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Humboldt Field Research Institute

Posted June 9, 1999

Consumers Will See Information Labels for Electricity

There are labels for everything we buy, from clothes to long-distance telephone service. In the near future, electricity customers in Maine and elsewhere will see new information labels developed on the basis of a research project involving the University of Maine, a Maine-based non-profit organization and three federal agencies.

As of March 1, 2000, Maine consumers will have the chance to buy electricity as a separate item on their monthly utility bill. To help them decide, Mario Teisl, of the UMaine Department of Resource Economics and Policy, and two graduate students have been testing consumer reactions to different types of labels that bear information about sources of power.

The results of their research are providing the basis for label information that will become standard for all New England Power Pool states, including Maine.

The labels will enable consumers to see at a glance what fuels are used by generators to produce electricity and what portion of their fuels comes from renewable sources. Maine law requires electricity providers doing business in the state to generate at least 30 percent of their power from renewable sources.

“Labels are like waving a flag. They're a signaling device,” says Teisl. “What researchers have found is that labels have different impacts depending on what consumers already know. If you know nothing about the information on the label or if it's not important to you, you tend to ignore it. For labels to have their desired effect, education has to come first.”

Working with Teisl on his electricity labeling studies are two master's degree students, Jason Weiss of Cottage Grove, Minnesota, and Huaping Rong of Shanghai, China.

Teisl specializes in the impact of health and environmental information on consumer behavior. He received his master's degree in 1990 from UMaine and his Ph.D. in 1997 from the University of Maryland. Before returning to UMaine in 1998, he worked for the U.S. Food and Drug Administration (FDA) and was a liaison to the U.S. Environmental Protection Agency (EPA).

Collaboration with federal agencies

The project began in a working group with representatives of three agencies (FDA, EPA and the Department of Energy) and the Regulatory Assistance Project (RAP) in Hallowell. Teisl did most of the focus group research and was one of three people who designed a survey of consumer opinion at shopping malls. The other two were Alan Levy, chief of the Consumer Studies Branch at FDA and Brian Roe, formerly of FDA and now at The Ohio State University.

With grants from the RAP, the EPA and the National Science Foundation, Teisl and his colleagues developed several label options and assembled small groups of people to provide feedback. Since the issue has implications for consumers elsewhere, they also tested labels on shoppers at malls in eight cities around the United States.

“We showed people alternative options for labels and asked them which product they would buy,” says Teisl. In general, the researchers found that people preferred basic information about electricity sources. They tended to be skeptical of symbols such as seal-of-approval logos that might certify electricity as meeting certain standards. In some cases, people regarded such seals as an indicator of higher prices.

“Another potential problem with seals-of-approval,” Teisl has written in an article to be published in the American Journal of Agricultural Economics, “is that they do not provide an objective basis for comparing marketing claims. As a result, customers may have to sift through environmental claims that are vague, unverifiable and misleading.”

While consumers may take environmental performance into account in electricity purchases, says Teisl, they will be more concerned with prices and contract terms. Billing and electricity distribution will still be handled by local utilities such as Bangor Hydro or Central Maine Power, just as local telephone service is managed by Bell Atlantic.

Power generation usually represents about 25 to 30% of a monthly bill, Teisl says. Remaining charges pay for the distribution system. As a result, the impact of deregulation on the ultimate prices people pay for electricity is uncertain.

“The EPA wants to avoid the kind of situation that has occurred with deregulation in the long distance telephone industry,” Teisl explains. “In that case, with all the special pricing plans and restrictions, it's very difficult for consumers to determine if one service really is less expensive than another.”

Teisl has also received grants to study food safety and forest products labeling issues.

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