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Got Prepaid?

Smart meters open the door to advance billing.

Fortnightly Magazine - July 2010

Many consumers prefer the $88 in-home display deposit, Lowe says, over the standard $275 deposit new customers pay to initiate residential service. Two thirds of prepaid customers chose it when activating their service and most buy power once a week, sometimes twice during summertime peak-demand periods. In recent surveys, Lowe adds, 90 percent of respondents said they prefer the prepaid service over the traditional post-pay option.

The benefit to SRP is substantial. For example, a customer in arrears can switch to prepay and gradually pay off the debt by having 40 cents of each M-Power credit dollar applied to the balance until it’s paid off. In 2009, Lowe says, this approach helped SRP collect some $18.5 million in overdue balances. Lowe couldn’t provide the total annual savings M-Power generates, but says it’s substantial. “I can’t give you an exact figure, but our bad debt write-off would be higher without it,” he says.

APS Initiative

Despite the obvious benefits for reducing collections costs, prepaid metering is gaining favor for its conservation potential. SRP says its customers who switch to prepay reduce their power consumption by 12 percent on average, a number that corresponds with other prepaid billing programs across the country. That’s important to IOUs like APS, because in 2009 the ACC ordered it to reduce energy consumption in its service territory by roughly 22 percent. In March, APS submitted an application for a home energy information pilot program, which includes the prepaid pilot with 2,000 volunteers and new time-of-use rates for on- and off-peak usage.

The home energy information program is intended to test an assortment of demand-response (DR) technologies and strategies to determine which ones are most effective in helping volunteer households measure and reduce their energy consumption, especially during the critical peak periods that crop up during Arizona’s grueling summer season.

As part of its AMI program, APS is rolling out 950,000 smart meters, most of them manufactured by Elster. About 400,000 are installed and the rest are scheduled to be in place by the end of 2012. For customers who already have smart meters, the home energy information program will test smart thermostats that will allow APS to remotely scale back central air conditioning systems during periods of peak demand, and in-home displays designed to help consumers monitor and possibly shift their energy consumption patterns. APS also will measure the impact of delivering energy information via smart phones, mobile devices and Internet channels.

The final component is the prepaid program, which will differ greatly from SRP’s, says Barbara Lockwood, director of smart-grid programs for APS. “Clearly, we’ve watched SRP’s success for quite some time,” Lockwood says, “But SRP operates a fundamentally different system. Ours will leverage the AMI roll-out.”

With an AMI deployment, a meter-data-management (MDM) system resides in the utility’s back office to collect and deliver use data in hour or 15-minute increments. The prepay software application will sit beside it, interacting with the customer information system (CIS).

“There are a variety of prepay solutions. In overseas markets, the customer’s balance is often calculated on the meter,” says