so that if we were on television at 7:00 at night, there was someone there to answer the phone." She added, "I don't want to lose sight of that because it's the integration of those elements that makes a successful campaign."
The approach seems to be paying off. Ongoing surveys revealed that as of September, 94 percent of Pennsylvanians were aware of electric choice, and 41 percent said they knew how to shop for new suppliers. In addition, 2 million of the commonwealth's 5.3 million electric customers had enrolled in the Electric Choice Program as of September. A million of those had made an affirmative decision to choose or not to choose, and of that million, about half, 480,000, had selected an alternative generation supplier. The PUC expected customer savings to approach $1 billion by the end of 1999.
An unintended benefit of the campaign has been the good feelings people have about Pennsylvania.
"I go anywhere in Pennsylvania and people say, 'Oh, where do you think you're from-Pennsylvania?'" said Brownell. "So just like Rice Krispies has a brand, well, we have a brand too. It's Electric Choice with the tagline ¼ and that's got enormous recognition. And to the extent that the good feelings about that spill over into their buying decision, people are feeling good."
Brownell sees the PPUC's experience in creating this program as an example of the changing role of state commissions to communicators and mediators. "It's important that we begin to think that way and staff that way, and to get more knowledge base on that."
For example, she said, "I really want to take this campaign and what we've learned from it and expand it to telephone and gas, and see if we can combine them into long-term campaigns. This has great potential for long-term empowerment for consumers."
To other states embarking on consumer education programs, Brownell offered some advice. Above all, she counseled, hire expert consultants, but then find a way to bring the information that surfaces into the commission. The PPUC accomplished that through the creation of a new position: manager of communications.
"You need a combination of a statewide campaign with all the layers of reinforcement in a more localized campaign. And you need a feedback mechanism," she emphasized. "We learned so much from what people were saying.
"The one bit of advice I have for all PUCs, no matter what they're doing these days, is think about the customer because that's why we're here."
New Jersey: "A Market All Its Own"
The New Jersey Board of Public Utilities faced several challenges in educating customers about choice when the state's energy restructuring law was enacted last February. Not only would customers be able to choose suppliers for gas service as well as electricity, complicating the informational needs, but time was short, with restructuring officially beginning Aug. 1. Since many of New Jersey's citizens receive broadcast signals and newspapers from New York City or Philadelphia, the BPU also needed to effectively target messages.
Although most of the state's citizens had little understanding of energy deregulation, the BPU had a head start in describing the coming change in parts of the state exposed to Pennsylvania's media. More than half of consumers statewide reported some awareness of energy restructuring.
The BPU created two groups to work together in educating the public. The Utility Education Committee, comprising the state's seven incumbent utilities, was charged with developing and implementing the public education campaign, with oversight from the BPU. The Energy Education Council, whose members include consumer advocates, served as an advisor to the BPU and UEC to ensure that the education program is neutral and fair. Mt. Laurel-based Winning Strategies was chosen as the advertising and public relations agency.
By July 6, the "New Jersey Energy Choice" campaign kicked off with a news conference, advertising, call center and website. The full website was posted in English and Spanish, with a summary available in seven other languages. TV and radio ads ran in the Philadelphia and New York markets, and on almost all of New Jersey's cable outlets. Full-page color ads ran in all 22 of the Sunday newspapers circulated in the state. Every household in New Jersey-3.3 million homes-received a brochure describing the restructuring program, how electricity and gas are distributed to homes and how to shop for a supplier. In addition to the statewide umbrella campaign, each utility was required to conduct a local outreach program to meet specific needs of customers in its service area.
"The Board felt if people weren't educated early on, they knew they'd become frustrated. That's why we came out early," explained Ralph Morano, vice president of Winning Strategies.
The program's budget is $13 million for the first year, and includes broadcast, print and Web advertising and direct mail. The campaign is expected to run three years. As with the other states' programs, the utilities may fund the campaign through customers' rates if it meets certain objectives for increasing awareness and depth of knowledge.
"Our first objective was to raise awareness and generate some enthusiasm about choice," said Morano. "We've accomplished that. Research done [in October] showed an 81 percent level of awareness."
Getting people interested in energy choice was the biggest challenge from a creative point of view, but Morano noted that its "undeniable benefits" helped in communicating the program's importance.
