Prepaid Electricity Meters and Issues related to ...

A traditional electronic prepaid metering system operates on three levels. First are the meters which are installed at the consumer’s home. The next level is the vending stations, situated at the utility’s offices or at appointed agents. The communication between the vending stations and the meters is in the form of a token, which is used to top up the credit in the meter. Tokens also transfer or download information to the meter, and in some cases upload information (depending on the token choice) back to the vending station. At the top level is the System Master Station (SMS) or master client, which is necessary to ensure a common database for reporting and to provide total management, administration, financial and engineering control. The SMS communicates with the various vending stations via modem or other data link. Information on consumers, tariff changes and so on is communicated to the vending station and detailed customer sales are communicated back up to the SMS.

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It would be interesting to see how prepaid has developed over the last 70 years from the primitive coin operated meter to the token-based systems and today’s smart card operated systems.

FIXED CHARGE COLLECTOR - HAND-RESET TYPE: This was the simplest form of prepaid metering, consisting of the meter and a switch. At each visit the meter reader removed the coins and tripped the meter’s switch. The consumer re-closed the switch by inserting the requisite number of coins.

FLAT RATE TARIFF METER: In one form or other, this type of meter comprised the majority of the electricity prepaid meters in the UK for several decades until its replacement by its electronic token counterpart in the s. Even today they are used by landlords as secondary metering.

Besides the above several other variations of prepayment meters were in use in different parts of the world for electricity at different points of time which all gave way to the electronic prepayment meters.

There are a number of reasons why a utility could consider installing a prepaid metering system. They include improved cash flow, no need for account posting or additional billing systems (1-2% savings), elimination of bad debts (5-12% average, with up to 40% in some developing countries), elimination of disconnection and reconnection fees, ease of installation, no need to access consumers’ property (particularly for split meter installations) and elimination of inaccurate meter readings.

There are also advantages to the customer, including budget management, control of energy usage, no cost for disconnection/reconnection and no waiting for reconnection, no deposits.

Prepaid energy meters using keypad based systems, disposable card systems (one-way) and two-way smart card systems are in use in various parts of the world for over a decade.

1. Keypad operated Prepaid Meters:

Electronic prepaid energy meters came initially with keypad systems for inputting the credit. Security of keypad payment system is very low. The main reason is that the algorithm of key creation is stored inside the meter and is available to hackers. Keypad systems were created when highly secure smart card payments did not exist.

Although keypad systems are getting obsolete, it may still be cost-effective for remote villages, where two-way vending may not be feasible.

2. Smart Card operated Prepaid Meters:

With Smart Card operated system, customers purchase a reusable power debit card for the amount of energy they desire. These special, easy to use cards are individualized, keyed to each customer's meter and account number. The customer simply passes the card a few inches in front of the meter, and using an integrated card reader, the meter is reset to the number of kilowatt-hours contained on the card. The system works very much like a bank debit card. Because the meter is completely sealed and has no moving parts, maintenance is reduced and reliability is improved. Modern Smart Card operated meters are "stand alone", requiring no separate in-house keypad or onsite programming. The card captures transaction and power usage information, sending automatic input into the utility's accounting system at the sales terminal each time the customer purchases additional power. The card also captures data critical for load forecasting.

Disposable card type prepaid meters are also in use in certain utilities. The vending infrastructure for this scheme is much simpler, but it does not offer the advantage of capturing customer’s usage data.

Smart card operated meters can be used either as prepaid or postpaid. In some countries, prepaid option is socially not acceptable. In such cases, each consumer is assigned 50-day credit. After each month, the consumer has to recharge a card to pay off his negative balance. After full payment, his 50-day credit is restored. Credit can be time-based or amount-based. Mixed option like 50-day but not more than certain kWh is also possible.

3. Prepaid Meter using two-way fixed network AMR

For meters installed with real-time two-way communication facility, the transaction data is stored on central computer and authorized in the same manner as for credit card terminals. Here security is not at risk as the credit information is stored on the central computer. However cost of implementing the AMR (Automated Meter Reading) scheme need to be justified on other merits than for prepayment advantages.

Smart Card Operated Prepaid Meters is the emerging leader in this segment for following reasons:

Detection of counterfeiting: Though security of smart card meters is extremely high, it is theoretically possible to break any card whatsoever, time being the only difference. It takes over a million hours to break the DES264 open-key random-base algorithm used in most smart cards (The same type of security is used for credit cards, electronic purses and GSM phones). Besides, such attempts can be easily detected by the utility. Each card is assigned its own number. Central database contains information of all the issued numbers. When numbers of used cards are matched against central database of issued cards, the utility will immediately receive report on unauthorized cards and cards with restored balance. Because meter ID's are known to utility, it can detect and prosecute those using counterfeit cards.

