Prepaid electricity services have been around for at least two decades in the United States, but they’re less common than in other parts of the world, such as the United Kingdom, Ireland, Australia, New Zealand, India, China, the Philippines, Brazil, Mexico, Turkey, South Africa, and many other African nations.  In these countries, prepayment for power is considered a very basic and standard form of utility payment.  Now, according to Pike Research’s report, Prepaid Electric Metering, more and more U.S. utilities are starting to offer prepayment options to their customers, especially with the introduction of new smart metering and communication technology to facilitate these types of services.  Pressure to improve customer service to give more choices to consumers is also a major driver.  In this new “demand” economy, offering more choices has become a corporate imperative.

One of the reasons why U.S. utilities have been slow to offer prepaid services is opposition from consumer advocacy groups, such as a recent report from the National Consumer Law Center (NCLC), claiming that these programs discriminate against low- and moderate-income households by creating an inequitable two-tiered customer delivery system.  This opposition is not new – over the years it’s been dredged up repeatedly by various consumer protection groups.  But a close examination of existing and new prepaid programs invariably shows that these objections are now outdated and no longer relevant.  Today, the majority of prepay programs don’t target a specific customer segment, such as “high risk credit” households.  Instead, most U.S. utilities target all of their customers with these programs, regardless of financial or socioeconomic status.  And many consumers – if given a choice – opt for prepayment because it provides them with greater flexibility in managing their finances, as they can choose the amount and frequency of payments.

Also, customers do not have to pay a large upfront deposit or face a credit check when initiating electric services and are able to avoid paying any disconnect and reconnect fees.  These benefits are especially valuable to the lower-income consumers that NCLC is so concerned about.

NCLC also points out that there could be an immediate loss of electricity when a customer’s credit reaches a threshold or zero.  Again, this concern is no longer valid.  Many utilities offer an emergency credit that can be used by consumers after their credit has been depleted, such as during the night, a weekend, or a holiday.  Furthermore, prior to any disconnect, the consumer receives an alert from the utility – via phone, email, and text message – which is sent far enough in advance to allow him/her to replenish the account balance.  And, if electricity has been terminated for whatever reason, the utility is able to turn the power back on relatively quickly (at least within a few hours) upon receipt of payment, thanks to the advanced technology that supports their prepaid programs.

The NCLC report also neglects to mention another important benefit to consumers.  By prepaying, consumers usually gain access to detailed information about their energy consumption, giving them the opportunity to manage their usage in order to save on their electricity bill.   Studies have consistently shown that prepaid programs can achieve a reduction in electricity use of about 12% to 14%.  This has been the experience of Salt River Project’s M-Power prepaid program, the largest and oldest electric prepay program in the United States.

Considering the general success of electric prepaid services as well as the high customer satisfaction levels among program participants, it’s unfortunate that consumer advocacy groups keep raising objections and stirring up fears that are based upon outdated assumptions and are contrary to the experience of most prepay customers.

The heat wave that is gripping the Mountain West and the Great Plains is expected to move east this week, bringing sweltering temperatures to the East Coast, including New York City.  That means all those window unit air conditioners in Manhattan will be working overtime – and consuming huge amounts of energy.

But with an energy usage program introduced last year by Con Edison in partnership with ThinkEco, called the coolNYC program, Manhattan residents are more easily and automatically able to control the energy use of their window ACs.  They will be able to do so by using ThinkEco’s smartAC kit, consisting of a modlet (an intelligent device that monitors the energy usage of appliances and can automatically control their settings) that plugs into an existing outlet and a smartAC thermostat.  The smart thermostat can automatically turn the AC unit on and off, based on the resident’s desired temperature settings, by sending a signal to the modlet.  The modlet, meanwhile, communicates wirelessly through ZigBee technology with the resident’s home computer so that energy usage can be tracked and monitored by the user remotely and in real-time.  The modlet has an internal memory and can store up to 10 days’ worth of energy use data.

Residents can purchase this smartAC kit at various Best Buy stores throughout the city for $69.99 and receive a $25 rebate upon setting up their smartAC account.  Every summer thereafter they receive an additional $25 in the form of an e-gift card if they continue to participate in the program.  (Because each modlet and smartAC thermostat works as a pair, users need these devices for each air conditioner.)

Besides being able to view their current room temperature, change the temperature for the room, or simply turn the window AC on/off from any smartphone or browser, users can preset on/off schedules for their unit through any web browser, so that their room is cooled only when needed.  In this way, the AC becomes a smart, networked device enabling residents to manage their energy usage, while at the same time saving money.

The coolNYC program is not only benefitting New York City residents, but it also allows Con Edison to execute its demand response programs by reducing electricity during peak times when the reliability of the grid is threatened.  With over six million window ACs in the utility’s service territory – many of which operate when residents are not home – it is important that Con Edison has the ability to manage peak demand by adjusting AC temperatures remotely and automatically – especially if New York is hit by another record heat wave like last summer.

Program participants will be notified a day ahead of any DR event, giving them an opportunity to opt in or out each time.  Con Edison expects, however, that such “emergency” events will not occur more than a few times each summer, and the utility adjusts the thermostat only to a slightly higher temperature, it says.

Con Edison and ThinkEco aim to achieve smart AC control through the smartAC kit on 10,000 New York City air-conditioners, in order to get 5 megawatts of demand reduction, which is enough power for 5,000 homes.  Con Edison plans to distribute the kits this summer in large apartment buildings throughout New York City, working with building owners and tenants to install the energy saving devices.

