Prepaid Electricity

Something that ought to be right up Jim’s alley: prepaying for electricity as a means of energy conservation:

A half-dozen utilities are trying prepaid programs now, but that could accelerate quickly if Texas utility regulators approve rules this summer allowing it. Experimentation with prepaid-service meters is part of a broader trend that is changing the electric meter from a dumb recorder of kilowatt hours consumed into a conservation tool capable of helping people monitor their use and which will allow utilities to talk directly to customers.

Billions of dollars are being spent by utilities to install advanced meters that track the amount of energy consumed at different times of the day, a capability that is expected to lead to rate plans that include higher prices when wholesale energy costs are higher and cheaper prices at times of slack demand.

But it’s also possible that utilities trying to reduce carbon-dioxide emissions from power plants in response to looming global warming legislation could use the meters to encourage conservation. If more people paid for electricity in advance, like they do for gasoline, they might want to make it stretch further.

Salt River Project, a Phoenix utility with the largest prepaid program in the U.S., said it has observed a conservation effect among its prepaid customers, with a 12% reduction in average bills. It’s not due to disconnections, says customer-service analyst Jennie King, “because most prepaid customers never suffer disconnections.”

In the next few years, some experts expect prepaid electric service to become a standard feature of U.S. utilities, as it already is in the U.K., China and South Africa.

Interesting. A major downside, as noted in the article, is that folks have to go to the utility’s local office to put more money in their accounts, as opposed to doing it online, or by other, remote, means. And there is the possibility that people can be cut off when they max-out their balances (but rude awakenings can sometimes impart valuable lessons).

Overall, though, if a system like this can encourage people to get a firmer handle on their electric bills and usage, then it’s probably worth exploring further.

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12 responses to “Prepaid Electricity”

  1. Jim Bacon Avatar
    Jim Bacon

    Norm, You are the *man*! I was going to post about this story, but you beat me to it.

    The only thing I would have added was some perspective on the ongoing energy debate in Virginia. The reregulation bill passed in the 2007 session will incentivize Virginia’s power companies to expand capacity in order to meet growing demand, with only nominal incentives for conservation and renewable energy.

    What this article demonstrates is that other states are way ahead of Virginia in putting into place market-based conservation measures.
    That’s the beauty of pre-paying for electricity: It allows homeowners to set budgets for their electric bills, and track their electricity usage and adjust consumption accordingly. It would work even better if coupled with a rate structure that encouraged homeowners to shift electric consumption to off-peak hours.

    The prospect of cutting residential electricity consumption by 12 percent is HUGE. Virginia needs to pursue this.

  2. Larry Gross Avatar
    Larry Gross

    This makes perfect sense in so many ways except one.

    What is in this for Dominion Power?

    Why would they get on this bandwagon if in the end, they make less profit?

    Bonus question: why would DR spend hundred of thousands of dollars to “invest” in GA lobby folks?

  3. Jim Bacon Avatar
    Jim Bacon

    Larry, There is nothing in this for Dominion. The General Assembly and SCC have to take the lead.

  4. Norman Leahy Avatar
    Norman Leahy

    There may be something in this for Dominion — look at the snip above again:

    “But it’s also possible that utilities trying to reduce carbon-dioxide emissions from power plants in response to looming global warming legislation could use the meters to encourage conservation.”

    The threat of legislation, from the feds, most likely, ought to be incentive enough for at least someone at Dominion to give the idea a bit of consideration.

    That said, after hearing Dominion’s CEO speak at a conference recently, I’m not at all confident those thoughts wil reach the executive suite.

    Thomas Farrell seemed more interested in pursuing new, improved rent seeking opportunities than anything else.

  5. Larry Gross Avatar
    Larry Gross

    yup.. the point I was making is that if there is nothing in it for DR.. then not only will they not support it.. but they might well use their high-paid lobby folk to stop any efforts along these lines.

    Just being pragmatic… if you want change.. you’ve got to get the players behind it… or else watch it be torpedoed….

    some utilities are allowed to charge more for higher useage or some kind of a price schedule that at the least allows the change to be mostly revenue neutral…

    Politics being the way they are.. I’m not sure how many GA folks .. would be willing to fall on their swords in hand-to-hand with DR… on issues that most of their constituents… don’t know much about and would vote the guy out of office if they thought he/she had a hand in rate increases.

    If you really wanted to move something like this forward… I think you’d need some level of support from DR.

  6. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    With all the cutting edge legislation that Virginia has concerning solar and other electrical generation schemes, I believe we already have the answer from both the GA and Dominion.

