Well over 200 electric utilities in the United States are offering, piloting, or planning to introduce prepaid service based on advanced metering infrastructure (AMI), according to the latest research from Prepaid Energy Hub.
Prepay programs available in over 30 states
Our research found that AMI prepay programs are emerging across many parts of the nation, with examples identified in 34 states overall.
Prepay is most prevalent in the southeast of the country, which accounts for around half of all programs. North Carolina alone boasts over 25 prepay programs, followed by Georgia, Kentucky and Tennessee. Prepayment is also rapidly gaining ground in the Midwest, especially in Illinois, Indiana and Missouri. While most prepayment programs so far have been introduced by distribution utilities, prepaid electric service is also available from over 20 competitive retail electric providers in Texas, which leverage the AMI deployments of the major distribution utilities such as Centerpoint and Oncor.
In the rest of the country, there are fewer prepaid programs. In the West most of the activity is centred on Colorado, Idaho, Oregon and Washington states, where a number of cooperatives and municipal utilities are rolling out smart prepaid options. But in the Northeast we found just a single example, the PrePay program recently introduced at Northwestern Rural Electric Cooperative in Pennsylvania.
It’s not just the warm-weather states that are seeing prepay deployments. Programs are also emerging in some of the states with the coldest winter temperatures, including Minnesota, Montana, Pennsylvania, Wisconsin, Wyoming, and even Alaska. To protect customers during extreme cold weather, utilities can mitigate the risk of getting disconnected by applying winter weather moratoria, extending the timescales for recharging negative balances during certain months, or unusually in Alaska activating wattage-limiting to maintain a lifeline service instead of fully disconnecting the supply.
Member-owned electric cooperatives, and to a lesser extent municipal utilities, account for the vast majority of the AMI-based prepaid implementations so far, but there is now also significant interest among the investor-owned utilities (IOUs).
Electric cooperatives lead the way
We have identified upwards of 170 cooperatives that have active AMI-based prepay programs, representing around 20% of the nation’s 838 electric distribution cooperatives. This finding compares with 95 programs that were included in a 2012 report for the National Rural Electric Cooperative Association (NRECA)[1] and confirms the rapid growth in smart prepay programs among cooperatives in recent years.
“The growth of prepayment with cooperatives is somewhat due to the perfect storm of AMI deployments, CIS support of prepayment, and the overwhelmingly positive impact of prepayment seen at early adopter coops,” said Mark Day from Z2 Solutions, author of the NRECA report.
Not only has the overall number of AMI-based prepay programs among cooperatives nearly doubled since 2012, but there are offerings in more states than ever before as the concept spreads beyond its south-eastern heartland. Over the past three years, Arizona, Idaho, Michigan, Mississippi, Nevada, Pennsylvania and Wyoming have joined the growing list of over 30 states where cooperatives have launched a prepay option.
A second survey for the NRECA found that providing an alternative to large deposits and improving relations with members that have trouble paying their bills were the two main reasons for cooperatives wanting to offer a prepay option. Reducing the costs of dealing with delinquent accounts, addressing high bill complaints and helping consumers save energy were also important factors for some cooperatives. Meanwhile, the top reason for cooperatives not offering prepay was because they had not deployed the required technological infrastructure, particularly AMI.[2]
Many electric cooperatives are quite small in size, serving as most do dispersed rural communities and a few thousand customers each. But those deploying AMI prepay also include some much larger cooperatives with over 100,000 customers, such as SECO Energy (Florida), Cobb EMC and Greystone Power (Georgia), EnergyUnited (North Carolina), Volunteer Energy (Tennessee), and Rappahannock Electric (Virginia).
“Large cooperatives are now finding the member and utility benefits derived from prepaid programs as one of the major business justifications for their significant investment in AMI/smart grid technologies,” said Jeff Severs, Chief Operating Officer of Exceleron Software. In total over 60 rural electric cooperatives have selected Exceleron Software’s MyUsage Prepaid Platform for their prepaid program launches. Exceleron has worked with a number of these utilities to document customer satisfaction levels ranging from 88–92% satisfied.
Prepaid solutions for cooperatives are also available from software vendors such as SmartGridCIS and increasingly from the incumbent cooperative customer information system (CIS) providers, including Cayenta, Daffron, NISC, PCS and SEDC. For example, in 2014 PCS launched a prepay module, which is fully integrated with its Utilit-e Connect CIS. The vendor is supporting the prepay project of Kotzebue Electric Association in Alaska.
