A New Service Delivery Model for Low-Income Energy Customers

How utilities can use innovative services to break the low-income customer debt cycle

Background

When utility customers get behind on their bills it’s expensive for everyone: customers fall into arrears and face shutoffs, utility companies shoulder overdue payments and bad debt. Nobody wins. On average, low-income households in Michigan spend one-third of their monthly income paying
for energy. In Flint, Michigan, Consumer’s Energy (CE) had $94,000,000 in bad debt and it was not uncommon to find low-income customers who owed CE more money than they earned in a year.

Low-income customers live in the least energy efficient housing. Things like broken windows translate to bigger energy bills.

Project

Originally an IDEO project, Ker-twang collaborated with Consumers Energy and The Heat and Warmth Fund (THAW) to pilot ways to help low-income customers use less energy, stay ahead on their bills, and reduce costs for all parties involved.

We spent time with CE’s low-income energy customers in Flint, learning about the difficulty of paying energy bills. We developed a range of general design principles — like the importance of fostering accountability and providing meaningful feedback — that we could translate to energy billing systems. With these in mind, we designed and implemented a twelve-month pilot study with
customers who could not afford their energy bills.

Concepts

We tested a variety of services that tailored the utility experience to the realities of low-income customers’ lives. Services ranged from a two-week bill cycle and date-certain shutoffs to daily energy usage text messages and energy assistance in advance. We then built a prototype billing engine rather than invest in costly IT system changes, continuously conducted energy usage analyses as well as in-home qualitative research, and modified interventions that did not prove to be effective.

Impact

Despite a winter that ranked among the coldest on record, pilot participants reduced their year-over-year energy consumption by 14%, paring their yearly energy bill by an average of $338. 95% of bills sent to our pilot participants were paid in full, versus a baseline of 35%. 77% of our participants were able to go one full year without accruing energy debt.

Aspects of this work have been incorporated at multiple utilities and vendors, including the Delta Institute’s mylumin.

Ker-twang helps organizations develop and scale high-quality services for low-income customers. To learn more, send a note to nate@ker-twang.com.