The program's second objective is to develop the customer's depth of knowledge to the level where he can shop for a supplier, mindful both of price and environmental impacts. That goal is the focus of the program's second phase.
"That will be a bigger challenge," said Morano. "We may juggle the media a bit. TV isn't a great educational tool, [so we'll look at] printed material and PR programs to compare the environmental impact."
He added that the agency also was considering programs through the schools whereby students and their parents would learn about energy choice through special projects. Hard-to-reach constituencies such as low-income and visually impaired customers were another target.
New Jersey's campaign has benefited from the experience of states that have gone before in energy choice education programs, said Moran. For instance, his team tried to draw upon what was successful in Pennsylvania's pilot program. But other state programs were helpful only to a point.
"New Jersey is a market all of its own," with the media influences of Pennsylvania and New York, he noted. The challenge for marketers trying to reach New Jerseyans, Morano explained, is that they need to buy ad placements in the New York and Philadelphia markets, "but when you do that you're buying a lot of other people you don't need to reach."
The BPU has set a rigorous benchmark for success. According to its goals, by April, awareness should be maintained at 80 percent, customer knowledge should be 75 percent, awareness of the selection process should be 70 percent, 70 percent of customers should have made a decision about switching, and satisfaction with the call center should be 80 percent.
"This program will need to meet certain statistical objectives ¼ to indicate that [it] has been successful in educating consumers about the new competitive market," said Morano. The BPU has retained an independent consultant, the Center for Research and Public Policy, to conduct focus groups and interviews.
Regina R. Johnson is managing editor and Bruce W. Radford is editor-in-chief at Public Utilities Fortnightly.
"Plug In, California!"
California's consumer education program included mass media, an Electric Education Call Center, local outreach and collateral materials in 14 languages. The prime consultant, DDB, also awarded 84 grants to local outreach organizations.
Russel Wohlwerth, DDB's group account director, said he is often contacted for information about California's education program. "Last week, I got calls from Denmark, Holland and Australia," he noted. Wohlwerth added that it's too early to judge the program's success. "I believe in 2002 when this transition period ends and there's a price incentive, you'll really see a fair degree of switching."
Client: Electric Restructuring Education Group, with oversight by the California Public Utility Commission
Budget: $74 million
Communications Agency: DDB Worldwide Communications Group
PR Agency: Rogers & Associates
Promotions: Flair Communication
African American Advertising: Carol H. Williams Advertising
African American PR: Young Communications
Latino PR: Durazo Communications
Latino Advertising: Anita Santiago Advertising
Asian Advertising & PR: Imada Wong Communications
Electric Education Call Center:
1-800-253-0500
"Where Do You Think You Are-Pennsylvania?"
Pennsylvania's four-year Electric Choice Program, launched in June 1998, includes broadcast and print media, the ElectriChoice website, collateral materials and a toll-free information line. In addition, several mailings of 5 million pieces were sent with detailed instructions for participating in the program and a list of licensed suppliers. More than 1,000 community-based organizations have participated in the consumer education efforts, including groups that serve hard-to-reach constituencies.
From a creative viewpoint, Earle Palmer Brown chose humor as a means of overcoming the negative feelings associated with telecom deregulation and electricity's lack of glamour. The approach paid off, actually creating a statewide buzz, according to Karen Connor, a partner at the firm. "[The campaign] became a topic of conversation and it's even been picked up by the news media."
Client: Council on Electric Choice and the Pennsylvania Public Utility Commission
Budget: $16 million in 1998, $10 million in 1999
Advertising Agency: Earle Palmer Brown
PR Agency: Burson-Marsteller
Minority Consultants: Mendoza-Harmelin; Beach Advertising
Website: www.electrichoice.com
Toll-Free Call Center:1-888-PUC-FACT
"New Jersey Energy Choice"
New Jersey's public education program was launched in July to describe coming deregulation of the state's electric and gas markets. The three-year campaign includes print and broadcast advertising, a call center, website and other outreach programs. The New Jersey Energy Choice website had logged 30,000 hits by mid-November.
Client: The Utility Education Committee with oversight from the Energy Education Council and the New Jersey Board of Public Utilities
First-Year Budget: $13 million
Communications Agency: Winning Strategies Public Relations LLC
Research Consultant: Center for Research and Public Policy
Website: www.njenergychoice.com
Toll-Free Call Center: 1-877-NJ5-5678
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