November 19, 2020
Your Top 10 Pre-Pay Questions Answered
Pre-pay energy solutions allow customers to add money to their utility account before energy is used. As the power is consumed, the pre-paid balance declines. Pre-pay solutions offer customers an alternative payment option that allows for manageable payment sizes and increased transparency into their energy usage and account balance.
We’ve rounded up the top 10 questions utilities ask when determining if pre-pay energy is the right solution for their customers. Let’s dive in.
1. Which customer segments benefit the most from pre-pay energy programs?
Pre-pay appeals to diverse groups of people for different reasons. Here’s a summary of who uses it and why.
- Millennials – Millennials are the top pre-pay demographic and account for nearly 22% of the U.S. population. Pre-pay makes sense for millennials due to their socio-economic status. For example, 62% of millennials live paycheck to paycheck.
- Limited-income individuals – For those who can’t afford to make a large monthly payment, the pre-pay “pay as you go” model is a convenient option.
- Wealthy individuals – This demographic often has more than one property, ranging from vacation homes to rental properties. This group prefers pre-pay for its flexibility to voluntarily shut off power for months at a time when relocating to and from their second home or as a way to manage utility bills at a rental property.
- Small/medium-sized business – SMBs have been greatly impacted by COVID-19. By having the option of making smaller, more frequent payments that better align with their cash flow, struggling businesses are able to manage their utility bills more effectively.
- Immigrants – Countries like South Africa, New Zealand, and the UK have had pre-pay energy programs for years. Newcomers to North America, who have been exposed to this type of program not only understand it, but like it.
2. How often do customers typically pre-pay their utility accounts (daily, weekly, monthly)? What is the average payment per transaction?
Depending on the utility and the time of year (winter vs. summer), the monthly payment frequency ranges from two to eight times, with an average of around three to four times per month. Using the same sample set, the typical payment amount ranges from $15 to $74, with an average of $40 per transaction.
3. Is there a credit card fee for each pre-pay transaction?
There is a credit card fee that is configurable. The utility can pass the cost of processing the payment to the customer in the form of a convenience fee, or the utility can absorb it.
4. Besides a pre-pay platform, what else does a utility need in order to be able to offer this service to customers?
For KUBRA PRE-PAY™ to work, the participating customers must have a “smart meter” installed that is capable of:
- Reporting hourly usage data back to the utility’s Meter Data Management (MDM) system
- Receiving remote disconnect and connect signals from the MDM
If your utility has this infrastructure in place, then disconnect and connect costs are negligible, meaning they are passed to your pre-pay customers as zero fees. If the meters do not have these capabilities, then disconnections will be expensive, which removes one of the main benefits of a pre-pay system (i.e., low disconnect/connect fees).
Also, regulatory approval is needed for investor-owned utilities (IOU).
5. Do utilities have to send a monthly bill to pre-pay customers?
Technically, pre-pay customers do not receive bills since there is no money due. However, many utilities will send statements to their pre-pay users. Some pre-pay statements look identical to bills in terms of content, with the only difference being that the statement reads, “This is not a bill. Please do not pay.” The utility can decide what they’d like to include on the statement and how the statements are delivered (paper vs. digital).
6. Does the utility send any true-up statements with pre-pay? How often does this occur, and what is the typical difference between the pre-paid amount and true-up balance?
Yes, many utilities send monthly true-up statements with pre-pay. Based on bill calculation comparisons, we estimate that the pre-paid amount is less than or equal to 0.5% of the trued-up balance.
7. Canadian and American investor-owned utilities (IOU) are heavily regulated and therefore have collections timelines to adhere to before disconnecting a customer for non-payment. What advice do you have for heavily-regulated utilities that use pre-pay?
For a pre-pay program to be successful, the following criteria must be met:
- The regulating agency agrees to waive the strict dunning rules for consumers on the pre-pay program.
- Consumers must acknowledge that they have waived their collections rights when they join the pre-pay program.
- The utility allows any consumer to quickly and easily leave the pre-pay program.
Consumers can use pre-pay with the understanding that they can return to the collection protections of the POST-PAY rules if necessary. And while utilities cannot prevent a consumer from leaving their pre-pay program, they may limit how frequently a consumer can rejoin the program.
8. Does pre-pay work for commercial and industrial customers?
Yes, pre-pay will work for this segment as long as the meters servicing these customers provide hourly/daily meter read information and allow for remote disconnect and connect.
9. Some pre-pay products provide a barcode that customers can use at local stores, such as CVS Pharmacy, to load more money onto their accounts while conducting business. Does KUBRA PRE-PAY™ offer anything like this?
KUBRA PRE-PAY can integrate with any payment provider that the utility chooses. If the payment provider supports retail cash payments, then those transactions will also be recorded by PRE-PAY as credits to the account.
10. Do you see many customers removing themselves from pre-pay programs after enrolling because they find it does not work for them?
We do not see this happen very often. Generally, most customers who leave pre-pay programs are those who move out of the utility’s service territory.
Have more questions about pre-pay energy? You can watch our latest pre-pay webinar, Pre-Pay Energy: Reliable Payments in Uncertain Times, to help answer your questions. Ready to see how KUBRA PRE-PAY™ works in action? Request a demo and we’ll be in touch with you shortly.