Pre-pay for electric service: Then and now – and what’s to come
A recent webinar conducted by the Smart Grid Consumer Collaborative (SGCC) presented some intriguing early results from recent US utility efforts to offer their customers pre-payment services. DNV GL also has findings from evaluations of six municipal utility forays into this promising new customer payment scheme. These services, called “Pre-Pay” for short, are a smart-meter enabled service whereby customers can pay in advance for the electricity they use, and receive periodic notifications as to the remaining “balance” of time and money on their account. Payments can be made wirelessly or remotely, when and where customers like and at any amount desired, providing the maximum in customer control.
Purchasing electricity on retainer is a new concept in the US, but has been in place in various places and forms around the globe for a long time:
- In countries such as South Africa and Pakistan, utilities have provided pre-pay meters to customers for years, using a system whereby a smart card is loaded with funds at a local convenience store or supermarket and placed in the meter, turning on the power in the home. Once the amount on the card is used up, the customer can reload additional funds allowing for more electric usage.
- Coin-operated systems are still prevalent in rental properties and hotels in Europe and the UK whereby coins are dropped into a slot to enable electricity to flow to the room.
While these methods have always allowed for strict control of electricity use and costs, they rely on outdated technology and transactional tools such as currency or cards. They also require customers to have coins or cards at the ready or to go to another location to reload the cards prior to use.
Enter smart meters, a key foundation of the smart grid transformation that is rapidly expanding the number and types of services available to customers. Smart meters enable a new kind of pre-payment service, this one based upon wireless communication between you, your devices (like your phone or computer) and the meter itself. According to the SGCC webinar presented by Georgia Power and PayGO, a leading provider of pre-pay services to utilities, today’s pre-pay services include:
- Forecasting element – Some services will forecast your near-future electricity usage based on prior use plus things such as the weather and temperature data. They turn this information into a prediction of how many days you are likely to have left given your remaining balance; e.g., “Your balance is $20, good for about 4 days of remaining electric use.”
- Disconnect-reconnect – The utility can program a grace period for you to reload your account when you are notified of being close to an empty tank. If you run out of gas completely, you can make a payment and be reconnected quickly, without need of a utility representative coming out to your home.
- How much & whenever – The system allows you to maintain whatever balance you wish on your account, providing maximum flexibility as to when you wish to pay, the amount and via whatever means is most convenient to you.
- Customized notifications – Customers can decide how often they want to be pinged on their mobile devices with updated information from the system, from hourly meter reads to once a month. The system also sends an instant message when payments are received.
- Arrearage reduction – A separate option of the Georgia Power program was to allocate a portion of payments toward arrearages – i.e., past due accounts. This ensured that even those with outstanding balances could participate in the program.
Georgia Power’s program includes provision of a NEST thermostat as an inducement to try the service out, and as a way to provide customers even more control over their electric usage. It also offers payment options at local offices as well as Walmart for those who do not wish to make payments over the internet.
What kind of results are utilities seeing as a result of these early initiatives to offer pre-pay services to customers? According to the SGCC webinar, about 10 investor-owned utilities have conducted pilot programs to date, with a few going system wide, while there has been even more activity in the public power sector. Utilities are seeing benefits in terms of improved payment behaviors, more rapidly reduced arrearages (depending on payment allocation schemes) and even energy savings. PayGO reports seeing from a low of 7.5% energy savings at Arizona Public Service to a high of 12.7% usage reduction from the pre-pay customers of Salt River Project. Because of these promising energy savings impacts, some utilities are funding their pre-pay programs as part of their energy efficiency portfolio budgets. Georgia Power’s program also showed significant reductions in arrearages for those electing that option, thereby adding to the energy savings benefits of pre-pay.
DNV GL Evaluations
DNV GL’s evaluations of pre-pay programs show fairly consistent results as those noted above. DNV GL takes the evaluation of energy savings to the next level by categorizing savings by seasons and customer size, and by the achieved savings and annual savings of the program participant. Achieved savings recognizes the average participant who does not stay in the prepay program for 12 months after initially entering. The achieved savings results for six local power companies ranged from 5 to 11.7%. Annualized savings is the percent energy reduction associated with 12 months of program participation. In this case, savings results ranged from 6 to 13% annualized energy savings. Five of the six programs showed consistency in annualized savings, between 6% and 8%. One program did achieve 13% annualized savings, with the additional savings attributable to unique operational or geographical characteristics, how they implement their program, the maturity of the program, and other factors. Finally, the seasonal effects showed that customers saved more in the winter than the summer, and the large customers saved more than the smaller ones.
Keep watching this space
While most early results look positive, some notes of caution are also in order.
- Faster cut-offs due to non-payment – While smart meters enable utilities to reconnect customers quickly, they can also cut you off just as fast. It’s important to check the grace periods allowed by utilities prior to cut-offs for nonpayment. As always, households with special circumstances – such as the presence of life-support equipment, elderly people, or small children in the home – can be treated differently.
- Persistent pinging – George Power reported that the main reason some customers dropped out of the program was the frequency of persistent notifications their phones received from the system. Customers can now set the notification frequency to their liking to avoid being overloaded with pings.
- A bias toward the tech-savvy – As with many new services in society today, pre-pay is primarily available to those with smart meters installed at their homes, and customers that use computers or mobile devices for receiving the notifications and making remote payments. In some cases utilities accommodate other customers by requiring controls to be placed on meters enabling remote disconnects/reconnects. For these customers, payments can be made over the phone or in person.
The SGCC webinar noted that only ½ of 1% of electric smart meters currently offer pre-pay options, compared to fully 33% for smart phones, indicating potentially significant room for growth. A survey conducted by Georgia Power in 2013 revealed that 15% to 20% of customers reported intentions to switch to pre-payment programs if offered by the utility. According to these statistics, combined with the early results from evaluations, indications are that pre-pay services may have a strong future as more and more utilities complete their smart grid transformations.
 For more information see also: Tweed, Katherine; Georgia Power Leverages Smart Meters for Prepaid Electricity; Greentech Media, April 22, 2015 http://www.greentechmedia.com/articles/read/georgia-power-leverages-smart-meters-for-prepay