|[June 11, 2013]
New IDC Energy Insights Report Explores Prepayment Solutions for Utilities and Energy Retailers
FRAMINGHAM, Mass. --(Business Wire)--
Energy Insights today announced a new report, Business
Strategy: Prepayment for Customer Choice and Financial Security
(Doc #EI241376), that explores the options for configuration, benefits
of undertaking, and potential challenges for utilities and retail energy
providers offering customers prepayment programs. Prepayment solutions
help utilities and energy retailers overcome bad debt and enhance
customer satisfaction by adding choice in billing options.
Key findings from the new report include:
Clear communication of prepayment program design and management is
critical to overcome opposition from regulators and/or consumer
advocates. Providers must be explicit about the payment process,
alerts for nearing end of budgeted consumption, warning of shut off,
and process of restoration.
Prepayment programs can benefit customers by expanding billing choice
and enhancing awareness of the impact of household behaviors on energy
consumption. These programs have proven to help customers more
effectively budget electricity costs and generate substantial energy
Smart grid investments such as advanced metering infrastructure, smart
meters (specifically RCDC-capable meters), and updated customer
information systems facilitate deployment of prepayment programs
through the utility rather than a third-party partner.
Utilities do have the option to deploy prepayment with alternative
configuration if smart grid investments have not matured to provide
the complete infrastructure for enablement or there is a desire to
utilize third-party partners as external service providers.
"Prepayment solutions benefit electric utilities and energy retailers as
a vehicle to overcome bad debt, enhance customer satisfaction through
expanded billing choice, and enhancing the benefits of smart meter
deployment," said Casey
Talon, Senior Research Analyst at IDC (News - Alert) Energy Insights. "Prepayment
solutions can be effectively managed in terms of communication for
shut-off and restoration of power to prove the customer value of this
billing option and respond to opposition from consumer advocates."
Overcoming Bad Debt & Ensuring Customer Satisfaction
Unpaid electricity bills represent a significant ongoing financial
burden for electricity providers. Regulatory limits, costs, and public
advocacy pressures associated with shutting off residential electricity
hinder providers' capacity to overcome this bad debt. Providers must
find new ways to reduce the revenue losses from non-payment while
complying with regulations and demands around customer service.
Prepayment solutions are gaining momentum as a billing solution to this
In addition, for both regulated utilities and retail energy providers,
the business focus is increasingly centered on customer satisfaction.
For utilities developing smart grid initiatives, regulators center much
of rate case debates for the cost recovery of technology deployments on
how these investments impact customers. In the retail markets,
competition for customer loyalty is paramount to ongoing business
viability. Prepay solutions have been gaining momentum with regulated
utilities as well as some retailers due to the fact that billing
flexibility can be an effective tool to enhance customer satisfaction
while providing a mechanism to overcome bad debt.
Higher adoption rate of prepayment have centered around particular
customer segments including territories with high churn due to transient
populations, notably centered around colleges and universities, lower
income segments looking for budget-focused cost management options, and
younger, mobile-device centric populations familiar with prepayment as
an option in other avenues of their finances.
Overcoming a significant portion of bad debt from unpaid bills is the
fundamental goal of a successful prepay solution deployment. Providers
can justify the cost of devices, infrastructure, and management of
service if they see reduction in bad debt and can effectively
communicate the customer benefits of prepay.
However, the issue of bad debt is complicated for energy providers.
Universal service access rules expose regulated utilities to higher risk
of non-payment. Retail energy providers in competitive markets, on the
other hand, can and do deny service based on risk. There are
limitations, however, such as PUCs requiring retailers to service a
percentage of high-risk customers such as the rules in Texas. On the
customer side, prepayment programs have demonstrated that increased
awareness of energy use through the regular updates embedded in this
platform change household behaviors to generate energy efficiency
improvements of around 10%.
Actions to Consider
Utilities and electric retailers have to consider both the configuration
design of prepay as well as alternative approaches to overcoming bad
debt such as deposit and budget billing programs. This new IDC Energy
Insights report highlights the process of prepay and the options to
consider in each element of the solution design. In addition, successful
prepayment programs rely on a network of information and communication
technology and devices for monitoring consumption and managing
disruption and return to service. The new report illustrates the
critical technologies that enable prepayment solution deployment and
For additional information about this report, or to arrange a one-on-one
briefing with Casey
Talon, please contact Sarah Murray at 781-378-2674 or firstname.lastname@example.org.
Reports are available to qualified members of the media. For information
on purchasing reports, contact email@example.com.
About IDC Energy Insights
Energy Insights assists energy businesses and IT leaders, as well as
the suppliers who serve them, in making more effective technology
decisions by providing accurate, timely, and insightful fact-based
research and consulting services. Staffed by senior analysts with
decades of industry experience, our global research analyzes and advises
on business and technology issues facing the utility and oil and gas
industries. International Data Corporation (IDC)
is the premier global provider of market intelligence, advisory
services, and events for the information technology market. IDC is a
subsidiary of IDG, the world's leading technology, media, research, and
events company. For more information, please visit www.idc-ei.com,
email firstname.lastname@example.org, or call
508-935-4400. Visit the IDC Energy Insights Community at http://idc-insights-community.com/energy.
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