4
Individuals and Households as Energy Users

Individuals and households use about one-third of the nation’s energy for space heating and cooling, transportation, and various household uses. In addition, they influence an even larger portion of energy use indirectly through their purchase decisions, which partly determine the amount of energy used in producing consumer goods and services. To understand energy demand, one must understand the energy-using behavior of individuals and households.

This book approaches understanding energy users differently from most previous studies. As we have noted, most past analyses have derived from a conception of energy as a commodity. Since energy use, in this view, is a type of consumer behavior, it is no surprise that most analyses of energy use have applied the dominant theory of consumer behavior—the theory of rational choice. These analyses have assumed that energy users—both individuals and organizations—are “rational”; that is, that they act in their own self-interest to maximize some objective function. The most common assumption about individuals and households is that they act to maximize the value of consumer goods and services acquired within their budgets. The most common assumption about firms is that they, or their managers, act to maximize profits. In the public sector, the most common assumption is that agencies try to maximize size, which means number of employees, number of programs or offices, and budget. For a “rational” decision maker, energy decisions are like any other decisions. Energy conservation will occur when a person, firm, or agency expects to save more than a dollar per dollar spent.

Even in this dominant view of energy consumption, it is acknowledged that energy users do not always take the actions that will benefit them



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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 55 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, 4 and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. Individuals and Households as Energy Users Individuals and households use about one-third of the nation’s energy for space heating and cooling, transportation, and various household uses. In addition, they influence an even larger portion of energy use indirectly through their purchase decisions, which partly determine the amount of energy used in producing consumer goods and services. To understand energy demand, one must understand the energy-using behavior of individuals and households. This book approaches understanding energy users differently from most previous studies. As we have noted, most past analyses have derived from a conception of energy as a commodity. Since energy use, in this view, is a type of consumer behavior, it is no surprise that most analyses of energy use have applied the dominant theory of consumer behavior—the theory of rational choice. These analyses have assumed that energy users—both individuals and organizations— are “rational”; that is, that they act in their own self-interest to maximize some objective function. The most common assumption about individuals and households is that they act to maximize the value of consumer goods and services acquired within their budgets. The most common assumption about firms is that they, or their managers, act to maximize profits. In the public sector, the most common assumption is that agencies try to maximize size, which means number of employees, number of programs or offices, and budget. For a “rational” decision maker, energy decisions are like any other decisions. Energy conservation will occur when a person, firm, or agency expects to save more than a dollar per dollar spent. Even in this dominant view of energy consumption, it is acknowledged that energy users do not always take the actions that will benefit them

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 56 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, most. Such behavior is usually attributed to short-term energy price fluctuations, to time lags in adjustment, to the unavailability of complete information to guide and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. decisions, or to impediments to market functioning, such as the presence of price controls on energy, the existence of regulated utilities, and the prevalence of situations such as rental housing, where purchasers of efficient energy-using equipment do not benefit from the investment.1 It follows from this argument that government action can make the energy system more efficient by removing impediments to market functioning, providing information, or offering incentives or penalties through tax policy, assistance programs, or through regulation. Such policies can shorten the time it takes for energy users to take actions that most benefit them. Despite some evident differences in energy policy among recent federal administrations, all have operated on the underlying assumption that when individuals or organizations use energy, they are making rational economic decisions aimed at maximizing some objective function. In the Ford and Carter administrations, this view provided the rationale for programs to inform citizens of the energy costs of major purchase decisions. It lay behind the Carter administration’s tax incentives to speed conversion to energy-efficient operation of homes and businesses and it helped justify the removal of oil price controls by the Carter and Reagan administrations. Such diverse governmental actions as low-income weatherization assistance, small “appropriate technology” grants, energy performance stanfor buildings, and even the elimination of these same programs have all been justified in terms of the assumption that energy users make economically rational decisions. While it may seem strange that the same basic assumption has been used to support opposing policies, the assumption remains useful for predicting and interpreting aggregate changes in energy use, and it has practical implications for policy. For example, the simple assumption of rationality correctly predicts that when oil prices rise relative to the prices of other fuels and of energy-efficient equipment, some energy users will switch from oil to other fuels, and some will invest in energy-efficient equipment. To cut oil use, then, the assumption of rationality suggests raising oil prices, and data from the United States and other industrialized nations show that this policy is effective (e.g., Marlay, 1982; Schipper and Ketoff, 1982). Careful observation of individuals and organizations provides support for the importance of simple cost and return factors in the behavior of energy users. However, careful observation also makes it clear that other factors are involved. For example, in Chapter 3, we described how energy users may lack the knowledge to take advantage of information conveyed in energy prices and how they fail to act on information they distrust. There is other evidence that a variety of social, political, economic, and