It is impossible to use counterfeit cards and not to be caught after the first reading of meters without only physically breaking the meter. Locks can be provided against tampering the card reader against coin and paper insertion.

Upgrade capabilities: Smart card operated meters use transparent card communication protocol that allows easily upgrading security of the card, or even switching to a different card.

Resistance to aggressive environment: In very high-humidity or very dusty environment contact-type card readers may lose their reliability. In such conditions, contact-less type rechargeable cards may be used. Contact-less cards are read by the meter through its cover.

Reliability: Card readers can perform up to 300,000 read-write cycles. Even if the cards are charged every week, in 30 years, meter operation requires less than 1,600 cycles. With external casing, physical and electrical insulation, smart card readers are very reliable and durable.

Data transfer: Rechargeable cards can be used for transfer of data between meters and central office. Information about energy consumption is stored on the card and transferred to central office during recharge. Cards are very reliable, with storage time of 10 years. The drawback of rechargeable cards is a necessity to install a large number of recharge terminals so that customers can conveniently access them.

Implementation of Prepaid Metering System

A prepaid metering system replaces the billing system, the reading of meters and the administration of revenue collection. Implementing such a system means a change of mindset, a change in the way the revenue collection is managed, a change in IT procedures, a change in customer service, a change in metering and a change in consumer behavior. All parties need to buy in to the system and understand the benefits.

It is also necessary to plan the implementation of the project in advance. Detailed program, schedules, including resource allocation, distribution of responsibilities and the setting of realistic milestones, are essential for success.

Marketing & Training: Most consumers view anything new with suspicion, particularly if they are not given a choice. The marketing department’s task is to put together a package which best suits the consumer’s needs.

A prepaid metering system is new not only to consumers but also to all the utility staff and a comprehensive internal training is essential.

Important points to be considered in this context are:

• Installation teams must be trained not only on meter installation but also on training the customers to operate and maintain the meters.
• Training of customer service staff to operate the Help Desk, the completion of the registration of new consumers etc.
• Training of vendors, so that they can give the customer good service and create the image the utility wishes to portray.
• Training of the SMS manager, supervisors and operators.

The success of any system relies on the acceptance of all the players within the utility as well as on consumer acceptance. Training and education will assist in communicating the benefits to all staff members.

Maintenance Management: Before the system has been installed, procedures should be in place on how to manage it from a maintenance point of view. The following issues should be considered:

• What happens if a consumer claims to have lost a token? This is more of a problem when using SMART cards than dispensable tokens. All tokens can be re-issued without any security risk, but there is obviously a cost involved. What that cost is, and who bears it, needs to be decided before the start of the project.
• What procedures will be followed if a meter fails? Apart from the actual replacement of the meter, the utility must decide whether it supplies a certain amount of credit with a replacement meter, and whether this credit is charged for. One consumer in South Africa used to complain regularly that his meter was not working, and the maintenance team regularly replaced the meter without testing it. The result was a high maintenance cost to the utility and a consumer who enjoyed the benefit of regular free credit.
• What procedures will be followed if a vending system fails? If the vending stations are situated far apart, a back-up vending station should be available.
• What procedures will be used to back up and archive data? Good housekeeping is required for any database.
• What procedures will be used to avoid the risk of meters being bypassed? (It is difficult to fraud a solid state meter in any other way). Controls should be set up regarding the sealing of meters. For example, will the seals be numbered and the number recorded? Does the installation staff have to sign for seals?
• What are the necessary controls and procedures for collection of revenue from vendors and the transfer of data between SMS and vending station?
• What are the selection criteria for internal and external vendors?

The success of a new prepaid metering installation depends to a very great degree on the thoroughness of the pre-planning phase. This includes seeking acceptance from both consumers and utility staff, and putting in place the necessary procedures for a smooth implementation.

Customer Education: With prepaid meters consumers are in control of their electricity budgets; they decide for themselves how often they wish to purchase electricity and to what value. Customer education assumes top priority for success of the scheme. The points to be considered here are:

• Consumers must know how and where to purchase credit.
• Consumers must be able to enter the credit successfully into the meter.
• Consumers must be able to read the meter so they know when they need to re-purchase credit.
• Consumers must know how much credit they have available at any time.
• Consumers must know how to clean the meter.
• Consumers must know what to do or who to contact if they experience problems with the meter.

