As the number of electric, water, and gas advanced metering infrastructure (AMI) deployments in the United States continues to grow, a new customer service opportunity for utilities is emerging: pre-paid energy metering. A concept internationally embraced for many years, American utilities have historically viewed prepay mostly as a quasi-punitive means for managing bad debt associated with low income energy customers. The current changes to the utility landscape may mean the time is finally right for wider scale adoption of pre-pay energy metering for the masses.

Since its inception in the United Kingdom during the 1930s, prepaid energy metering has enjoyed increasing popularity with utilities in many countries around the world. With the advent of new technologies utilizing tokens, keypads, or swipe cards, the global use of prepay has surged since the 1980s. In-home displays allow users to monitor their consumption, and account balance has helped boost the popularity of the payment method among customers, as well as power utilities. The consumer engagement facilitated by the IHDs, one of the basic tenets of today’s Smart Grid movement, has actually proven to help reduce consumption. South African utilities have experienced significant growth in prepay adoption since the early 1990s. Several prepaid energy meter manufacturers have set up shop in the country. Prepay has also gained significant traction in the Caribbean, where utilities may see prepay penetration rates of 30 percent or more. The option is extremely popular among owners of rental properties and vacation homes, who enjoy the convenience and economy of not having to continually contact the utility to arrange for disconnects and reconnects.

While numerous utilities and millions of their customers around the world are reaping the benefits of prepaid metering, why hasn’t it caught on in the United States? It’s because of the negative stigma attached to the concept of prepay. I believe that the American sentiment is generally that prepay is a method of debt control, forced by utilities onto non-paying (read: low income) customers to limit their own financial risk. Even power utilities that may recognize the value of prepay have been afraid to implement, for fear of the PR backlash caused by such a “negative” program. Americans’ strong value of personal freedom, our general loathing of the external control often associated with utility programs and the relative affordability of energy in the US has also slowed the wide-spread adoption of prepay. What some utilities fail to see, however, are the highly marketable consumer benefits inherent to prepay.

This is not to say that there are no prepay energy meter success stories in the US. Arizona’s Salt River Project (SRP), the nation’s third-largest public utility with approximately 950,000 customers, has successfully utilized prepaid electric metering since 1993. Their current, voluntary program called M-Power—introduced in May of 2000—has over 100,000 customers enrolled and a high customer satisfaction rate. SRP believes that the IHD’s real-time consumption data makes electricity tangible for consumers; and over 90 percent of customers feel they use electricity more wisely because of it. Customers enrolled in M-Power demonstrate an average 12 percent reduction in energy consumption. The company expects AMI implementation to expand prepay adoption even further.

Upward pricing pressure, combined with increasing environmental focus and consumer awareness, will continue to force American power utilities to look for new and innovative methods to provide customer satisfaction. Once they begin to understand the mutual benefits that prepay metering offers their customers and companies, prepay will likely catch on here in the US, the same way it has elsewhere. A natural migration to prepay, facilitated by AMI, will help foster the type of customer collaboration that is necessary for a truly Smart Grid. What are your thoughts?

By: Craig Bialy, principal consultant, DNV KEMA Energy & Sustainability