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 57 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, personal influences are significant determinants of energy consumption.2 It has become a commonplace observation, for example, that different families of the and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. same size occupying identical residences can vary in their energy use by a factor of two or more (Lundstrom, 1980; Sonderegger, 1978). Thus, the behavior of building occupants is often a major factor in the building’s energy consumption. Even more compelling is the fact, demonstrated in numerous careful studies, that energy-using behavior can be altered greatly while technological and economic factors remain constant. We describe here some examples related to residential energy use. Michael Pallak and his colleagues (Pallak, Cook, and Sullivan, 1980) showed that, all other things being equal, getting people to pay attention to their energy use led them to reduce consumption. They asked seventeen Iowa homeowners to participate in a study aimed at determining whether personal efforts could make much difference in saving energy. The researcher asked the homeowners to keep an “energy log” by noting their appliance use twice a day and reading their electric meters weekly. At the end of a month, these homeowners were using 13 percent less electricity than a group of sixteen control households that had agreed to participate but had not been asked to keep an energy log. The experiment officially ended at that point, but among the experimental households, the energy savings continued for almost a full year. More aggressive efforts to influence energy use make a bigger difference. Richard Winett and his colleagues (Winett, Hatcher, Fort, Leckliter, Love, Riley, and Fishback, 1982) combined knowledge of behavioral psychology and communication techniques into a carefully constructed package to teach and motivate householders to cut energy use in their all-electric apartments and townhouses without spending money on equipment and with minimal loss in comfort. Their experimental program featured twenty-minute videotape programs that showed a young couple acting as a model by taking energy-saving actions in their home. The videotape on summer energy savings, for example, demonstrated the proper use of fans and natural ventilation in the evening; ways to shift the time or place of activities such as cooking and eating to decrease the need for air conditioning; dressing in lightweight clothing; and so forth. The script was carefully constructed to present energy efficiency as a positive action rather than emphasizing conservation. Participants in the study all attended a fortyfive- minute meeting explaining the project at which they were given instructions in the proper use of window fans, information on the exact insulating value of different items of clothing, and information on how to use a hygrothermograph installed in their homes to monitor temperature and humidity. In addition, some of the participants were given daily feedback for thirty days on the amount of energy they were using. The group that saw the videotape cut total electricity consumption by 10 percent in comparison with a control group that only attended the

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 58 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, meeting. In a three-week follow-up after the experiment, the savings were 19 percent. These savings amounted to 26 and 63 percent, respectively, of the and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. electricity used for air conditioning. This saving was accomplished with little or no change in indoor temperature and no change in residents’ comfort. When householders were given daily feedback on their rates of energy use, in addition to the videotape, their savings increased even further. In a parallel experiment with winter energy savings, the combination of videotapes and feedback produced a total savings of energy of more than 25 percent of the electricity used for heating. These studies demonstrate that social and psychological factors can make a sizable difference in residential energy use even when both economic incentives and the physical properties of the building are held constant. Of course, energy use depends not only on the habits of building occupants, but on levels of investment in insulation, energy-efficient heating and cooling equipment, and other practical devices. The evidence is that most of the remaining potential for energy savings in the residential sector requires such investments.3 Furthermore, the level of investment in energy efficiency can be increased substantially by changing social and psychological conditions—with very little reliance on special financial incentives or penalties. For example, Stern, Black, and Elworth (1981, 1982a) studied a program in the Northeast that offered homeowners a combined package of home energy audits, assistance with financing, contact with certified contractors, and inspection of energy conservation work done on the home. The program was financed in part by a surcharge on the work done under contract, so the program did not provide its services at the lowest available cost to consumers. Nevertheless, 2,000 households—about one-quarter of those who requested its free energy audits— went on to have the recommended work done by the program. These homeowners made investments that will save them almost four times as much energy as will be saved by the investments of homeowners who did not participate in the program. In fact, even participants who received free energy audits and declined to have work done through the program reported making investments that will save twice as much energy as the comparison group.4 The most frequently given reasons for signing contracts with the program were distinctly nonfinancial: “I trusted the work because it would be inspected” (98 percent); “I didn’t have to worry about finding a reliable contractor” (96 percent); “The staff was very professional and trustworthy” (89 percent); “It was convenient to have them do the recommended work” (62 percent). In short, the program’s qualitative advantages, rather than simply the net financial benefit to be expected from energy efficiency, made a large difference in household behavior and in energy savings. Each of these studies demonstrates, in a different way, that nontechnical and noneconomic factors can have a major impact on energy use. Taken

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 59 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, together, the studies suggest that the human dimension may explain a significant proportion of what has been unknown about energy use in the United States. The and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. findings showed that householders’ behavior is not readily predicted from the notion of rational decision making. In Pallak’s research, energy was saved when people were induced to pay attention to information that was already available to them with little effort. Winett’s procedures combined new information with motivational techniques, fairly sophisticated use of media, and again, attention to information that was already available. The study by Stern and his colleagues showed that certain nonfinancial but significant features of a conservation program might make more difference to householders than an interest subsidy or other financial inducements. In none of these cases was household behavior “irrational,” but these studies showed that people often do not act in their economic self-interest, despite the availability of information sufficient for such action. The studies further suggest that there is considerable practical potential for residential energy savings without modifying existing economic incentives. Much of this potential can be realized by building on an empirically based knowledge of what actually is keeping energy users from taking actions that will benefit them. In the next section, we define five different views of energy users, each of which is supported by behavioral knowledge. This knowledge is then applied to our previous analysis of barriers to energy efficiency (Chapter 3) and to the problem of providing energy information to individuals and households. We identify some principles and offer some concrete suggestions for making energy information effective, and we present a detailed discussion of home energy audits as an example. FIVE VIEWS OF THE INDIVIDUAL AS ENERGY USER Energy User as Investor Energy users can be regarded as investors for whom energy has a cost that is carefully considered in making purchases of equipment that uses energy. User- investors consider such equipment as capital, in the sense that it is a durable good that produces a stream of economic benefits, such as reduced energy costs, over its useful life. Building or vehicle owners may also see the purchase of energy- saving equipment as an investment if they expect it will increase the resale value of a property. The view of an energy user as an investor is completely consistent with the assumption of economic rationality. Every individual may be seen as acting to maximize future disposable income. In theory, investments are based on stable preferences and on an analysis of the discounted future