The positive aspects of the system should continually be reinforced. It is important that consumers see prepayment as a benefit rather than a means of punishment.

Brochures should be available at each vending site. Vendors should be trained both in the use of the vending equipment and in the use of the meters and the benefits of the system, so that they are able to promote it.

A television and video should be set up at the vending site if possible. A number of prepaid meter manufacturers provide marketing and training videos which can be used to show the consumer how to use the system and what the benefits are. A help line should be set up which customers can use if they are unclear on any issue.

Regulatory and Ethical Issues associated with Prepaid Meters

Automatic service interruption has always been an integral part of prepaid electric service. But over the years electric service came to be regarded as a right more than a privilege in every society and hence regulators and law makers have found it difficult to accept the automatic disconnection feature of the prepaid meters.

In the USA, regulatory rules evolved to protect customers of investor-owned utilities from service interruption. Before terminating service to a customer whose payment is seriously past due, the utility must pursue an array of measures to secure payment. Prepaid electric service with automatic disconnection when the prepayment runs out is incompatible with the protective measures, and as a result only a few thousand customers are being served through prepaid metering in the US, mostly in municipal and cooperative utilities. Where as in UK there are more than 3 million prepaid electricity meters are in use today. ESKOM has installed about 2.6 million key pad type prepaid meters in South Africa during the past 10 years.

Widespread concern exists about the growing use of pre-paid water and electricity meters by private companies and governments. The meters are considered efficient and cost-effective for companies, which experience no lost revenue because users are cut off when they use all the credit they have paid for. But the public health impact of prepaid meters, particularly prepaid water meters can be devastating.

In some countries there have been protests against use of prepaid meters. Pre-paid water meters were declared illegal in the United Kingdom (U.K.) under the U.K. Water Act of after water cut-offs were linked to increased cases of dysentery and other diseases related to lack of clean water. Being efficient on one end only leads to a backlog of expenses on the other end when people who can't afford clean water get sick from drinking dirty water and then seek services at public health clinics.

In developing countries, ethical issues in use of prepaid electricity meters should not be treated as an injustice to the society at initial stages of development. However, caution may be exercised while choosing areas for deployment of prepaid meters.

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Nobody wants to spend more on household bills than necessary. But you can&#;t exactly cut out the essentials, like electricity, altogether! If you&#;re exploring ways to save, you might have come across the concept of prepaid energy.

With this type of payment model, you put money into an account, and your electricity bill is paid from that account using those funds. When the balance is running low, you simply add more money to the account.

But does this payment model actually save you cash&#;and what happens if your account balance gets too low? Does your power simply get switched off? And how can you track the funds in your account and your power usage? There&#;s a lot to figure out.

Read on for the answers to these and other essential questions about prepaid energy. The below pros and cons can help you decide if it&#;s the right type of plan for your household&#;s needs.

What is prepaid energy?

Prepaid energy is a type of electricity plan in which homeowners pay for their power in advance. The customer sets up an account with the relevant energy provider and funds that account with their own money. Money is then deducted from the pre-funded account in line with the customer&#;s energy usage. As the balance in the prepaid account decreases, the customer can add more funds.

Prepaid vs. postpaid energy

For many households, prepaid energy can be a smart alternative to postpaid energy. In a postpaid plan, there isn&#;t any advance payment. The electric company simply calculates the household&#;s energy usage and then sends a bill to be paid at regular intervals, usually monthly.

In a prepaid energy plan, the customer sets up a prepaid account that they fund when and how they want. The money needed to pay for their electricity use is then deducted from this account&#;which they can refill regularly&#;according to their energy usage.

Why would a household opt for a prepaid plan over a postpaid plan? Some people find it easier to monitor their energy usage using prepaid plans&#;and even report saving money using prepaid plans. That said, there are drawbacks to prepaid plans versus postpaid plans. Learn more about the pros and cons below.

How does prepaid electricity work?

Prepaid energy plans have gained popularity thanks to the flexibility they offer. While they aren&#;t available in every state, those with deregulated energy markets&#;like Texas&#;offer them.

To enroll in a prepaid energy plan in Texas, you need a local address and a smart meter in your home (if you don&#;t have a smart meter, the power company can install one). Homes with a smart meter can often be connected to the power grid and activated remotely on the same day.

