Prepaid Energy: Innovative Energy Payment or Low Income Discrimination?

A lack of trust among stakeholders has been palpable during the course of DEFG's research regarding the potential for prepaid energy service. Some stakeholders consider prepaid service a positive innovation for consumers -- a 21st century payment channel that leverages advanced meters and the capabilities of the smart grid. Others view prepaid energy as potentially predatory or discriminatory against low-income consumers.

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There appears to be a common desire to see low-income consumers pay fair rates for electric service. There is also a universal desire to protect all consumers during dangerous weather periods (moratorium on disconnection). Despite these common concerns, the biggest barrier to prepaid energy service seems to be a lack of trust among industry stakeholders.

How do we identify a basis for trust to address the challenges, concerns and opportunities presented by prepaid service? DEFG has identified four screens that create an analytical framework to examine existing regulations. Is a fundamental principle involved, such as "everyone must be served equally"? A rule formulated decades ago may be based on a practice that could not anticipate 21st century technologies. New capabilities could allow a change in the rules without giving up the basic regulatory principle. There may be new services and products which change the degree to which consumers are permitted to make choices and express their preferences.

In some cases, a rule or practice may be rooted in an ideological difference, such as supporting or opposing the role of competition in energy markets. A more rigorous analytical framework may allow us to identify an underlying motivation, and thus advance the discussion and possibly narrow differences.