Lessons in Sustainable Business: PG&E Smart Meters

The following article is part of our lessons in sustainable business series by students at the Presidio Graduate School.

By Eric Waldspurger

When PG&E rolled out Smart Meters, poor communication, improperly prepared customer service agents and bad timing coincided with a tiered rate hike during an uncommonly hot summer and resulted in excessive customer backlash. This eventually led to the California Public Utility Commission (CPUC) hiring an outside consulting group to find out what happened and delays in the Smart Meter rollout program.

A smart campaign of engaging the public with creative and powerful stories of conservation combined with educational material about the benefits of Smart Meters could have had the opposite results, and would have increased - instead of decreased - the public’s trust in PG&E.

Nonetheless, Smart Meters are inevitable. Nationwide implementation is on track with utility companies investing up to $29 billion by 2015, as a primary step towards improving the nation’s power grid. The technology offers consumers near real-time use measurement and dynamic pricing based on current consumption that allows consumers to strategize when to run appliances or turn down usage depending on the current rate. PG&E would save man-hours by decreasing manual meter readings of their 15 million customers, thereby reducing costs that could be passed on to the consumer. Smart Meters also provide a great start towards the deployment of a smart grid (to eventually replace our archaic “dumb grid”), allowing for more intelligent energy movement, and proper credit given to those with solar panels.

The problem is that using Smart Meters requires behavioral change. Some people are more willing to make this change than others, but anyone familiar with consumer behavior understands that when an external company (in this case PG&E) asks consumers to change their behavior, they face unfavorable odds. PG&E assumed the public would embrace this advanced technology.  Unfortunately, many did not.

By not proactively campaigning, educating, and working to garner community buy-in, PG&E allowed naysayers ample time and media coverage to create paranoia and backlash resulting in the CPUC conducting a study on the Smart Meters’ effectiveness, and creating delays in the rollout of PG&E’s $2.2 billion program to deploy the devices.

PG&E’s rollout of the Smart Meter program was victim of poor planning magnified by bad timing. Unfortunate coincidences, like the Smart Meter rollout in Bakersfield just prior to an uncommonly hot summer in 2009, combined with “inverted tier rates” that charge higher rates when more power is consumed, resulted in consumer outcry with PG&E facing a class action lawsuit from residents of Bakersfield, and created significant delays to the Smart Meter program rollout.

PG&E problems began when they didn't support their inverted tier rate program with continued educational literature, reminding residents of the benefits and structure of the program and how to collect on these benefits. More importantly, they completely overlooked a golden opportunity to garner public support, and even community buy-in prior to the Smart Meter program rollout.

An effective marketing campaign utilizing passionate stories of conservation, public outreach to educate residents on the benefits and potential savings provided by the Smart Meter, and being transparent about the structure and information provided by the Smart Meter program could have increased the public’s trust in PG&E, possibly even creating excitement. Instead PG&E mistakenly assumed consumers would embrace the new technology.

Pleasing everyone is impossible. Most public opposition is a response to the unknown because the unknown represents change from stability. Change is scary, especially when change impacts something that the public doesn’t consider broken. Companies who include consumers and stakeholders when implementing changes are less likely to experience derailment by public opposition.

If PG&E had treated the consumer as their partner in the Smart Meter program rollout, and taken the year or two prior to the program’s implementation to effectively campaign with succinct, impactful and positive messaging, they could have created allies instead of enemies.