Where’s My Rebate?

The concept of offering rebates on energy efficient products has become part of the common language of retail commerce. It’s a billion dollar industry driven in large part by electric and gas utilities and paid for by individual rate payers across the country.
While an important driver in the emergence of the energy efficiency industry, advances in technology and changes in consumer behavior pose some interesting challenges for the industry’s future. Namely, why does it still take so damn long to get that rebate check?

The answer has to do with how rebates are funded.

Like all business endeavors someone has to pay for all those rebates not to mention the administrative costs of implementation, but unlike a privately funded rebate from a manufacturer or retailer for which anyone might qualify, utility rebates are only available for customers within that utility’s narrow service territory. This fact alone determines how a utility implements a new rebate program, how much it has to spend, and what products or services it elects to incent.

Depending on the availability of the energy source and where the utilities are located, regulators set energy goals for the utilities they represent; those utilities must then adjust their energy usage throughout their customer base. In order to achieve those goals – due in large part to restrictions placed on demand generation (i.e., no new power plants) – utilities have to find a way to feed their customers’ insatiable appetite for energy without (a) the ability to increase supply (b) the desire to decrease demand, or (c) the peril of raising rates. To balance this seemingly impossible confluence of economic forces, utilities implement energy efficiency programs.

There are always early adopters and people for whom doing the right thing is its own reward, but for everyone else they need a little nudge in the right direction. Some call it free-ridership, others call it out-right bribery, but the fact remains: (a) if customers are not getting paid (b) customers do not participate and (c) utilities do not meet their goals. And while regulators often mandate that the implementation of a rebate program be de-coupled from the utility itself as a safeguard against any conflict of interest, the standards for how rebates are to be processed are comically outdated. This is why customers still have to submit paper applications (or some close electronic facsimile) and wait six to eight weeks for their rebate checks to arrive in the mail.

The problem stems from the data systems that house customer information: they are ancient by today’s standards and no two utilities have a database that can be integrated with any market actor at any stage of the verification process. Compound this with the fact that the firms that process these rebates rarely have direct access to the data they need to verify an application and you begin to appreciate the scale of the thing. Not only do those firms have to manually re-enter information from each application into their own databases, they also have to spend days transferring data files to their utility clients until each line item on each application has been authenticated and verified. It’s easy to see how those days can quickly turn into weeks.

The fact is, any marginally savvy app designer could easily develop an algorithm in their basement that could simultaneously verify and cross reference a qualified product with a qualified customer at the point-of-sale, but they would never be granted access to a utility’s database to authenticate the transaction. The same holds true for any retailer who might otherwise be able to offer a true point-of-sale rebate. A New York utility obviously has an interest in ensuring that a California utility customer doesn’t receive their rebate, but there are certainly other industries that have embraced technology to streamline their services without losing control or ownership of their data.

Who among us cannot transfer funds from their bank account using their smart phone? Is that data any less sensitive than the information needed to verify and cross reference a qualified appliance with utility customer status?

Utilities have played a key role in getting manufactures to develop more energy efficient products and retailers to stock more qualified appliances; the next stage in this evolution is to create an environment where point-of-sale rebates are actually possible. Though some have managed to pull this off on a small scale, there is no universally accepted model that has proven to work everywhere.

To facilitate this kind of change, utilities need to dramatically update their data systems and then grant access to every retailer that might ever sell a qualified product. Whether or not this happens anytime soon is up for debate. But as newer, more energy efficient products replace their less efficient counterparts the question is, will there be anything left to incent once that change arrives?

The Masked E-Venenger!



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