Customer pre-pay for services : LUSENET : Deregulation / Restructuring Discussion: - Energy Utilities in the 21st Century : One Thread

In a deregulated energy market, be it electric or gas, the residential customer is the least desireable type of account from a business perspective. Residential accounts are typically "high maintenance" - from customer service to payment collections.

Evolving technologies will enable electric and gas companies to install metering equipment for residential accounts that would require prepayment for service deliver - in other words (for example) the customer buys $100.00 worth of electricity in advance of using the power. The meter is updated with this purchase, and it becomes kind of like a parking meter - when the "purchased energy" is used up, the meter expires, and the power goes off. The consumer is notified before this happens, though, and the consumer can then go out and buy more "energy credits" to "recharge" the meter.

What are the implications of this technology? Will it evolve along the lines of credit card providers - in other words, if a customer is habitually late with paying their power bill, will the cost of energy be increased to that consumer? (If you're late with your credit card payments, most credit card companies increase the interest rate you're paying on the card.) What about winter shutoff moratoriums that are typically imposed on energy delivery companies? How will that issue be dealt with in a "prepay" environment?

Basically, it seems to me that there are some social implications of this technology that need to be worked out before large scale implementations.

-- Rick Cowles (, September 27, 1999


Rick, Didn't I read somewhere that England has this prepay thing already? Do you know how it works for them?

-- Debbie Higgins (, February 02, 2000.

This is being done in England and I seem to remember a Y2K-related snafu that left many without electricity for a while.

I have a problem with pre-paying for anything. How many other products do we pre-pay for. Aside for insurance (they still get us with co-pays), I can't think of any. You pay for what you use/get after the fact. Also, when you pre-pay, you lose the benefit of having that money for other uses, such as investments. If the electric companies go this route, it should be mandated that they return any savings from a cheaper cost of doing business to those who are subsidizing it - the bill payers.

-- Ted Markow (, February 15, 2000.

You're right (both of you) - prepay technology is already in place in the U.K. And yes, there were some problems with the technology during Y2k remediation. The technology remains in place, though. I also had an interesting conversation with a gentleman who had been working on contract with a South African power producer / provider, and they are starting to work with the technology also. Domestically here in the U.S., Motorola recently conducted a pilot study with SRP in Arizona, wiring some of SRP's customers to a prepayment meter.

The bottom line is, and particularly in light of the need for incumbent power companies to cut costs and increase collection rates, I have no doubt that the technnology will be deployed here in the U.S. on a wide scale within the next 10 years. There will be some token political resistance at first, but it will happen.

-- Rick Cowles (, February 15, 2000.

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