You then deposit money into your account before you start using electricity. The money to pay for your power use is then deducted from that account. You can fund the account easily via online payments or on the website. It&#;s also possible to fund the account via or in person at a MoneyGram location.

Your home&#;s smart meter is read daily, and you&#;ll receive a notification via or text message that tells you how much power you&#;re using. Your daily report will show how many kilowatt-hours you&#;ve consumed, your remaining account balance, your savings for the day, and how many days of power (estimated) you have left, given your current balance.

Learn more about how prepaid energy works.

Pros of having prepaid energy

If you&#;re considering prepaid energy, you&#;re probably wondering what the benefits are. Here are some of the advantages.

No credit check or deposit

Unfortunately, bad credit can stand in the way of securing a traditional postpaid plan with retail electric providers. Here&#;s the good news: A prepaid plan doesn&#;t require a credit check or security deposit like a postpaid plan would. This is why prepaid energy plans are also called &#;no deposit electricity&#; or &#;no credit check electricity.&#;

This means that a prepaid service is accessible to you, even if you don&#;t have a great credit history. Your financial past doesn&#;t have to get in the way of you accessing this basic everyday need.

Quick and easy same-day connection

Since prepaid plans have a low barrier to entry, without the need for a security deposit or credit check, they&#;re fast and easy to set up. Same-day connection is often possible. Depending on your location, if you already have a smart meter installed in your home, you can connect and activate your plan remotely within four to six hours.

If you don&#;t yet have a smart meter, same-day activation likely won&#;t be possible. You&#;ll need to wait at least a day for a technician to come to your home and install the smart meter.

Transparency and real-time notifications

Prepaid electric services can be a great way to save money because they allow you to track daily electricity use easily. Most providers will or text you a daily usage report, so you&#;re always in the know. This transparency makes it easy to monitor and control your electric usage and cut costs&#;more on that next.

Saves money

Real-time notifications about your daily energy use and account balance are a great way to promote energy- and money-saving behaviors. Best practices for saving energy include switching to more efficient light bulbs, optimizing your thermostat&#;s programming, and unplugging appliances when they aren&#;t in use.

Flexibility and control

When you simply get one big energy bill month-to-month, it&#;s hard to monitor your daily habits. However, prepaid electricity plans tell you exactly how much you&#;re using every day, so you can better control your energy usage. This gives you greater flexibility too, so you can adapt as you go along.

No long-term contracts

Prepaid plans also enhance flexibility because they don&#;t demand long-term contracts. You&#;re only paying for what you&#;re using. Plus, prepaid plans don&#;t require long-term contracts, since you pay for power upfront via your funded account. For people who aren&#;t ready to commit to a lengthy contract, this is ideal.

Suitable for new customers

The lack of long-term contracts&#;plus the fact that there&#;s no credit check or security deposit required&#;makes prepaid plans ideal for new customers. For example, say you&#;ve just moved to Houston and are scoping out Texas electricity providers. While you figure out which provider and plan are best for you, you can use a prepaid plan to get the power you need in the meantime.

No termination fees

Another major benefit of not getting locked into a long-term postpaid contract is that you don&#;t have to deal with termination fees. With prepaid plans, you don&#;t have to stress about the possible financial penalties of terminating your contract. You just pay as you go and end it when needed.

No monthly bill surprises

Nobody likes to get a bill that&#;s higher than expected, especially when it comes to something as essential as electricity use. When you prepay for your power, it&#;s easier to manage consumption and avoid overspending. There&#;s no concern about unpredictable overages and higher-than-anticipated monthly bills as a result.

Budget control

With a prepaid account, you can set a budget for your energy expenses by only funding your account to a set amount. Of course, you don&#;t want to let your account get too low. It&#;s like putting gas in your car. You don&#;t need a full tank, but you still want enough fuel in the tank&#;in this case, money in your account&#;to keep it running.

Security and privacy

Unfortunately, household bills like utilities can be used by criminals to steal others&#; identities. Fraudsters may even go through a household&#;s trash to retrieve bills and bank statements with sensitive information&#;or, in the modern age, hack emails.

When you don&#;t have a monthly bill coming to you, this risk is mitigated. With the prepaid plan, you simply fund your energy account. As a result, there&#;s less likelihood that your personal financial information will be exposed if you aren&#;t paying your electric bills via a credit card or bank account.

Cons of having prepaid energy

Prepaid energy plans aren&#;t right for everyone. Beware of these drawbacks before signing up for a prepaid plan.