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 60 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, value of energy expected to be used or saved. A family decision to exchange a large “gas guzzler” automobile for a new fuel-efficient subcompact car can be and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. regarded as an investment decision: for a capital investment of, say, $7,500 less trade-in, the family will be able to reduce its energy costs by a predictable annual amount. This sort of analysis underlies the practice of analyzing expenditures on energy-efficient technologies in terms of payback period or return on investment. There are many ways an energy user might calculate the expected outcome from an energy investment. Economists generally argue that the best, most accurate index is the internal rate of return. This index is the interest rate that would make the present value of the stream of benefits expected from the investment equal to the initial cost of the investment. It is considered best because it takes into account the fact that a dollar now would grow if invested, and because rate of return allows easy comparisons with the value of alternative investments. An internal rate of return, however, is difficult to calculate, since it is the sum of a mathematical series. It requires careful mathematics and uncommon patience—or a small computer. In fact, many economic analyses of energy-efficiency investments have used more simplified indices, such as the present-value, time-discounted cost-benefit ratio or the payback period. If the most accurate index of the value of an investment is difficult even for economists to use, it is not surprising that few ordinary energy users do these calculations. Individuals tend to quantify most household energy sources in dollars, rather than in energy units (Kempton and Montgomery, 1982). This difference in estimation procedures makes energy users behave very differently than an expert’s analysis would predict. Figure 3 shows two sets of calculations of a simple index of investment—the payback period from an investment that costs the equivalent of one year’s fuel cost and that cuts energy use by 30 percent. A payback period is the time it takes to recover the cost of investment through energy savings. The “expert model” shows that the initial cost of the investment is paid back faster if fuel prices increase, because more costly fuel is being saved. The “folk model,” by contrast, calculates savings in dollars compared to preinvestment expenditures. In this model, fuel price increases can quickly make a 30 percent fuel savings disappear because fuel bills return to their preinvestment levels. While this folk model may be demonstrably “irrational” in economic terms, it does follow logically from the method most commonly used by individuals to judge the effects of attempts to save energy. People who try to make rational calculations based on their own assumptions about energy would be led to make fewer energy-saving investments than an expert analyst would recommend. Not only would they interpret their investments as less effective than would an expert; they would also communicate this judgment to their friends. It is of little use to decry the unsophisticated

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 61 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. Fig. 3 . Payback period as a function of fuel price escalation, as computed by a folk model and an expert model SOURCE: Kempton and Montgomery (1982) calculations made by the folk model: it approximates the ways most individuals calculate, if they calculate at all. More fundamentally, there is a problem with the very notion of users as investors. People do not see their purchases of energy and energy-using equipment only as investments; they have meanings unrelated to the cost of fuel. Car purchasers, for example, do not look solely at fuel efficiency. They are also concerned with performance, safety, styling, status considerations, and other factors. To take another example, decisions about home improvements can have major implications for household energy use. The homeowner may view these decisions as economic investments, in the sense that home improvements may have a continuing benefit by reducing operating costs, but they also have implications that do not easily translate into return on investment. They may increase comfort, provide more space or light, or improve the appearance of the home. Thus, when a homeowner considers reinsulating or replacing a working furnace, that choice is competing against unlike alternatives—another bathroom, a picture window,

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 62 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, new living-room furniture, and so forth. People do not usually weigh the potential value of the energy saved by one purchase against the pleasure, and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. convenience, or status achievable by alternative purchases. People are not likely to treat energy efficiency strictly as investment when they are not likely to consider the alternatives to energy efficiency as investments. In households, other important energy decisions are made when furnaces, water heaters, refrigerators, and other equipment wear out. Such decisions may be made under time pressure and with only partial information, with quick replacement a more pressing issue than life-cycle energy costs. Although those decisions may affect energy use for years or even decades, the purchaser may see them as repair, not investment, decisions. Seen as a repair, a $200 water heater will be viewed as costing less than a $300 water heater—even though the latter is better insulated and consumes $25 less in energy each year. In addition, there are the serious difficulties that are involved in any effort to find complete information. As already noted, many important decisions about energy use are made by intermediaries who are not the ultimate users of energy-using equipment. These intermediaries include developers of residential and commercial buildings and operators of automobile rental agencies. In these cases, the investors do not pay for the energy used. The investors’ concerns have to do with ultimate sale or lease of a product that is competing with similar products. For example, in new multihousehold residences, electric resistance heating is often installed to keep down the price of construction of the building, to shift responsibility for heating to the occupants, and to let the building owner escape the various management problems associated with central heating. Decisions about what appliances to install in a new building are often based more on visual appeal than on life-cycle cost. While these are certainly investment decisions, future energy costs are not involved since they will be paid by someone other than the person who makes the investment decision. Thus, the investor is relatively unconcerned with energy consumption, and the energy user is uninvolved in purchasing the durable goods that might be seen as an investment. For all these reasons, to view energy users as only investors leads to an inaccurate account of individual behavior, even with respect to capital goods. Other views of energy users are often more applicable. Energy User as Consumer In another view, individuals think of their homes and automobiles as consumer goods, that is, as providing necessities and pleasures. Energy-using activities and equipment are purchased for the value of using them. Once purchased, they require money primarily to maintain or increase their ability to provide necessities and pleasures and only secondarily to increase their economic value. This view might offer an explanation of the

