Prepaid electricity has taken off in a big way in Northern Ireland over the last decade. 41% of domestic customers are now using the region’s keypad prepayment metering system for their electricity service, according to the Utility Regulator’s latest official figures – a huge leap up from around 15% at the turn of the millennium. In the past three years alone, there’s been an 7 percentage point rise in the share of keypad prepay customers, with additions averaging 1400 per month. This feature takes a look at why pay-as-you-go electricity service is proving so popular.
Keypad prepay meters replaced an older token-based system
Northern Ireland started rolling out Secure Meter’s ‘Liberty’ keypad prepayment metering system in 2002 after several years of trials, to replace an earlier generation of physical-token ‘Powercard’ prepayment meters.
The Powercard metering system had been beset with customer and business issues, including social acceptance problems and high operating costs. Customers had a poor user experience and perceived the system negatively, viewing it as nothing more than a tool for the utility. Tokens were frequently rejected for no apparent reason when the customer came to use them, meters were often sited in hard-to-reach locations making it hard to upload credit, and there was no way of replacing any tokens the customer had lost.
The problems with token acceptance contributed towards the system’s unattractive operating costs, as they caused a high volume of inbound calls and calls out of hours and increased the need for site visits to repair or replace the meters. These costs, plus those of maintaining a robust audit system for the token sales, were passed on in the form of a higher rental charge compared to credit meters, which left prepayment customers feeling “victimised”.
Another customer gripe was that there was no way to judge how long a meter’s credit would last, so users found it difficult to avoid the inconvenience of being cut off outside office hours when the vending outlets were shut.
Reasons for keypad’s success
One of the reasons why the keypad prepayment metering system has been much more successful in attracting householders than its predecessor is that the former monopoly utility, Northern Ireland Electricity (NIE), focused not just on upgrading the meter technology and addressing the business issues but also on ensuring that the system would be helpful for customers and easy to use. The resulting solution is much more customer-friendly, with prepay users now benefiting from:
- A more flexible vending system, which allows customers to buy credit over the phone or via the Internet, as well as at the traditional physical pay-points. The incumbent supplier Power NI has also launched a free smartphone app for checking balances and topping up.
- Meaningful usage information provided via the meter and a remote display, including recent consumption history and an estimate of the number of days’ usage remaining. This feedback can help customers keep track of their usage and budget ahead more effectively. The remote display addresses the issues with inaccessible meters and allows customers to easily access information irrespective of where the meter is.
- An audible low-credit warning from the meter, acting as a prompt to users to top up.
- Emergency credit, to tide users over until they can buy credit.
- Friendly credit, ensuring customers cannot be disconnected out of office hours.
- A system to replace lost codes, so that top-ups are protected and consumers are never left out of pocket.
These innovations have addressed the main social acceptance issues associated with the earlier system, while at the same time reducing the cost to serve. This enabled NIE to do away with the higher rental charge for prepayment meters. In fact, customers not only no longer pay a premium for using a prepayment meter but instead benefit from a discount on standard credit rates. This boosts the attractiveness of prepayment for the consumer.
Prepayment segment benefitting from competition
Competition in the electricity prepayment segment, which began in May 2011, is also contributing to the growing number of Northern Ireland households using keypad meters. Although the incumbent Power NI continues to dominate the domestic electricity market overall, the alternative energy suppliers have been relatively more successful in the PAYG segment, where they have a collective 38% market share, compared to 22% in the domestic credit segment.
Competitive pricing is an important factor, with Power NI’s rivals all undercutting the incumbent’s regulated tariffs either with their standard keypad tariffs or introductory discounted rates.
SSE Airtricity – the province’s second-largest domestic energy supplier – discounts its keypad rates by 10% for the first year and also offers new customers a £40 welcome credit. However, after the first year its keypad tariffs are on a par with Power NI’s.
Budget Energy is Northern Ireland’s low-cost, no-frills energy supplier, which its CEO Eleanor McEvoy has dubbed “the Ryanair of the energy business without the bad manners.” Budget Energy’s strategy is to maintain competitive low pricing over the long term, which it says is made possible by keeping its operations lean. Keypad is always Budget Energy’s lowest tariff, and the vast majority of its customers (95%) are on keypad meters. Budget Energy also promotes its values as a Northern Ireland based company, employing local staff and retaining its profits in the province. McEvoy is targeting a 50% market share in Northern Ireland, as well as eyeing expansion to the Republic of Ireland and Great Britain.
Northern Ireland’s keypad prepayment system shows the huge potential there is for electricity prepayment, if market conditions are favourable, operating costs are attractive, and the implementation is customer-friendly.
The current keypad system is ‘semi-smart’ – there’s no communications network connecting the meters to the utility back office. This means that the meters still have to be read manually, to keep customer accounts up to date and ensure there are recent readings for those wanting to switch. This could change over the next five years, as Northern Ireland introduces electricity smart metering, although the specifics of the implementation programme and its impact on the current generation of keypad meters are still being worked out.
NORTHERN IRELAND DOMESTIC ELECTRICITY MARKET AT A GLANCE
- 784,340 domestic electricity customers (latest figures as of November 2014)
- 41% use prepayment meters
- Domestic electricity market opened to competition in 2007, with the first alternative suppliers launching in 2010
- Incumbent Power NI retains a 72% overall share of domestic customers
- Alternative suppliers have a 38% share of prepayment customers
- Budget Energy focuses on prepayment and is growing rapidly, with an 18% market share in the keypad segment