Prepaid Energy and Low Income Issues
October 10, 2011
The Distributed Energy Financial Group (DEFG) has released a white paper entitled, "Low Income Consumer Issues and Voluntary Prepaid Energy Offerings: Perspectives from Three Industry Thought Leaders."
Prepaid energy offerings are the first consumer-facing application of the smart grid with significant market potential. DEFG thus launched the 2011 Utility Prepay Working Group to further explore leading regulatory and consumer opportunities and challenges presented by prepaid energy. Regulatory issues include disconnect and reconnect policies, weather moratoriums, forms of account notification, cost and benefit allocation, fees and rates.
While these issues need to be addressed to implement a prepaid offering for all customers, they present greater concerns when dealing with low-income customers. Consumer advocates argue that prepaid energy invites low-income customers to make tough choices, potentially opting to disconnect electric service to keep money available for other necessities such as food, clothes and gasoline. Yet, existing prepaid customers provide positive feedback, primarily the convenience, flexibility and control that goes with paying any amount at any time. Consumers find that prepayment allows them to budget in a manner most compatible with their lifestyle and income (e.g., make payments weekly or every other week).
There is indeed a tension between the possibilities enabled by new technologies and consumer protections.
Two key questions are – how can a balance be struck between allowing consumers to exercise their preferences and ensuring that adequate consumer protections are in place? And, how can regulatory rules and practices, including for low income consumers, be revised or updated to allow for innovation and new offerings such as prepaid energy or other new services enabled by smart grid yet maintain the intent of the original regulatory rationale?
