DEFG issues paper on electricity prepayment


And to participants, the service provides consumers with increased energy efficiency, relevant and timely information and associated potential savings as well as increased control over household budget.

Whilst some consumers and industry stakeholders agree that prepaid service is a positive innovation providing convenience, flexibility and predictability of electricity usage, on the other hand are the dissenters labelling the service as discriminatory and targeting low-income consumers.

For example, the Oklahama Electric Cooperative carried out a survey and found out that amongst consumers under its prepaid service, 45% were satisfied, 40% were very satisfied and 15% were against the service.

Electricity prepayment service planning

To provide a framework and foundation for stakeholders considering the launch and regulatory approval of electricity prepayment, energy management consulting firm DEFG in collaboration with prepaid energy research company Prepay Energy Working Group released a report in February.

The report analyses the costs of electricity prepayment including costs of launch and support of the program as well as the service’s impacts on both the consumer and the provider.

According to DEFG, the main challenge which utilities are facing in adopting electricity prepaid service lies within fitting the service into traditional regulatory models as well as identifying the party responsible for the costs as this may complicate planning around costs allocations and benefits realised.

Prepaid service costs and benefits

Costs incurred in implementation of the programme include regulatory approval costs, costs related prepaid program design, costs related reasons that consumers choose prepayment and the utility business case for the service.

For instance, the report helps utilities understand that they are the party responsible for investments in operations of AMI, communications technologies and operations, Meter Data Management, training of call centre staffing and leasing of prepayment software.

On the side of participants, direct costs include program participation fees, communication costs, starting balance, late payment surcharges and service disconnection and reconnection fees.

US utility Westar Energy in 2014 received approval from the Kansas Corporation Commission to implement a pilot on electricity prepayment to its 1,000 consumers whom were charged $4 service fee per month.

However, the report points out that the time spent for utilities to realise benefits of the service is very long as both intangible and direct benefits can only be realised as programme adoption grows and customers gain confidence in the platform.

The extended time for benefits realisation on the other hand can be an obstacle in launching of the program as utilities will be driven away from emerging into the programme due to initial costs of the service.

For stakeholders to implement the program, the report reiterates that there is need for them to develop a weighing platform to prioritise program’s key costs and benefits comparing them with the traditional cost-benefits analysis.