EcoPinion No. 25 - Prepay for Everyone: Prepay Energy and Higher Income Consumers
EcoPinion 25 is intended to gauge the interest and preferences of higher-income consumers in a voluntary prepay energy option offered by their local utility.
The consumer survey indicated that more affluent Americans–those earning $50,000 or more annually–are more interested in a voluntary prepay option from the local utility than the general population. This survey indicated that 28% of higher-income Americans would be interested. That’s eleven percentage points higher than the response to the the same question posed in our national consumer survey (all consumer income levels) conducted late in 2015 .
All income levels, and especially higher-income levels, appear to find a voluntary prepayment option for utility services quite appealing. Prepay utility service is not on option that would only appeal to low-income customers.
Interest and participation are two vastly different types of engagement. It seems like a stretch to use prepaid cards (i.e., gift cards) as an indicator of customers interest in prepaid electricity. As indicated, 2 out of 3 respondents had some concerns with prepaid electricity after finding out how it would actually work. Also, the value proposition that prepaid energy would help children outside of the home manage their utility bill may have little relevance unless the parent is on the account and forces the child to sign up for prepay. While I agree there is definitely interest in prepaid electricity from customer whose household income is over $50k, I’m still not convinced many would actually participate.
Increasing the number of consumer payment options appeals to certain customer segments. Roommates can decide that prepayment solves the problem of who collects the security deposit at the end of a school year. (There is no security deposit.) Prepayment helps with budgeting (roommates take turns paying). Self selection is a powerful measure of value of an option to individuals.
With regard to your comment about prepaid cards, we find a strong correlation between prepaid phone service, the use of prepaid cards, and the use of prepaid electric service. When people put money toward a service, they are in control of their finances. They avoid getting into debt. People who struggle financially are very good at making daily tradeoffs to get the greatest value from their limited income. Traditional post-payment (monthly utility bills) can get them in trouble because they are not aware of how much energy they consume. In focus groups we have heard people say, “I can afford $25 a week, but I cannot afford $100 a month.” Adding a little cash to a prepay account every week works well for them.