DEFG says focus on prepay energy’s convenience and control benefits

Increasing control over energy costs and budget plus avoiding bill shock are the top reasons why Americans would choose a voluntary pay-as-you-go electric service, according to the latest survey of prepay energy trends from management consultancy DEFG. As in previous years, the 2014 survey also found that consumers strongly associate prepayment with convenience.

These are the messages that DEFG says should frame how utilities market their advanced (smart meter based) prepay energy services – and they should be integral to the program development right from the outset. “The marketing and messaging aspects of prepay energy have oftentimes been an afterthought to the regulatory and operational considerations. This is a mistake. There is a wide range of aspects tied to consumer education, communication and marketing that should be considered and planned for from the beginning.”

High but largely untapped interest in prepaid energy

Over the years DEFG’s surveys have consistently found that there are high levels of consumer interest in a voluntary prepaid electricity service. In the 2014 survey, 17% of respondents were either “extremely interested” or “very interested” in such a payment option, while a further 15% were “interested”. Younger people were especially keen, with around a half of respondents expressing an interest compared to 32% overall.

DEFG survey results showing consumer interest in prepay energy

DEFG survey results showing consumer interest in prepay energy – Source: DEFG EcoPinion Survey report

DEFG estimates that only around 200,000 of Americans are currently energy prepayment users, so much of this interest has yet to translate into consumer adoption of prepaid energy services. But DEFG believes prepay energy is now primed for growth, as the first clear “killer app” enabled by the roll-out of advanced metering infrastructure in North America. According to a recent study from Navigant Research, within a decade there could be over 3 million households in North America using a prepay energy option. DEFG notes that the growth of voluntary prepaid service in the utility sector will happen in the context of a broader “megatrend” towards prepayment in consumer finance.

While the survey findings suggest energy prepayment has a high growth potential, some questions do remain over the extent of future demand. The latest figures from DEFG represent a fall in interest levels compared to the previous year, when around 40% of Americans surveyed were interested in prepay energy.

According to DEFG, this could be because fewer people see a need for prepay to manage their utility bills amid improving economic conditions, or possibly because they aren’t yet familiar with the idea of prepaying for utility services. The findings may also reflect a slow-down in the broader trend towards prepayment for consumer services. DEFG added that there may also still be some stigma associated with prepay energy, as many Americans, particularly among older age groups, perceive prepayment largely as option to help those who struggle to pay their bills.

Getting the mechanics right first time

One of DEFG’s key recommendations is that utilities get the nuts and bolts of their prepay energy services “right the first time”. This is especially true of the communication channel, says DEFG. The survey found that respondents would prefer to receive account notifications by email (72%), text message (48%) or a combination of channels (42%) – so utilities planning to offer a voluntary prepay energy option may need to update their communications channels to include mobile.

The survey revealed that utilities should also be prepared to cater for consumer preferences for mobile, electronic or automatic payments. Almost 80% of respondents indicated they would want to reload their accounts online, while 47% wanted to be able to make automatic payments when their balance ran low and 42% wanted to use their smartphones or other electronic devices to make payments.

Visit DEFG’s website for a free copy of the report.