Prepaid Power Consumers Using Salt River Project’s M-power Service Reduce Power Consumption About 12 Percent

Michael Giberson

The most detailed study of a prepaid power program in the United States is EPRI’s “Paying Upfront: A Review of Salt River Project’s M-Power Prepaid Program.” The report provides a good overview and assessment of the program. See the abstract, copied below, for more of a description of the content.

One issue of interest with prepaid is whether it promotes energy conservation. The Salt River Project has studied this question a few times and, with varying methods, has found that M-Power customers tend to consume about 12 percent less power than customers on traditional post-paid power accounts.

Not all of the conservation effect may be due to the prepaid program itself, however. In M-Power, consumers get an interval meter installed that can provide relatively instant feedback on consumption rates and remaining balance. Non M-Power consumers get a monthly paper bill that arrives a week or so after the end of the billing period. Some of the conservation effect may be driven by the instant feedback and greater sense of awareness and control that such a device provides.

The Texas market may offer an additional approach to study this question. Many millions of customers have received smart meters in the last few years, and all power customers in the ERCOT portion of the state will have smart meters within the next year or two. These customers can already gain relatively contemporaneous feedback on consumption rates, whether prepaid or post-paid. I haven’t seen any studies of whether smart meter consumers tend to reduce consumption (with billing plan and rates constant), but presumably retailers are watching there data for such affects.

And within the population of customers with smart meters, some are switching into prepaid retail contract. A careful study, perhaps structured similarly to those described in “Paying Upfront,” could give further insight into whether it is the meter information or the change in financial terms that inspires the conservation effect.

A few weeks ago I met a program manager responsible for a prepaid service for one of the Texas competitive retailers. He spoke of how a prepaid contract changes the relationship between customer and retailer to one that is more “conversational.” Every day the retailer emails or texts the consumer with account status information. Additional, more detailed information may be available online. The relationship becomes more interactive. Perhaps there is something about the changing financial terms that changes the way prepaid retail consumers think about buying electric power. Or maybe this same change is available to any consumer with instant feedback from a smart meter.

ABSTRACT for  EPRI’s “Paying Upfront: A Review of Salt River Project’s M-Power Prepaid Program“:

Arizona’s Salt River Project (SRP) has operated M-Power, the largest electricity prepayment program in the United States, since 1993. The customer population has grown to about 100,000 (approximately 12% of all residences served by SRP), and it has expanded from the initial target population—consumers with arrears facing service terminations and low-income customers—to include consumers with different expectations from M-Power service. The in-home portion of the SRP prepay configuration consists of a user display terminal (UDT) that communicates with the customer’s meter. The purchasing component of the M-Power program is the self-service kiosk, known as a PayCenter, accessed via a Smart Card, which is also the conduit through which electricity consumption information is transferred back to SRP.

The constant aspects of the M-Power experience have been a high level of customer satisfaction and an overall conservation effect reported by SRP of approximately 12%. SRP attributes the conservation effect to a variety of factors, noting that M-Power requires consumers to pay attention to when and how they use electricity, allowing them to make immediate adjustments in usage to lower their bills.

This report provides an overview of how the M-Power program works along with an examination of the technology, systems, and costs associated with the program. The overview is followed by an analysis of customer perceptions of the program as well as a discussion of the program’s potential conservation effect. The report concludes with a discussion of impact studies needed to answer several outstanding research questions, including the effect of various types of payment options on conservation as well as whether SRP’s experience is transferrable to other markets, climates, customer circumstances, and supply conditions.

4 thoughts on “Prepaid Power Consumers Using Salt River Project’s M-power Service Reduce Power Consumption About 12 Percent

  1. Thanks for the heads up. I can definitely see the implications for ERCOT in a couple of years when Smart Grid is fully deployed.

  2. This is an interesting idea. The 12% reduction seems questionable to me if its based on comparing the program customers with others customers. Those who select to be in the program seem likely to be interested in reduced bills more than average, or they are poorer and consume less to begin with.

    I think the change in consumption (weather adjusted) for those customers from before and after joining the program would be more informative.

  3. I agree that 12 percent seems fairly substantial. The EPRI report’s description of the studies indicate that they did try to control for some possibly confounding factors. As I recall, they had three different studies over a couple of years, using different approaches, and each giving a result in the 11 – 14 percent range.

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