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Prepay Programs: A Win-Win for Utilities and Consumers

The convenience of paying for services in advance has changed the way Americans do business. We prepay for coffee with apps, make purchases with gift cards at our favorite stores, and buy no-contract prepay cell phones. A recent study found that 41% “of Americans [are] interested in a voluntary prepaid energy option,” and that segment is growing. Now electric cooperatives, municipalities, and other utilities across the country are realizing the win-win benefits of offering prepay convenience and flexibility to consumers.

Prepayment Success Within CSA

Since 2009, eighteen CSA member utilities in six states have selected Exceleron Software’s prepayment solution, MyUsage. More than 16,000 CSA consumers are using MyUsage to manage their electricity, water, gas, and other utility services. MyUsage is a comprehensive, hosted solution that is fully integrated with utilities’ CIS, AMI, payment processors, and other solution providers.

Prepayment Benefits for Utilities

Utilities that adopt prepay programs consistently reduce aged accounts receivables, bad debt, and write-offs. Southwest Tennessee EMC adopted MyUsage in 2009. Phillip Mullins, Vice President of Operations, noted that with its prepay program, branded FLEXPAY, “our write-offs…are down dramatically and our cash flow and accounts receivable have improved since we receive payments in advance instead of 45 days after KWHs are used.”

CSA member utilities using MyUsage have recovered over $1.7 million in debt. For example, Clinton Utilities Board (CUB) alone reduced write-offs by 60% in less than two years after introducing its MyUsage program, branded FlexPay. “Our most troublesome customers have thanked us for starting this program,” said CUB’s Director of Accounting and Finance, Dudley Fagan. “The program truly benefits the customer and the utility, making FlexPay one of my proudest accomplishments in 35 years.”

Prepay programs significantly increase customer satisfaction. In 2009, customers participating in Salt River Project’s prepay solution reported 96% satisfaction—significantly higher than customers not participating in the program. Among Exceleron utilities, prepay program growth is correlated with significant increases in J.D. Power customer satisfaction ratings. Similarly, Oklahoma Electric Cooperative reports 85% satisfaction rates.

In addition to better financials and more satisfied customers, utilities enjoy significant cost savings resulting from fewer truck rolls, reduced bill preparation and mailing costs, and fewer calls placed to customer service representatives.

Prepayment Benefits for Consumers

Consumers opt into prepay programs largely because of the financial benefits. Most CSA member utilities offer prepay accounts with no deposits, late fees, or disconnect/reconnect fees. For consumers stuck in a downward spiral of repeated disconnections, fees, and large monthly bills, prepay accounts offer a ray of hope. Since 2009, CSA prepay consumers have avoided over 330,000 disconnections and associated fees, which often lead to bad debt.

With prepay accounts, there are no surprises on a monthly bill. Consumers enjoy greater peace of mind as they track usage and make smaller, more frequent payments. When consumers use the web portal, mobile apps, phone, email, and text messages, they take control of their consumption and prepayment balance to avoid disconnections. Furthermore, when the utility uses the MyUsage Debt Recovery feature, consumers have a clear plan for paying off outstanding debt while continuing to receive service.

One consumer at Southwest Tennessee EMC was a retiree with utility bills of $300–$700 per month and significant debt. In October 2013, he opted into the prepay program, FLEXPAY, and $2,559 was put into debt recovery. Twenty months later, the debt was fully paid off—with no disconnections or collection activities.

Return on Investment in Prepay Programs

When utilities crunch the numbers, they’re often surprised to learn how much their prepay programs are saving them. Experience shows that for every dollar invested in prepay programs, CSA utilities can earn a return of up to $3 on their investment in bad debt recovery alone. This impressive 300% ROI does not reflect the additional benefits associated with better cash flow, fewer write-offs, reduced call volume and increased customer satisfaction.

Exceleron draws on its experience with more than 100 MyUsage deployments to guide utilities through every step of the process, from creating business rules, to marketing the program, to providing training and support. Exceleron helps utilities calculate the ROI of their prepay programs and project the ROI for prepay programs still under consideration.