(October 2012) Exelon sells plants in Maryland and Cali; Mitsui buys into Viridity; Duke issues $1.2B; plus deals at TVA, Xcel, PG&E, etc....
Charging Kwhs and BTUs on Credit
"On the other hand, there are benefits associated with card acceptance that are not associated with other forms of payment, such as customer satisfaction, customer convenience [and] customer demand. So there's a cost for providing that level of service. And most of the companies that are accepting, if you asked them why they accept, many of them said they began accepting because of customer requests."
A Worthy Investment?
Not only will these customer satisfaction tools help utilities be more competitive, says Holmes, they also will help to retain customers. Other benefits are improved cash flow, increased sales to new customers and customer enhancement (see Table 3).
To the extent that there is cash flow improvement, there's some improvement in bad debt. But "bad debt is something that is not necessarily going to be cured by accepting cards," Holmes reports. "In fact, the consumer¼ [who's] most interested in paying on their card is the more upscale customer, the one who lives in a large metropolitan area, has a relatively large household income, is college educated. It's the type of consumer that many businesses consider their best customer and they're the ones they want to keep happy and they're the ones they want to keep on their books."
Visa offers a special interchange rate of 1.43 percent, plus five cents. On top of that, banks serving utilities charge a "modest" mark-up fee, Holmes says.
MasterCard in April began promoting a lower rate for recurring payments. The company would not release the figure, but Lisa Brzezicki, a company vice president, says it's 30 percent lower than it was previously.
"That is a significant incentive opportunity for a merchant to take advantage of," she says. "And it was done to assist the merchant in defraying some of their start-up costs - their systems development, those kinds of things. And really to be more in line with the dynamics of the industry."
Holmes points out that many utilities don't have the hardware and software systems to process recurring payments. Telecommunications companies have led in this area, which is one reason their volume is higher than that of the gas, water and electric industries combined.
Like Visa, MasterCard's surveys show that convenience is the primary motivator in being able to pay with a credit card. Some 42 percent of consumers said so in a recent survey, Brzezicki says. And when they sign up to pay recurring bills, there are other benefits.
"People who sign up for recurring payments by credit card are longer-term customers than the general population," Brzezicki says. Studies show that a customer who signs up for recurring payment by credit card stays a customer for between 24 and 36 months, which is significantly longer than average. "Historically, that wouldn't be an issue in utilities, but with deregulation, it will be a competitive issue," she says.
She also insists that when the payment costs are broken down credit card processing costs are "in the ballpark with other payment methods."
Holmes says utilities have looked for a way to "ease the pain" associated with closing some