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 63 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, fact that home improvement loans are taken out much more frequently for room additions or new siding than for reinsulation or new and improved furnaces. The and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. former expenditures give owners pleasure or tangibly add to a home’s appearance, in addition to their economic benefits; the latter are unseen and mainly save money. Among energy investments, the usual preference for storm windows rather than wall insulation may reflect the same phenomenon: storm windows are attractive, cut down on street noise, and may decrease the physical effort of home upkeep; insulation offers a faster return on investment, but it lacks these consumer benefits. This view of the energy user can be consistent with an assumption of rational action if people are assumed to act to maximize some subjective quality —what economists call a utility function. The usefulness of an assumption of rationality for predicting behavior would then depend on empirical knowledge of such utility functions and on a demonstration that they are based on reasonably stable preferences. Such evidence is lacking, so the view of the energy user as consumer is described here as a heuristic rather than a formal model. Energy Consumer as Member of a Social Group Homes and automobiles also may have social meaning. They express membership in a community or attainment of a certain status in society. In youth, the keys to the family car symbolize attaining adult status; a home in the suburbs often symbolizes career success. And that home must be acceptable in appearance to the friends, neighbors, or co-workers—or the homeowner risks loss of status and rejection. As a local energy manager remarked to a member of the committee: “I’m committed to saving energy and I know plastic sheeting over my windows would have a fast payback, but I wouldn’t dream of putting plastic on my house. My neighbors would kill me.” Energy considerations almost always take second place when they are in conflict with strong social pressures. Social group memberships are also important as sources of innovation and of energy information. A homeowner may get the idea to install a clock thermostat from seeing one in a friend’s or neighbor’s home; the decisive information about whether the investment is a good one may come from the experiences of that friend or neighbor. When this happens, the action is most accurately described by the metaphor of social contagion, even if the individual rationalizes his or her action in terms of expected financial return. Since such action is not the outcome of detailed search for information and may not produce the maximum expected benefit, it is not rational in the formal sense. It may not even approximate formal rationality—individuals may rely on sources that can add no accurate information whatever. Still, reliance on word-of-mouth information from

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 64 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, friends or associates may be a sensible strategy under some circumstances, such as when more formally prepared information is conflicting and untrustworthy. and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. Energy Consumption as Expression of Personal Values Individuals use or conserve energy in ways consistent with their personal ideals or their self-images. For some, central air conditioning may be an important expression of a value of comfortable and gracious living. For others, solar collectors on the roof may express values of self-reliance or environmental preservation. There is evidence of important variations in energy-related values. When presented with a choice between energy and environmental values, for example, women and younger people usually express greater preference for environmental protection than men and older people (Farhar, Weis, Unseld, and Burns, 1979). This may be significant because environmental concern has an effect on energy- related behavior (Black, 1978; Stern, Black, and Elworth, 1982b, 1983; Verhallen and van Raaij, 1981).5 The age difference with respect to environmental values may be particularly important in the future. If environmental concern among the young is a reflection of the increased importance of environmental issues during their formative years, the data may portend increasing importance of environmental values as an influence on energy consumption. Energy User as Problem Avoider According to the view of energy users as problem avoiders, people usually take energy use for granted and treat it as no more than a potential source of annoyance or inconvenience. Nothing is done about energy until the furnace breaks down, a power outage or a gasoline shortage occurs, or there is such a sharp rise in the price of energy as to command immediate attention either because of the change itself or because energy becomes a more significant portion of the budget. In this view, attention is a scarce resource. People do not change their energy-use patterns until some threshold of annoyance is passed. At that point, they respond, and that behavioral response continues until some new and pressing problem appears to change behavior again. Behavior typically is haphazard and oriented toward short-term avoidance of inconvenience, perhaps guided by hearsay, rule of thumb, “what worked last time,” or other unsystematic influences. This view implies that people will not take energy-saving action if this action involves significant inconvenience or disruption to household routines. A paper by Penz (1981) contains a detailed anecdotal account of the process of deciding about home insulation and is convincing on this

