Prepay: Saving electricity and money or going without?

(ACEEE blog, 16 May 2019) As more utilities look at prepay plans, new research finds this option carries both benefits and potential risks. While it may put at risk the wellbeing of some customers trying to save money, it can also lower electricity use and garner customer satisfaction.

The report, by ACEEE and energy nonprofit Slipstream, explores programs that require customers to pay in advance of receiving electricity. The idea is controversial because when a customer’s balance reaches zero, their electricity is shut off until they recharge their account. Traditional plans allow a grace period for payment and permit customers to go into the red before they are eventually disconnected (with plenty of notice), but prepay plans skirt these requirements.

The issues are compounded because customers on prepay plans also tend to have lower incomes and are more likely to let their electricity be shut off to save money. However, in North America, prepay programs also generally come with detailed and frequent real-time feedback that encourages customers to learn about their energy use.

Although these programs are generally not well researched, we found 16 program evaluations in 10 reports that suggest customers reduce their consumption by about 9% when on prepay plans. We complemented this research with stakeholder and expert interviews and reviews of regulatory proceedings. We concluded that prepay programs are likely to reduce energy use, but we aren’t sure why.

None of the evaluations from North American prepay plans used a randomized control design or examined the individual features of the programs. It’s possible that certain aspects of the programs —such as enhanced frequent feedback — may lead to the bulk of savings. So prepay itself may not be a necessary program component to reduce energy use. Based on our research, however, we suspect that feedback with prepay may be more effective than feedback alone.

How prepay plans reduce energy use

Multiple factors work together in prepay programs to influence energy use. The combination of enhanced feedback and a threat of shut-off is particularly likely to reduce energy use. But without further research, we can’t be sure of the impact of each on program savings. Other factors inherent to prepay plans, such as more frequent payments, active decision making for payment, higher costs (for some prepay programs), and paying in advance may also play a role in influencing savings.

External link

ACEEE blog, 16 May 2019: Prepay: Saving electricity and money or going without?