  7. Larry Gross Avatar
    Larry Gross

    I just bought a “Kill a Watt” unit that monitors electric useage per plugged-in appliance… and has a “forecast” feature to predict annual costs.

    “Smart Meters” do the same thing except for your entire house.

    The “Kill a Watt” unit cost all of $20 and if not mistaken the Smart Meters cost on the order of $400.

    Both of these – without any changes in cost structure.. would help folks do a better job of finding the low hanging fruit of the bigger consumers of power in the house.

    One of the reasons I got the “Kill a Watt” is reading an article where a guy figured that NOT using the power saver feature on his computer was costing him more than $100 a year – and so he went out and found some freeware that not properly hibernates his computer and saves him most of the $100.

    Just imagine this one thing… done .. by thousands of people… using a $20 device that pays for itself 5 times over for just one thing – computers.

    or for instance, we could do what Rappahannock Electric does – which offers free water heater repairs in exchange for letting them put a load-demand unit on it that allows them to cut power to the water heater during peak hour useage.

    There are dozens if not hundreds of simple strategies that would save money and electricity .. but as I’ve pointed out – Dominion appears to have almost no interest in any of them.

  8. Ray Hyde Avatar
    Ray Hyde

    I see the value of what Larry says.

    Having said that, I have a problem with paying in advance. I don,t even like paying magazine subscriptions in advance. How many times do we have to see health clubs taake in the memberships, and then fail?

    Thwe Chinese pay their doctors to keep thme well. When they get sick, they stop paying.

    That makes sense to me.

    I’m willing to pay the power company to keep me well, or in business. When they let me get sick, then I’m going to stop paying them.

    If I pay as I go, then I pay for what I get. If power goes out and I lose my freezer, well that is an unstated part of the bargain. But, if I pay in advance, then I want a gurantee on the contents of my freezer, and that cost will be distributed.

    Which Dominon customers want to pay extra to subsidize the future value of the contents of my freezer?

  9. Larry Gross Avatar
    Larry Gross

    well .. it boils down to this – how much money/electricity could be saved if Dominon could let your freezer gain a few degrees during peak useage …. in exchange .. for insuring the contents against outages?

    The main point is that Dominion has a very simple premise.

    They have a monopoly and they are guaranteed a set rate of return – no matter what else they do or do not do…

    why screw up that arrangement?

    take the money and run…

    Now.. if folks who live in Va want MORE than that from their electric utility – under the current rules – good luck.

  10. Prepaid solves some unique problems for utilities. “Non technical Losses” aka Theft, not by evil people, but by people that cannot afford the reconnect charges from being disconnected by arrears billing. Putting certain types of customers on prepaid is an enabler, not a penalty. It allows the paycheck to paycheck crowd to buy power easily when they get paid, and in a manner that they can afford it. Good prepaid electric systems allow cash purchases at odd hours.

    Regarding meter costs: At large utility volumes, (10000+ at a time), 3rd generation smart meters like the Echelon ones can be installed with supporting communications infrastructure and IT systems for less than $250 per meter. Often. much less. Figuring a single truck roll can cost $100-$200 to connect or disconnect, a prepaid enabled smart meter (has integral disconnect). pays for itself on one disconnect/reconnect call.

    Disclaimer: I work at UtiliFlex, in the industry, as a programmer.

  11. Donny Avatar

    In Texas pre paid electric service is quite new and I only know of two energy companies in Texas that even offer this type of service. It is truly a unique niche as it caters to the “living from pay check to pay check” crowd but is a smart idea. Texas energy is at a 3 year high right now because of skyrocketing energy fuel costs and one of the only Prepaid electric companies in Texas has filed for bankruptcy as of a few days ago. A few other energy providers may do the same pretty soon and the reason has to do with these providers not hedging the energy they sell, which is equivalent to betting on the energy market. PreBuy Electric Company is the name of the company that has gone bankrupt and a few other providers like Riverway Power and National Power Company in Texas appear to be toying with bankruptcy as well under similar circumstances. My take on this is even if you get your money up front you may still go under if you don’t hedge your energy correctly.

  12. meuon from Avatar
    meuon from

    PreBuy Electric were nice guys, doing pre-paid without technology. ie; It was all about billing and overactive disconnects (manual) and collections.

    It works best with smart meters, that actually know how much power you have purchased, and automatically disconnect when you use it up. Prepaid with
    a good working prepaid electricity system is a wonderful thing. They figured it out in developing countries years ago.

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