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 65 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, point. Penz followed numerous false leads from the telephone Yellow Pages and other sources, spoke with unresponsive retailers and utilities, and went through and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. the exhausting process of calling unknown contractors and comparing their recommendations, their bids, and his impressions of their competence. The prospect of all this effort, no doubt, is sufficient deterrent for many homeowners.6 Householders sometimes try to avoid problems like this by a strategy of relying on a single trusted source for energy advice and services. But reliance on a heating oil delivery company, a furnace repairman, or a handy neighbor may not be the best way to get energy services at the lowest cost because the trusted source may not be expert in the relevant area. Worse, the source may have an interest that conflicts with the energy user’s. But the alternative of searching for accurate information and reliable service providers in the present energy environment is perceived as an extremely onerous task. As a result, many people are willing to trade the likelihood of saving on some energy costs for the sense that they have done something to improve their situation and the assurance that they are avoiding a major loss or ridding themselves of an annoyance.7 A good example of this consumer strategy can be found in the study by Stern and his colleagues (1981), already mentioned, of a comprehensive residential conservation program in the Northeast. Among program participants, the reasons most often given for signing contracts with the program reflected issues of risk avoidance and convenience. These reasons are most readily interpreted in terms of a motive to avoid problems, especially the very costly ones that may result from unsatisfactory work by contractors. The notion of avoiding problems also includes difficulties that arise among household members. It is tempting to think of a household acting as a unit, but this view is not always accurate. If an effort to cut energy use involves arguments about thermostat settings, or negotiation over who will use an automobile, or nagging children to turn off appliances, take short showers, and the like, a great many people will quickly revert to their previous patterns of energy use. SOCIAL AND PSYCHOLOGICAL PROCESSES AFFECTING ENERGY USERS The five views of energy users are presented not to argue that one is superior, but because there are elements of truth in each. It is appropriate to consider the conditions under which each view furnishes useful insights about how energy users behave. The following discussion elaborates on some of the processes that lead energy users to behave as other than investors.

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 95 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, “Framing” Messages. Recent research has shown that information is moreor less effective depending on the way it is “framed” (Tversky and Kahneman, and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. 1981). An illustration of this is the evidence that while most people might drive across town to save $5 on a $15 item, few would drive across town to save $5 on a $125 item. Rational actors would be equally likely to make the effort under both conditions, but for real people, the situations are apparently very different.18 Another example of the importance of framing a situation is that the amount of joy experienced when someone wins $100 is not equal to the consternation suffered when that same person loses $100. Related to this fact are research results indicating that individuals are more willing to take a risk to avoid or minimize a loss than they are if the purpose of the risk is to increase their fortunes. Thus, people who fear a loss will probably be more open to innovation. This finding implies that information emphasizing payback and return on investment, because it stresses the amount of money and energy which can be saved or gained through conservation, is not optimally effective. Telling people how much they can save by investing money in conservation or alternative energy sources encourages people to define this as a “gain” or “win” situation. Once the situation is labelled as such, people express a reluctance to accept risks or depart from the status quo. Thus, this campaign strategy may actually be inadvertently discouraging people from changing their habits of energy use. But if auditors clearly framed energy conservation as the avoidance of loss—by showing residents how much they were losing every month by not investing in alternative energy sources and other conservation measures—one would expect a very different reaction. Once the loss becomes salient, people are encouraged to take more drastic action. A recent study by Yates (1982) provides some direct support for this notion as it relates to energy. Homeowners were asked to evaluate some cost-benefit information about either a solar water heater or an insulating blanket for the water heater. The presentations were designed to focus either on potential savings if the investment was made or on continued losses if the investment was not made. The homeowners evaluated the worth of products on a number of dimensions and indicated their intent to install a device in the coming year. The findings generally confirm the contention that homeowners find energy-efficient technology more attractive when they consider the negative consequences of inaction. Commitment and Choice. The energy auditing process can also make useof what is known about the effects of commitment on action. We have already mentioned research that demonstrates that when people make a public commitment, set themselves an explicit goal, or voluntarily take a small action in accordance with their wishes to conserve energy, they are likely to go on to take more significant action. This can be applied in an

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 96 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, energy audit if some small actions can be taken on the spot. Thus, an energy auditor may show a householder how to install a flow limiter in a shower or how and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. to weatherstrip a window, using materials provided by the audit program. To gain the effects of behavioral commitment, it is important to encourage people to do some of the work themselves. Weatherstripping may be especially effective because it can be used to combine hands-on experience, behavioral commitment, and, using smoke sticks or similar devices, a vivid before-and-after demonstration of effectiveness. Even with small improvements like using weatherstripping material and flow-limiters, an energy audit should give an energy user a choice among actions to take. Allowing a choice increases commitment to the chosen action and also increases the householder’s sense of control over his or her situation. As we have noted, the sense of control has a great effect both on a person’s sense of well- being (e.g., Langer and Rodin, 1976) and on the willingness to accept suggestions from outside authorities (Brehm and Brehm, 1981). Choice has also been an important factor in the adoption of energy- conserving measures, such as the automatic day-night thermostats studied at Princeton University (Becker, Seligman, and Darley, 1979) and the gasoline- saving device the U.S. Army tried and rejected (Thomas et al., 1975). Allowing choice, as with the override mechanism on the automatic thermostat, serves a purpose even if the available choice is never actually made. Choice makes information more acceptable and increases commitment. Involving people in the decision-making process and allowing them more control over their destinies can make an energy audit more effective at the time and encourage further efforts at savings in the future. To summarize, then, to be effective an energy audit has to do much more than provide accurate, reliable, and useful information. The information must be organized to make the auditors credible sources, and the auditors should supplement their accurate information with vivid, personalized examples, hands- on demonstrations, and a choice of activities involving householders that will save energy on the spot. Most of these changes can be made in the audit process easily and inexpensively simply by training the auditors in communication skills. Credibility and Program Design Other problems of energy information, especially the credibility issue, call for efforts beyond training auditors. They require attention to the design of the program. Some of the most attractive features of RCS are its inspection and contractor-listing features—two design elements that build credibility. Still, distrust of the source of energy audits may make it very difficult for audits to be effective, even if they are well publicized, offer accurate information, and make highly sophisticated presentations. Doubt

