Navigant Research Blog

Prepaid Metering: Another Power Shift?

Carol Stimmel — June 15, 2012

The National Consumer Law Center (NCLC), whose tagline is “Advancing Fairness in the Marketplace for All,” is opposed to prepaid utility service, which my colleague Marianne Hedin has written about here previously.  The NCLC asserts in its recently released report, “Prepaid Utility Service: Rethinking Prepaid Utility Service: Customers at Risk,” that prepaid utility service programs are putting low- and moderate-income households’ health and safety at risk, and that the associated costs are regressive.  Yet, a recent report from EcoAlign, an energy and environment marketing agency that surveyed 900 customers, found high satisfaction responses from consumers on prepay programs for cost containment, convenience, and control over energy consumption.  This is not without some apprehension though; these same consumers also raised concerns about fear of service disconnection, higher rates, and the fees associated with prepay.

If the EcoAlign survey is on target and consumer and NCLC issues can be mitigated, utilities have an opportunity to integrate their AMI/AMR systems with their meter and billing servers to reduce delinquent payments, reduce collection costs and effort, and hopefully improve customer satisfaction.  By now, though, industry watchers know the lessons learned from the intense backlash experienced against smart meters in Texas and California: relatively few numbers of upset customers can successfully channel their dissatisfaction into a widespread social media campaign that can have significant consequences for utilities.  Utilities have been denunciated, protested against, and subjected to negative headlines over smart meters, and, unable to circumvent the firestorm, have seen resulting changes in regulatory policies and been compelled to modify programs and deployment plans.

In 1962, President John F. Kennedy made a speech that included what would later come to be called The Consumer Bill of Rights.  He said that there are four basic rights: the Right to Safety, the Right to be Informed, the Right to Choose, and the Right to be Heard.  Backlash against the utility industry is an expression of these deeply held rights.  However, for many customers, choosing their electricity provider is not an option.  This phenomenon is likely the reason that, when customers are dissatisfied with costs and service offerings, they don’t begrudgingly switch providers, but entrench to get their concerns publicly aired and addressed by higher authorities.  Because of this, consumer advocacy organizations, like the NCLC, play a heightened role in consumer protection.

The NCLC is asking utilities to acknowledge that their programs could have negative consequences on economically challenged families, and dispense with transaction fees, drive down the costs for those who prepay, and work to reduce risks related to health and safety concerns when offering these programs.  Utilities have the option to leverage the advantages that consumers might see in a prepay offering, including the ability to budget around their consumption of energy.  There are challenges, however, and utilities that are implementing or considering these programs, especially in combination with sophisticated smart meter capabilities, are wise to develop a model that focuses on reasonable rates and fair treatment of prepay customers.

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