Public power companies embracing prepaid
While the rural electric cooperatives were the early adopters of AMI prepay, over the past three years there has been an uptick in interest among publicly owned utilities, which collectively serve around 14% of US customers.
Notably, some of the larger municipal utilities have also now begun implementing prepayment solutions. These include Jacksonville Electric Authority in Florida – the eighth-largest municipal utility in the US with 447,000 electric customers – whose MyWay prepaid electric program uses Exceleron Software’s MyUsage Prepaid solution. Exceleron also supports around 30 other municipal utilities, including Orlando in Florida, Kansas City, and Lenoir City and Memphis in Tennessee.
Other municipal deployments include Wake Forest Power in North Carolina, which is expanding its prepaid billing program by installing smart meters in all rental units in its service area. The program, which uses the GridLink Prepaid solution from SmartGridCIS, has brought benefits for both the utility and its customers.
“Two years ago, one of their customers was more than US$1000 past due on her power bill, and in order to be reconnected, she needed to come up with a US$200 deposit, plus half of what she owed. It didn’t seem possible that this customer would ever be eligible to have her lights on again,” said John Bastian, President of SmartGridCIS. “Today this same customer has managed to pay off her past due amount despite being disconnected 95 times.”
Arizona’s Salt River Project, whose M-Power prepaid program is one of the longest-running and largest in the US with over 140,000 customers, has embarked on a ten-year plan to upgrade its dedicated prepayment meters to advanced metering technology from Landis+Gyr. It is one of the last utilities in North America to still use a dedicated prepayment system.
Some cities are eyeing up prepayment as a payment option not just for electricity but for other municipal services too, although the concept of remote disconnection is typically only viable for electric service. “Today’s consumers are buying into the concept of prepaid with their cell phones, prepaid debit cards, and more,” said Bastian. “So why not offer it now for electricity, water, and natural gas?”
In the next few months, the City of Memphis, Tennessee (Memphis Light, Gas & Water) will introduce the first commercial program in the country to offer a prepayment option for three utilities – electric, water and gas – using Exceleron’s MyUsage Prepaid platform. “Electric utilities were the early adopters of prepayment services. Now, multi-service utilities are recognizing the overall value of prepayment as they expand programs to include water and gas as well,” said Severs.
Meanwhile, Bryan Texas Utilities (BTU) plans to offer prepayment for a comprehensive range of municipal services, including electric, water, wastewater, garbage, security lights, transportation and drainage. It has already fully implemented AMI in its service territory but won’t go live with prepayment until late 2016 to allow time for its vendors to finish implementing prepay functionality within their products. Until 2011, BTU had around 4000 electricity customers on a legacy prepaid system, which was discontinued when the AMI implementation began.
Investor-owned utilities active in trials
As prepaid billing expands among the rural electric cooperatives and public power companies, IOUs – which account for 70% of the overall market – are taking note of the success of these programs, including increased customer satisfaction and energy conservation benefits. Several IOUs have kicked off trials, including Arizona Public Service, DTE, Hawaiian Electric Company and Westar Energy. So far, Georgia Power is alone in commercially launching prepayment and is upbeat about its prospects, estimating that 15% of its customers could shift to prepaid over the next five years.
For regulated utilities, the biggest uncertainty is whether they can convince regulatory agencies and, in some states, legislators, that a prepayment option is in the interests of consumers as well as their businesses. While challenges remain, there are signs that regulators are becoming more open to prepayment, and over the past few years there has been a noticeable shift in how prepaid utility service is viewed.
Texas was one of the first states to understand the need to adopt rules that would allow for utilities to offer prepaid as an alternative to traditional billing for electric service. The Virginia legislature followed in 2011, passing an amendment that allowed utilities to waive the 10-day disconnection notification if a customer was voluntarily enrolled in a tariffed prepaid program. One group that is working to help educate regulators and consumer advocacy groups is DEFG, which has formed a Prepaid Energy Working Group comprising over 40 members from utilities, vendors and other groups.
[1] Mark Day, Prepaid Metering Analytical Report, National Rural Electric Cooperative Association, June 2012.
[2] Mark Day, Conservation Impact of Prepaid Metering. Motivation and Incentives for Pre-Pay Systems, National Rural Electric Cooperative Association, June 2014.
Note: Since writing this article, we have updated our research and published a major study on prepaid electric service in the United States. For further information, click here.