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 97 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, ful information sources—which probably include many of the utilities responsible for RCS audits—have serious credibility problems that must be overcome if their and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. programs are to be effective. There are several strategies for doing this. One is to achieve cooperation between a low-credibility information source (which may be able to offer a program essential funds and expertise) and another information source that is better trusted by the clientele. The latter will want to be sure its credibility is not damaged by the association with a doubtful source and will, therefore, make demands on the program. But if it comes to accept the audit program as credible, the action of this trusted source should help to communicate trustworthiness to its membership or clientele. This sort of partnership between a utility or other large sponsor and small community groups has been tried with success in Rochester, New York, and is being pursued elsewhere (Talbot and Morgan, 1981). A promising variant of this approach involves building on the systems that already are most effective in providing individuals and households with information about energy-saving activities—informal social networks. A program can gain the considerable benefits of word-of-mouth publicity by using people who are part of local social groups, relying on neighborhood organizations to announce its existence or deliver its services, and doing its publicity or disseminating its services on a local or neighborhood basis. Some programs have used a “Tupperware party” approach, in which energy audit information or installation instructions are delivered to a group of householders meeting in the home of one of them (Olsen and Cluett, 1979; Fitchburg Office of the Planning Coordinator, 1980). This brings neighbors together in a way that can create a network in which people talk about saving energy. Such informal social networks provide highly credible information. They can be incorporated in program design and implementation alone or in combination with other techniques. It is in the interest of an effective program to make sure that the information entering the social networks in any way is accurate. This can be done, for example, by installing energy-monitoring instruments in selected homes for demonstration purposes. Another strategy is to create a new organization to run an audit program. At first such organizations will lack public recognition and may need a lot of publicity, but they can get off to a good start with support from state officials, as they did in Massachusetts and Rhode Island (Rosenberg, 1980). After that, however, they must prove trustworthiness by their performance. A third strategy is to organize a program so as to encourage and ensure good work: strict standards for materials, independent inspection of work resulting from the energy audits, independent conflict resolution mechanisms, and other consumer protection features are examples of useful procedures. Some procedures like these are incorporated in the regulations

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 98 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, for RCS, and some of these have demonstrably increased the effectiveness of programs in encouraging energy-saving activity (Stern et al., 1981). Another and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. procedure to encourage good work is the so-called Bradley Plan being tried in an innovative conservation experiment in New Jersey (Stern et al., 1981). In this plan, a private company offers free energy audits and free energy-saving home improvements to homeowners and earns a return on this investment through payments by the utility companies on the basis of actual energy savings. Although many problems can be anticipated in working out the practical details of this approach, the procedures give the energy service company clear incentives to provide good information and competent installations. A program can increase its credibility if its energy auditors are well trained, if it recommends competent contractors, and if it is structured to reward auditors —and contractors, if they are involved—for accuracy and thoroughness. To produce a high level of participation may take time because distrust can only be removed by an extended record of trustworthiness. But because of the general distrust in energy information, proof of trustworthiness in action is the only way to have an effective energy information program. A fourth way to encourage trustworthiness and build credibility for good programs is to get reliable information to energy users about which energy programs can be trusted. Energy programs may themselves take on the task of demonstrating their trustworthiness to their clients. If a householder can see clearly the effects of his or her actions—preferably in terms of money not lost, the comparison between actual energy costs and what they would have been without action—a program’s effectiveness is vividly demonstrated. It may benefit an effective conservation program to monitor its clients’ energy use before and after participation, and to feed this information back to the household in meaningful units of saving. It is also possible to develop independent institutions to gather and disseminate information about energy programs. For mass-market products, including those that claim to save energy, a credible magazine like Consumer Reports serves this function. For information about energy programs and about the services of contractors who install energy-saving equipment, such a national approach is inappropriate because the services are not national. But it might be possible for similar institutions to be established at the local level. Like Consumer Reports, they would only be credible if they maintained high standards of objectivity and remained free of ties to interests other than those of consumers. It is not clear whether such information sources could be funded by subscribers or would need independent support. But experiments with independent information sources would be valuable because of the obvious need for credible sources of energy information for household energy users.

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 99 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, Beyond Credible Information Improved energy audits, even if performed by credible experts, are not sufficient and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. to make a program such as RCS optimally effective. There are other elements needed for an effective residential conservation program, and behavioral knowledge can be useful in designing some of them. In addition to publicity, important issues include assuring consumer protection, promoting trust, eliminating conflicts of interest, certifying contractors, assuring competition and consumer choice among service providers, and establishing effective relations among the organizations whose actions affect the program’s success.19 Even with its organizational needs met and problems of conflict of interest overcome, a program such as RCS would not be enough to produce all the economically justifiable improvements in residential energy efficiency. For example, RCS has not been designed to meet the need for energy efficiency in rental housing, and it does not provide funds for households that lack sufficient money or credit for major energy saving expenses. But attention to the issues discussed here can improve the effectiveness of programs that rely on energy information among households who are able to take advantage of the information. Whether governments will develop or require more effective information programs depends on the definition of a public interest in energy efficiency, allocation of sufficient resources, and willingness to adopt some of the more aggressive approaches that make information more effective. SUMMARY AND IMPLICATIONS Five different views of the individual energy user contain important elements of truth. First, household users are investors; they are motivated to get the services that energy provides at the lowest net cost or to achieve the greatest possible return from investments in energy efficiency. Second, energy users are consumers; their energy-related activities have value to them in terms of comfort, esthetics, and similar goals—not just in financial terms. Third, individuals and households are members of social groups; they get information and ideas from their peers who, by communication and example, can exert considerable influence on energy-related behavior. Fourth, people seek to express their personal values in the things that they do—including things that use energy. Fifth, people try to avoid problems: they often persist in patterns of energy use that are not economically beneficial, but that could be changed only with effort; they tend to make decisions based on simple rules of thumb, confidence in someone else’s advice, or other shortcuts, rather than on the basis of careful analysis. The five views of the energy user draw attention to certain social and psychological processes that are significant for energy use but that have

