Costs and Benefits of Prepaid Energy Services
Regulated energy utilities and state regulatory commissions have decades of experience with well-established cost-benefit analysis methodologies to assess energy efficiency programs. Less attention has been paid to calculating the cost and benefits of other activities, including customer education, behavioral programs, alternative rate designs and bill payment options. When consumers are offerred something new, the effects are less certain; for example, the persistence of savings may not be well known, or the spread of benefits across the utility business and across time may be uncertain. Impacts that seem “intangible” must be studied.
Energy prepayment is a utility payment choice that allows households to receive the same electricity, over the same wires, but with advanced payment–any amount at any time. There is customer monitoring of household usage (daily or weekly updates). With prepayment and close monitoring, customer behavior changes, and consumers reduce their usage by 10% or more.
The paper provides a framework for the assessment of the costs and benefits of prepaid energy service. It is accepted that the traditional cost-benefit analysis is not a neat fit for smart, new, segmented offerings like prepaid energy service. The paper suggests new metrics to look at costs and benefits over time, both to utilities and to utility customers. The next step could be the development of a weighing process to prioritize costs and benefits, and a rethinking of the underlying methodology and rational for traditional cost-benefit analysis.