Color of Power

As California gets ready to flip the switch that ends regulation in the electricity industry, companies with earthy names are lining up to pitch premium-priced “green” power generated by solar panels and wind farms.

In their ads, Green Mountain Energy Resources, EarthSource and Foresight Energy paint visions of pure electrons pulsing through power lines to homes where environmentally conscious Southern Californians can microwave popcorn and watch “The Drew Carey Show” without contributing to acid rain or the nation’s growing mountain of spent nuclear rods.

Energy marketing firms are donning the green because environmental concerns are an attractive way to distinguish their electric product lines in a world where electricity has long been a commodity.

Power marketers won’t be able to wring fat profit margins from already costly green energy. But marketing experts sense pent-up demand among consumers who think big generating plants are harmful to the environment.

Green marketing represents a big change in a long-sleepy industry that for decades relied on cartoon character Reddy Kilowatt and staid ads promising reliable service. The new breed of marketers is using warm and fuzzy images of kids and balloons and staging promotional stunts to get consumers’ attention.

“We need to retail energy the way Starbucks sells coffee and Nordstrom sells clothes,” says Kevin Hartley, marketing vice president for Vermont-based Green Mountain. “And we have to get a little funky. . . . We can’t have our ‘earnest’ dial set on 10 just because this is an important thing for people to do.”

Deregulation is designed to lower electricity costs by ending utilities’ monopolies and opening generation to new competitors. Consumers and businesses will be able to select their power suppliers in much the same way that they choose their long-distance carriers. No matter which company a consumer picks, local utility lines will deliver power to a home or business through existing electric grids.

Selling green electricity to consumers who previously gave little thought to the matter is a complicated task, say marketers now using print, radio and television ads to drum up interest before deregulation takes effect Jan. 1.

“Electricity is probably the lowest-interest, most boring consumer product category there is,” Hartley says. “There’s a real communications challenge facing us.”

For decades, utility industry advertising has been almost formulaic, shaped in large part by a strictly regulated environment that produced bland ads focusing on reliable service and state-ordered energy conservation programs. There was no incentive to do more, since utilities such as Southern California Edison and the Los Angeles Department of Water and Power had exclusive locks on their territories.

Marketers now face the challenge of telling consumers that they have a choice and that wind, solar and hydroelectric energy, although more expensive, are now an option.

The battle over California’s $20-billion energy market will be waged mostly on price. Low rates will be the weapon of choice for hard-charging competitors such as Enron, which are using the promise of price cuts and rebates to lure customers.

But price alone won’t sell every consumer. The growing army of marketing companies--longtime power firms and upstarts alike--will need to find other ways to differentiate their faceless commodity.

And that’s where green energy enters the mix. If they succeed here, the green firms’ marketing programs could be rolled out nationwide as the $240-billion U.S. power market is deregulated.

Marketers such as EarthSource are relying on consumer concern that large electricity plants are hurting the environment.

In a statement that would make Reddy Kilowatt blanch, Hartley argues that his company isn’t really selling electricity anymore--rather, it’s offering armchair environmentalists an opportunity to act.

“We’re offering a chance for you to cast the single largest environmental vote you can make with your checkbook,” Hartley says. “And you don’t have to leave your couch to do it.”

The demographics for consumers who are likely to pay more for green power aren’t surprising. These are the same people who regularly recycle waste products, buy bottled water and organic vegetables and pay a premium for energy-efficient appliances.

Rather than trying to convert consumers who will shop on price alone, marketers are concentrating on people with a predisposition toward environmentally friendly products.

“Our research suggests that 50% of California consumers view the environment as a serious issue,” says Clark Collins, senior vice president for Rosemead-based Edison Enterprises, which is marketing EarthSource. “And 25% of them say they’ll actually do something about it. And 15% of that group have a definite propensity to buy this kind of product.”

There’s an obvious difference, however, between purchasing an energy-efficient hot water heater that will produce quantifiable savings for a family’s budget and agreeing to help clean up the air by buying green power.

Research shows that although many Americans want to support environmentally friendly products and services, price is a key factor, says Howard Geller, executive director of the Washington-based American Council for an Energy-Efficient Economy.

Surveys suggest that 70% of Americans might embrace green power if prices aren’t too far out of line. And early reports suggest that green power marketing tests are drawing 20% of potential customers.

But Geller cautions that “consumers tend to shy away from the product that costs more initially or they don’t see a quick payback. . . . And it’s hard to get consumers interested in areas where energy prices are low.”

Green power marketers will also have to be upfront with consumers, who, quite naturally, will want proof that their monthly green power payment is making the air cleaner.

It’s quite possible that a Los Angeles resident might sign up with a Vermont-based marketing firm that is importing green power from a hydro plant in the Pacific Northwest.

But the nation’s complex system for generating and distributing electricity makes it almost impossible to track where an individual consumer’s electric power comes from.

“You won’t have green electrons that leave a wind farm, cross the electric lines and pop into your home,” says Kirk Brown of the Center for Resource Solutions, a San Francisco-based nonprofit group that runs a voluntary certification program for green power marketers.

Instead, the electric system operates more like a huge lake, with consumers drawing buckets of water out while generating companies pump more product in from various points along the shore.

Southern Californians who go green could see red if they subsequently learn that a good portion of their power comes from coal-fired or nuclear power plants.

“That’s why the marketing and the sales process has to be very transparent,” Brown says. “Companies have to be very clear on the fact that green is going to cost more and the exact mix of power they’re using.”

Marketers learned a painful lesson during early experiments with green power in Northeastern states when critics leveled charges of “greenwashing” against companies that marketed environmentally friendly power that actually was generated at nuclear plants.

The Center for Resource Solutions in September opened an independent, voluntary certification process that awards a “green” logo to marketing pitches that meet state and federal definitions of clean power.

As they gear up for a new era of competition, the long-staid electric industry is turning to outside marketing experts to run campaigns that offer consumers their pick of hydro, solar and wind-powered electricity.

For example, prior to joining Edison Enterprises, Collins worked with Glendale Federal Bank and Bank of America on marketing strategies for their checking accounts. Collins is credited with Glendale Federal’s successful “No” campaign, which targeted Wells Fargo Bank and mega-mergers that have swept through the banking industry. He’s tapped Zoo Advertising of San Francisco and Wise Guys, a Pasadena agency, to produce ads for EarthSource.

Industry observers suspect that marketing campaigns will work if companies hone their messages and concentrate on consumers with a predisposition to support green issues.

“Buying green power is akin to buying recycled paper,” says Michael Shames, executive director of UCAN, a San Diego-based consumer group. “It is the responsible thing to do, but it costs a little more. You won’t save money, but in a modest way, you may help save the planet.”