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 100 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, not figured prominently in past analyses of energy consumption. These include imitation; interpersonal communication from friends and others; the and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. “momentum” of past behavior; the effects of personal choice and commitment; the expression of values; and the activation of norms. Findings from research on these processes indicate that energy policies and programs that rely for their effectiveness on the actions of a large number of people can be improved by taking into account the social and psychological processes of energy users. We have pointed to a series of issues that any effective energy information programs must address. Essentially, an energy information program is a communication process, rather than a simple form of information transfer. This fact has implications for the way information is presented and for the design of energy programs. To be effective, energy information programs should be based on established knowledge about communication processes. While this point seems obvious, most programs to inform individuals and households about energy saving have been poorly constructed as communications vehicles. Energy information should be presented in an attractive format to get attention, and care should be taken to make the information understandable to the intended audience. Vivid, personalized examples are useful to make information memorable, and information is presented most effectively through personal contact. In addition, information should be organized so that it is relevant to a user’s specific concerns, is presented at a time and place that makes it relevant to those concerns, and is delivered by a source that is likely to attract attention and to garner trust. Because of the diversity of energy users and their needs, these requirements usually imply different messages and different information sources for different segments of the public. Information programs are likely to be more effective if they are decentralized to allow for a variety of methods of reaching diverse groups of people. It is also valuable to employ outreach workers or to rely on informal social networks within communities to deliver information. When outreach workers are used, they should receive training in communication skills and in effective methods of communicating. Energy information is more effective when it makes energy and energy savings more visible and understandable to energy users. As was discussedin Chapter 3, to the extent energy flows remain invisible, energy users fail to respond to the signals given by rising energy prices. One way to make energy more visible is to offer frequent and meaningful feedback to energy users about the rate at which they are using energy. The typical utility bill is quite inadequate to this task, as demonstrated by the evidence of how much change can occur when feedback is improved. Cost-effective

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 101 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, alternatives can be developed. Research is needed on how to design utility bills to be more useful as feedback, to develop ways for householders to learn more from and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. reading their own meters, and to design feedback monitors and displays for use in residences, automobiles, and large buildings. Such research should emphasize communicating information in meaningful units and in exciting, eye-catching display formats. The energy efficiency of equipment can also be made more visible by developing simple, understandable indices comparable to miles-per-gallon for automobiles. Further field testing of indices such as energy efficiency ratings for appliances and buildings is warranted because effective indices would decrease the level of effort needed to respond to energy price signals. Energy audits and other informational programs can make energy flows and savings more visible by using vivid demonstrations with smoke sticks or infrared scanners and by using feedback techniques and energy efficiency indices. The question of whether the effort to make energy more visible must be publicly sponsored is still open. We do, however, have some doubts about the likelihood that utilities, which command extensive research resources and are in a particularly good position to make energy visible, will often do so effectively. They have done relatively little in this area so far, and their information programs would conflict with a desire to minimize customer complaints when feedback calls attention to rate increases. Energy information programs must earn public trust. This need must beaddressed in the design of any program. Information can be channeled to potential audiences through sources they find credible. To maintain their credibility these sources should monitor the quality of the information. Procedures and incentives can also be created to encourage information-providers to work in the energy user’s interest. It is also possible to give energy users better ways to make independent judgments—by making energy and energy savings more visible so the effectiveness of programs is more evident; by creating new institutions, on the model of Consumer Reports magazine, to work in the energy users’ interest to evaluate information and energy-related services available at the local level; and by directing the best available information to informal social networks that are highly trusted. Some of our suggestions may also be applicable to other programs. For example, tax-credit programs and low-income weatherization services are like information programs in that they have the same trouble getting the attention of all eligible energy users. Information by itself is not sufficient to bring about all or nearly all the energy-efficient investments that would save households money over the long term. Some of the other significant barriers were outlined in Chapter 3, and others are discussed in Chapter 5.

