Utility Prepay Opportunity Continues to Ripen According to DEFG Industry Survey

Many Regulatory Challenges Balanced Against Conservation and Consumer Benefits Possible with Prepay

Washington, DC … DEFG, a management consulting firm in the energy sector, released the findings today from an industry survey exploring the market potential of a voluntary prepay option offered to consumers by local utilities.  Approximately 600 industry stakeholders responded to the survey conducted in mid-November representing a diverse array of stakeholders.  This represents a record number of respondents for one of DEFG’s industry surveys, demonstrating the high level of industry interest in utility prepay options.

“… prepay is mainstream and some segment of consumers, including 20 percent of the respondents, will really like that option …”

Jamie Wimberly, CEO, DEFG

Findings from the survey include:

• A majority of the respondents claim to be very knowledgeable about prepaid products.
• 83 percent of the industry respondents have used some form of prepaid products in the past.
• Respondents who have used prepaid products indicated high levels of satisfaction.
• When asked if they personally would be interested in a prepaid option offered by their local electric or natural gas utility, a majority (53 percent) indicated that they were “not at all interested.” Approximately 20 percent of industry respondents indicated a higher level of interest (responding either “interested,” “very interested,” or “extremely interested.”)
• Industry respondents estimated that approximately 10 percent of a utility’s customer base (the median of all the responses) would choose a voluntary prepay option.
• With a quarter of the responses (25 percent), the top benefit cited by respondents for consumers to use prepay was “consumers may receive a discount if they pay in advance.”  Other leading benefits cited by respondents include:  “consumer don’t want to pay a security deposit and/ or avoid other fees associated with traditional service” (17 percent) and “consumers prefer increased control over energy costs and budget” (14 percent).
• The industry driver for utility prepay offerings most often cited was actually “other,” with a quarter of the respondents (25 percent) providing open responses. Most of the open responses emphasized the benefits of prepay to revenue (collections, cash flow, etc.) and risk management (bad debt management, credit risk, etc.) at the utility. 17 percent of the respondents pointed to smart grid deployment as the key driver in the industry. Another 16 percent cited “economic realities driven by the recession have created a real consumer need/ preference.”
• Over half of the respondents (54 percent) expressed interest in the idea that prepay could lead to lower energy consumption through consumer awareness of consumption and cost on a real-time basis. About 10 percent of the respondents were very skeptical of this idea.
• There was approximately an even split between the respondents on their concern (49 percent concerned, 41 percent not concerned) about regulatory challenges or rule changes to permit utilities to offer prepay.

“The survey confirms that prepay is mainstream and some segment of consumers, including 20 percent of the respondents, will really like that option if offered by their local utility,” stated Jamie Wimberly, CEO of DEFG LLC.  “Prepay may not suit every customer – and that’s OK.  The real challenges will be regulatory since prepay touches on most of the hot button consumer protection questions.”

DEFG is making the survey report available at no charge on our website:  www.defgllc.com

DEFG LLC (www.defgllc.com) is a management consulting firm focused on the consumer and the delivery of innovative energy technologies, clean tech solutions and new services by utilities, retail energy suppliers, and energy solution providers.