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Paying with Plastic

Customers demand real choices for bill payment.

Fortnightly Magazine - December 2009

provide customers multiple device and power use choices;
• Information management programs that support the management of energy consumption and spending, and extend utilities’ communication capabilities to mobile devices; and
• Net metering programs required to support the interconnection of distributed renewables and plug-in hybrid electric vehicles (PHEVs).

As customers engage utilities on a more frequent basis, they’ll develop a new sense of how to manage their personal energy consumption and costs. And as mobile devices continue proliferating, utility customers will more frequently use these devices to conduct routine electronic transactions. For example, a limited number of utilities are piloting text-messaging based systems to inform customers of outages and bill due dates. Because of the increased data-handling capabilities available with subsequent generations of mobile devices and the increased comfort level customers have in using these devices, mobile payments are expected to become an increasingly popular method for electronic payments over the next five to 10 years.

From a future utility bill payment perspective, card payments play an important role in this transformational change. For recurring debit or credit card payments, mobile devices will provide the same capability as the computer does today—the new mobile channel then simply results in a more tailored customer experience and greater customer satisfaction. However, because a large number of low-income customers don’t have ready internet access, mobile payment capabilities likely will result in an increased usage of payment cards. Therefore, for utilities to achieve large-scale adoption of card payments, they must leverage the pre-existing payment card networks to support no-fee transactions through mobile devices.

Another driver for card payments, also enabled by the smart grid, is the increasing intersection of the transportation and utility industries. The mass marketing of PHEVs will be far more important to electric utilities than existing hybrid vehicles are. PHEVs won’t just draw power from the grid through a standard AC electric connection, they also might discharge some of their stored electricity during peak hours to the utility serving the area where the vehicle is parked. This bi-directional interchange between power consumption and power production will add a new level of net metering complexity, exacerbated by the potential for customer account and electronic payment portability across service territories. For example, a PHEV owner drives his or her vehicle to another service territory, plugs in for a recharge and subsequently sells some power back into that grid during peak-demand hours. Standards for how a customer will pay and receive credit for portable charging and discharging aren’t yet developed; regardless, the payment card company network will be the most likely platform to support these dynamic interactions, due to the infrastructure that has been developed and refined through countless pay-at-the-pump transactions.

Absorbing Fees

Historically, utility executives rejected offering customers no-fee card payment options due to the cost—and regulatory barriers—of absorbing interchange and TPP fees. However, the utility card payment business case is moving in the direction of cost neutrality, driven by the increased usage of debit and prepaid cards in combination with a better understanding of the drivers of the business case. Going forward, payment card