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 102 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, Notes and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. 1. A more detailed discussion of these issues has been presented by Schipper (1976). 2. There remains some confusion in the literature about the definitions of these influences and the relation of each to energy use. For example, Neels (1982) has concluded that in housing, “feasible changes in occupant behavior would reduce energy use only 2 to 5 percent.” This conclusion is based on a regression analysis in which “behavior” was operationalized as energy price, income, household size, number of nonworkers, home ownership, and the presence or absence of an elderly household head. Neels considered these variables behavioral in that they operate through behavior, but they are not in fact behaviors. It is reasonable to expect that measured behavior would have a stronger effect on energy use than these more indirectly related influences. There is evidence to support this view (e.g., Verhallen and van Raaij, 1981). Recent research suggests that several levels of causal influence on energy use exist. Causally earlier influences may act either directly on energy use or indirectly through intervening variables such as housing stocks, general and specific attitudes, and energy-using behavior (Olsen, 1981; Stern, Black, and Elworth, 1982b; Verhallen and van Raaij, 1981). 3. A study by the Office of Policy, Planning, and Analysis (1982) of the Department of Energy found that in residential buildings between 1973 and 1980 curtailments such as temperature setbacks, room shutoffs, and reduced appliance use accounted for three times as much in energy savings as the combination of improved insulation and more efficient heating and cooling equipment and appliances. Yet most estimates suggest that the overall potential savings are greater from efficiency than from curtailment (e.g., Kempton, Harris, Keith, and Weihl, 1982; Stern and Gardner, 1981). The evidence that households’ first responses have been curtailments only underlines the importance of efficiency improvements for achieving further savings. 4. The estimates of energy savings in this study were based on calculations that project the effect of energy-efficiency investments on energy use, rather than on measured energy consumption. The research can also be questioned because it was not a controlled experiment: participation in the program was voluntary, and it is possible that participants had already decided to make major investments in energy efficiency before calling the program. While this may be so, when the statistical analysis

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 103 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, held several economic, demographic, and attitudinal variables constant by regression procedures, the effect of program participation remained strong. and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. 5. Survey research has usually failed to find simple correlations between general environmental concern and energy-using behavior (Farhar et al., 1979; Olsen, 1981). The new evidence points rather to indirect causality, in which general attitudes affect more specific attitudes, beliefs, and norms, with those attitudes then influencing behavior. 6. In some ways, the nuisance and uncertainty involved in shopping for home insulation is not unusual and affects many major purchases for the home. However, the existence of many untested firms in the home energy efficiency business makes anxiety realistic, and the national importance of changing energy prices makes consumer paralysis important as a public issue. 7. This can be seen as an example of a “satisficing” decision strategy, as described by Simon (1957). 8. One might ask whether it is possible for an appeal to be too vivid. The answer is almost always in the negative. The exception occurs when extreme fear is being created, such as when gory pictures of cancerous lungs are used to discourage cigarette smoking. Extreme fear can, under certain specifiable conditions (Higbee, 1969; Leventhal, 1970), tend to immobilize an individual. This is an extremely unlikely occurrence, however, with appeals to save energy. 9. There is a large research literature in social psychology bearing on dissonance phenomena: Irle and Montmann (1978) list 856 separate published articles (largely research publications). 10. Some studies show that energy use was responsive to general social conditions, apart from price, during the 1973–1974 oil embargo (Walker, 1980). Exhortations from government and a general crisis atmosphere probably combined to influence the public at that time. 11. This criterion assumes the view of energy as commodity. Other views of energy imply other goals for government programs—the view of energy as ecological resource, for example, seems to imply encouraging energy users to minimize energy use beyond that dictated by their individual economic self-interest. 12. The data are not always consistent, however; Mutton’s (1982) review of three recent conservation campaigns found no evidence for a linear relationship between repeated exposures of a communication and increased effectiveness.

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 104 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, 13. A payback estimate is obtained by dividing the cost of an investment (e.g., a storm window) by the value of the energy it saves in a year. Although it is an imperfect guide to economic self-interest, it is potentially usable by an average householder. However, it is only one of several possible simple and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. indicators (e.g., annual savings, percentage return on investment), and there is no research comparing the usefulness of different indices. 14. Some variables that might also thought to be important have not been shown to relate to the effectiveness of feedback; these include the use of mechanical versus human sources of the information and, within some range, the units in which the information is presented. Feedback has been about equally effective when delivered in a variety of units: temperature-corrected consumption units, energy use compared to similar households, temperature-corrected dollars-per-day, and so forth. The credibility of the information seems more important than the particular units (Seligman et al., 1981). 15. Problems can arise when the initiative is left to the utilities. In 1974, a New Jersey electric utility started informing residential customers of their present electricity consumption in comparison with weather-corrected consumption from the previous year. The program was initiated to promote energy savings, but it was soon cancelled. What happened was that after a rate increase, many customers used the new information to bolster complaints that even though they were using less energy than before, their bills had increased. Thus, partly because the program succeeded in reducing energy use (Russo, 1977), it was discontinued. Customer reaction might have been different had the utility added information on what the bill would have been without the conservation efforts. As it was, the bill made energy savings visible, but not in the units that were most meaningful to the utility’s customers. 16. While the RCS is more than just an energy audit program—in fact, the energy audit may not be the most important features of the RCS package (Stern et al., 1981)—and RCS energy audits are administered in many different ways around the country, the home energy audit as described in the RCS regulations is prototypical of energy audits in the United States. 17. While the RCS regulations were later revised (Federal Register, June 25, 1982), the 1979 requirements were still being followed in most programs in late 1982 (according to M.Friedrichs, of the Office of Building Energy Research and Development, U.S. Department of Energy).

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INDIVIDUALS AND HOUSEHOLDS AS ENERGY USERS 105 About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, 18. In most simple models of rational economic behavior, the cost of travel is the same in both instances, as is the benefit ($5); thus, the cost-benefit ratios are the same. That one item is marked down 33 percent and the other only 4 percent does not make one trip more worthwhile than the other and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. when economic savings is the sole criterion of value. 19. For more detailed discussion of some behavioral issues in these domains, see Stern, Black, and Elworth (1981).