Many customers have difficulty budgeting for a monthly utility bill when they are paid weekly or irregularly, especially when the monthly bill represents a substantial outlay relative to their income. Extreme weather conditions exacerbate the budgeting difficulty when customers depend on electricity for heating or cooling.
To understand how prepayment could help customers better manage their household expenditures for electricity, Salt River Project (SRP) launched a pilot programme in 1993 with 100 customers. Those who participated began to praise the programme, encouraging SRP to expand its reach. Today, over 31,000 customers are served under the SRP M-Power® programme, making SRP the largest provider of prepaid electric service in North America.
SRP corporate headquarters in Tempe, Arizona
M-Power consists of an electric meter and disconnect switch located on the outside of the home, connected via power line carrier to an in-home user display. Programme participation is voluntary.
M-Power has transformed very dissatisfied customers into very satisfied supporters. Frequent conflicts over bill collection and embarrassingly visible field disconnection activity are eliminated, restoring dignity to the customer. In one study, 95% of the customers surveyed told us that M-Power gave them more control over their electricity bill. M-Power customers have also demonstrated an 11% reduction in annual electricity consumption compared to control groups, owing to the real-time consumption information provided by the in-home display terminal and the ability to manage their electricity usage. M-Power makes electricity tangible and provides a tool to help customers control their consumption.
Customers buy power when they choose, and in amounts they choose, from 51 automated payment terminals located throughout SRP’s service territory. Collectively, these terminals process over 2.6 million payments per year and are a cornerstone in the cost-effective deployment of our prepay programme. The typical purchase occurs on Friday evenings following receipt of weekly wages, and the typical purchase amount is $20, though purchases as low as $1 are frequently made.
The payment terminal loads the purchase information onto a smart card that the customer inserts into the in-home user display, and the display unit loads the purchase onto the meter. If the disconnect switch on the meter is open, the loading of the purchase causes the disconnect switch to close until the purchase is exhausted. Customers receive real-time information about how much power they are consuming and how many days of credit are remaining.
M-Power is often the better choice for new customers establishing service with SRP. Credit checks are performed on all new customers, and those with credit scores below our threshold who elect standard billing are subject to a $200 utility deposit, representing the typical credit line associated with our credit cycle. In contrast, customers choosing M-Power pay a deposit of only $99, which covers the cost of the in-home display terminal. This deposit is refunded when the terminal is returned and service terminated.
SRP M-Power Meter, in-home display unit, and smart cards.
The colourful smart card features Mexican cultural art and is designed to appeal to our large and rapidly growing Hispanic immigrant population
M-Power is also often the better choice for customers who are behind on their payments to us, even for those customers who are so delinquent that they have been disconnected for non-payment. If we are in possession of a deposit, we apply $101 to the arrears, leaving $99 to cover the cost of the in-home display terminal. The balance owed to SRP is then carried forward on the account, and a percentage of every future M-Power purchase is allocated to pay off the arrears until the account is fully paid. And, because prepayment means no late payment, the customer never pays fees for late payments, collections activity, or disconnections. This is a substantial financial benefit for many customers.
Several major community-based organisations in our service territory advocate for M-Power, acknowledging the programme as a better way to keep customers in power. M-Power customers maintain eligibility for utility assistance programmes, and M-Power’s lower deposits and reduced monthly consumption stretch agency relief funds, while the voluntary nature of the programme preserves customer choice.
M-Power is good for SRP too. SRP has recovered $11 million in arrears from delinquent customers who have transferred their service to M-Power. Based on our collection experience on accounts that are billed monthly, we estimate that approx-imately one-half of this amount would not have been recovered outside of the M-Power programme. Moreover, the expenses of reading meters, generating bills, answering credit calls, attempting collections and disconnecting for non-payment are eliminated.
SRP plans to double participation in the M-Power programme over the next three years, and ultimately anticipates that 10% of its residential customers will choose the programme. The expected energy conservation deriving from programme expansion will make a major contribution to the achievement of SRP’s conservation objectives. SRP has selected next-generation prepayment meters from Ampy Metering Limited for its programme expansion.
The Ampy system has customer-friendly features we look forward to using, such as the ability to give customers a code to obtain emergency credit by phone. Additionally, we’ve configured non-disconnect periods that include late nights, weekends and holidays. The system is also capable of accommodating shut-off moratoriums and TOU rates.