Without the support of a national policy and having faced numerous obstacles over the years, U.S. cap-and-trade programs have lingered, most of them managing to survive despite many setbacks.  With California’s upcoming launch of the nation’s first economy-wide carbon market, new vigor (and hope) is being injected into the struggle to develop and foster a carbon trading scheme in this country.

In 2010, Californians reaffirmed by a vote of 61% to 39% their intention to implement cap-and-trade auctions for greenhouse gas (GHG) emissions by 2012.  They are getting ready to hold a “practice” carbon allowance auction in August, followed soon by the first official auction in November.  A few months later, the state’s cap-and-trade program will formally kick off in January 2013, when GHG emissions will start to be counted against the cap.  But this achievement has not been without difficulties and court battles, with various neighborhood and environmental justice groups claiming that the program will allow industrial plants to avoid installing much tougher pollution controls. Originally scheduled to start in January 2012, the program was delayed one year to give the state’s Air Resources Board (ARB) extra time to make sure that all the necessary steps had been taken and to protect the program from potential market manipulation and fraud.

Championed by former Governor Arnold Schwarzenegger, the cap-and-trade program is the cornerstone of California’s effort to reduce GHG emissions to 1990 levels by 2020.  It will affect 600 power plants, factories, and other industrial facilities and accounts for one fifth of the planned cuts under the state’s 2006 Global Warming Solutions Act, AB 32.  In 2015, the state will include transportation fuels.  Besides setting an emissions limit on sources responsible for 85% of the carbon footprint, ARB is providing a financial incentive for investments in clean technology and energy efficiency initiatives.

But as the August auction is rapidly approaching, one key issue is emerging.  What is the state going to do with the revenues from this and future auctions held on a quarterly basis?  Considering that these auctions could generate as much as $1.8 billion in the first year and the state already has a $16 billion budget deficit, this revenue question has become a very serious matter indeed.  Although the law requires that the money be invested in carbon reduction programs, a fierce debate is already going on among the state’s lawmakers and other stakeholders, along with intense lobbying from various clean energy and environmental groups. Both ARB and the utility companies want the money to help offset the rate increases that will result from the trading scheme, while the California’s public utility commission proposes to return 90% of the revenues to customers as rebates and use the remaining 10% for energy efficiency upgrades in buildings.  Other proposals have included funding for California’s high-speed rail project, establishing a “green bank” for alternative energy projects, and (not surprisingly) reducing the state’s budget deficit. To complicate matters, the California Chamber of Commerce claims that the allowances are a form of tax, so ARB has no legal right to impose it.

As these debates and arguments continue to rage in the coming months along with new amendments, California’s cap-and-trade program should send a strong message to the U.S. government that the time has come to reconsider a national carbon trading scheme and join other major economies, such as the European Union (with the world’s first and largest cap-and-trade system), Australia (which passed a carbon tax in 2011 that will shift into an emissions trading scheme in 2015), and China (which plans to start seven pilot carbon emissions trading programs in five major cities and two provinces in 2013). The success of the California carbon market could have a significant impact on the future policy decision-making of adopting a nation-wide carbon trading scheme in the United States.

Fueled by environmental and regulatory requirements, supply chain mandates, brand image, shareholder pressures, and consumer purchase preferences for “green” products, companies from every sector have adopted sustainability strategies that typically have included ambitious carbon emission reduction goals.  But Microsoft’s recent announcement of levying an internal carbon tax on all its business units goes a step further than any other company in achieving lower carbon emissions.  It’s an unusually aggressive approach to achieving carbon neutrality.

Beginning on July 1, 2012 (the start of the company’s fiscal year 2013), Microsoft business units will be held financially responsible for the cost to offset the carbon (CO2) emissions that they produce.  In other words, each group will be charged a fee for every ton of carbon it generates, specifically from electricity consumption and company flights.  Administered by the corporate finance department, the money collected will be used to purchase renewable energy certificates (RECs) and carbon offsets to make it possible for Microsoft to become “carbon neutral.”  To this end, the company has developed an accountability model that quantifies each group’s carbon impact and price, based on the cost of buying offsets and investing in renewable energy.  According to a Microsoft spokesman, “… the internal cost for electricity includes not only the price we pay the utility for electricity, but also the price we pay to offset the carbon emissions associated with our electricity use.  For air travel, the cost includes not only the price we pay the airline for the ticket, but also the price we pay to offset the carbon emissions associated with the flight.”

Why such a drastic step?  Microsoft has already been effective in meeting its fiscal 2012 goal of reducing emissions by 30% per unit of revenue from 2007 levels through, for example, energy efficiency measures, a PC power management program, and installation of 2,288 solar panels at its Mountain View, California campus.  It has even been recognized, according to the company, by the U.S. Environmental Protection Agency for its commitment to renewable energy.  But these measures have apparently not been considered sufficient.

It would seem that besides aiming for carbon neutrality, Microsoft is also seeking to achieve behavioral change throughout its organization by setting a carbon price to help individuals internalize the environmental impact of their daily business activities.  While pricing carbon emissions is an effective way to raise awareness about energy use, it can also change behavior.  Perhaps another and more obvious reason is that by creating this type of accountability, Microsoft forces its business units to take ownership of the emissions they produce, thereby empowering them to take any necessary mitigating action.

And, let’s not underestimate the media and consumer attention that this announcement has created.  Because an internal carbon tax is a unique idea, it has attracted renewed interest in and curiosity about the company – perhaps much more so than any new product release could have generated by the company.  Microsoft stands out in the marketplace as an innovative environmental leader, providing a role model for other companies.  Though it’s unlikely to motivate U.S. government officials to re-consider their position on a national carbon tax, it could certainly inspire other corporations to adopt a similar approach to achieve carbon neutrality.