Higher energy rates

If you&#;re looking for a low rate for your energy, a postpaid plan may actually be the better option. Prepaid plans generally tend to have slightly higher base rates, which can result in greater costs in the big picture&#;especially if you&#;re not carefully monitoring and controlling your energy usage.

Frequent account management

Prepaid energy plans give you a great amount of power and control because you&#;re only paying for what you use on a day-by-day basis. You&#;ll receive daily notifications that tell you exactly how much electricity you&#;re using and how much money is left in your pre-funded account.

While some people love the personal agency this gives them, others don&#;t like the high level of management it requires. If you don&#;t like the idea of constantly checking your energy account and reloading it, a hands-off alternative&#;like a traditional postpaid plan, where you just get a bill at month&#;s end&#;may be best.

Variable rates

The costs of prepaid plans tend to be more unpredictable than those of postpaid plans. This is because prepaid energy is usually subject to a variable rate instead of a fixed rate. As a result, your energy usage costs may fluctuate more than with a postpaid plan. If you prefer predictability, then you may want to go postpaid.

Usage monitoring required

The variable energy rates may make prepaid plans seem unpredictable at first. However, you can actually tightly control what you&#;re paying, since you&#;re only funding your account to a certain amount&#;plus, you get daily info about energy usage and costs.

That&#;s good news, right? Well, if you&#;re not in the mood to constantly keep an eye on your usage and related costs, it may not be. It&#;s simply a matter of how much hands-on effort you want to put into your electricity consumption management.

No energy bill credit

A good credit score is helpful for all kinds of things in life, from getting a cell contract to securing a mortgage. One way that people can build credit is through their utilities. By getting a long-term postpaid contract with a provider and regularly paying your bill in full and on time, you can build credit.

If you opt for a prepaid plan, you won&#;t have this opportunity to build a good credit score. This can be a drawback if you&#;re trying to improve your score. That said, there are plenty of other ways to build credit too&#;this isn&#;t a must.

No grace periods

If you&#;re opting for a prepaid energy plan, you have to take care to always keep your account funded. If you don&#;t have money left in your account, your power will likely be shut off. There&#;s little to no grace period. Immediate payment is needed for continued service.

In contrast, postpaid plans tend to have more of a grace period. Once you get your bill, you&#;re given a deadline by which you need to pay the given amount. Your power won&#;t be shut off immediately if you don&#;t pay on the same day, for example.

How to know if it&#;s right for you

Still not sure if a prepaid plan versus a postpaid plan is right for you? There isn&#;t one right solution for everyone&#;it depends on your unique needs and situation. Ask yourself these questions to figure out if a prepaid power plan may be right for you:

• What&#;s my credit score? A low credit score can keep you from getting a traditional prepaid plan, making a postpaid plan the perfect alternative. You can view your credit score for free once every twelve months. Pro tip: Some people may also use a regular postpaid energy plan to help build their credit!
• Will I stay on top of my account management? With a prepaid plan, you need to keep an eye on the funds in your account. If you&#;re busy with everyday life, taking the time to reload your account may be a hassle you don&#;t want to deal with.
• Are monthly bills or usage-based payments better for me? Some consumers prefer to get a fixed monthly bill every month. Others like usage-based payments better. It&#;s just a matter of preference!
• Do I have plans to move any time soon? One major benefit of prepaid plans is their flexibility. You don&#;t need to get locked into any kind of long-term contract since you&#;re paying as you go. If you have plans to move, this is ideal.
• Is flexibility a consideration for me for other reasons? Even if you aren&#;t planning to move, you may appreciate the flexibility of a prepaid plan. For example, you may be shopping around for energy providers and trying to find the best one for you. While you figure that out, you don&#;t want to get tied to a lengthy contract, making prepaid a good choice.

Take control of your energy usage with Payless Power

If you&#;re looking for a prepaid energy provider in Texas, check out Payless Power. Our prepaid plans are fast and easy to set up and don&#;t require you to commit to a long-term contract. Plus, there&#;s no credit check or security deposit required.

Check the list of service areas, from Dallas to Houston and beyond, to see if you&#;re covered. Once you&#;re all set up, we&#;ll send you daily notifications via text or about your energy usage, so you can start saving money on power right away.Visit our enrollment page to get started.

By Payless Power

Payless Power is a thought leader in the energy industry, focusing on technology, innovation, and accessibility. The company's expertise includes the Texas energy grid, infrastructure improvements, weatherization safeguards, and the advancement of clean, renewable resources. Since , Payless Power has provided energy solutions to residences and businesses across the Lone Star state.