Pay-as-you-go electricity? Peco wants to introduce prepaid power plans

Cellphone companies have long offered prepaid service plans for their customers. Now, Peco  wants to introduce a similar pay-as-you-go arrangement for its electricity customers.

Peco has filed a proposal with Pennsylvania regulators to create a pilot program that would allow a customer to deposit a sum with the utility whose balance would be reduced with each kilowatt-hour the customer consumed.

“We feel this may be an option that many of our customers may be interested in exploring,” said Peco spokesman Ben Armstrong.

The pilot program would aim to enroll 1,000 of Peco’s 1.6 million customers, but the company believes a pay-as-you-go system might eventually appeal to a broader base. Customers enrolled in similar programs elsewhere tend to use less electricity as they become more aware of the connection between consumption and costs.

Peco asked the Public Utility Commission to review and approve its proposal in the next few months. The plan, which is voluntary, would go into effect in early 2018.

No other Pennsylvania utility has a prepaid program, which might appeal to customers with late-payment histories since they could avoid getting hit with late fees or having to pay security deposits. Peco has proposed allowing customers who already have paid security deposits to transfer the sums to their prepaid accounts.  For customers with delinquencies, 25 percent of the amounts they pay would apply to past-due balances.

A 2015 report by the National Consumer Law Center said that 55 U.S. utilities, mostly cooperatives and municipally owned systems, had pay-as-you-go plans, but it expressed concerns about the effect such programs might have on low-income customers. Peco says customers enrolled in low-income assistance programs would not be eligible for the prepaid plan.

Pay-as-you-go systems are more common in the United Kingdom, where utilities long ago introduced meters into which customers insert coins or tokens to prepay for gas or electric service. About 13 percent of customers in Great Britain are enrolled in prepaid programs, according to the law center report.

Peco’s system would not involve plugging coins into meters. Customers could prepay the utility online, by mail or in person, and monitor their use by computer or on a telephone app. The utility would issue notices when five, three and one day’s worth of service remained. After a zero balance was hit, customers would get a five-day grace period to replenish the funds before the utility shut off service.

In its 2015 report, the law center said that prepaid programs might encourage customers to be more budget-conscious, but that they also lead to a high rate of service disconnections, can create inconveniences for customers who pay frequently, and reduce utilities’ incentives to negotiate payment agreements with customers.

Peco says the program would be permitted under 1978 regulations that allow utilities to implement “prepayment meter programs.” It says that no Pennsylvania utilities have previously embraced prepaid plans, but that such plans are more feasible now because of smart meters, which give utilities the capacity to turn on or shut off customers remotely.

The state regulations say prepaid programs can be extended only to delinquent customers, but Peco has asked the PUC to waive the rules to allow it to enroll customers in good standing for whom the program might be appealing. It said the pilot program would be a “low-risk opportunity” for the commission to gather data on how the arrangement was received.

The regulations also do not allow the program to be extended to low-income customers. In a footnote to its proposal, filed Wednesday, Peco said that it had intended to ask the PUC to allow low-income customers to enroll, but that it removed the option from its proposal at the request of the Office of Consumer Advocate and low-income advocates. 

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