Battle brewing over prepaid electric meters

Utilities want them, but they may put consumer protections at risk

Iowa has one of the nation’s best consumer protection laws to keep low-income customers from having electricity or natur
Iowa has one of the nation’s best consumer protection laws to keep low-income customers from having electricity or natural gas shut off during winter months. (Sourcemedia Group)

A debate is brewing in Des Moines over utilities’ interest in prepaid electric meters that would allow customers’ power to be remotely shut off when their accounts run dry.

Prepaid electric meters would be either a splendid advancement in accommodating lower-income households or an attempt to circumvent vital consumer protections, depending on which side you listen to in an emerging debate.

“It would be a better way to monitor energy usage,” said Amy Myers, spokeswoman for the Iowa Association of Electric Cooperatives. Customers on the prepaid meters could monitor their energy usage so that they can modify their consumption to meet their payment abilities, Myers said, and wouldn’t even have to receive bills.

Prepaid meters would make it easier for low-income households to establish electric service because they would eliminate the need for utilities to charge a service deposit, equivalent to about one-month’s electric bill, according to Bob Haug, executive director of the Iowa Association of Municipal Utilities.

If a utility customer’s account runs dry, the utility could turn off their electricity immediately by remote control, but they could also reconnect it swiftly without charging a reconnect fee after another prepayment is made, according to Ron Sewell of Atlanta-based PayGo Electric, which supplies prepaid metering technology.

Some consumer advocates doubt that customer service improvement are motivating the prepaid meter push.

“It’s all about credit and collections,” said Jerry McKim, chief of the state’s Bureau of Energy Assistance, which administers low income energy assistance for the state.

McKim says prepaid metering could mean a recurrent threat of electrical shut-off for such frail populations as senior citizens, customers with life-threatening medical conditions, and household members with disabilities.

Iowa has one of the nation’s best consumer protection laws to keep low-income customers from having their electricity or natural gas shut off during the cold weather months, McKim said. If prepaid meters are allowed, he believes utilities could circumvent the protections. In states that have allowed prepaid electric meters, McKim said fee structures set up by some utilities that offer the service have made electricity more expensive for low-income customers.

A bill to a prepaid electric metering that was introduced in the Iowa General Assembly last session, but failed to advance.

Now, the Iowa Utilities Board is conducting a formal inquiry into the merits of the practice, trying to determine how it would fit with the existing regulatory and legal framework.

McKim said it became clear at a recent Iowa Utilities Board workshop on prepaid meters that there wasn’t much common ground between consumer advocates and the electric power industry. He said the utilities board staff responded by suggesting a kind of mock or “straw man” rule-making proceeding, in which both sides would submit comments as if they were in an actual regulatory case.

Rural electric utilities rather than the state’s two major regulated electric utilities — MidAmerican Energy and Interstate Power & Light — have been at the forefront in supporting prepaid metering.

Myers said the Iowa Association of Electric Cooperatives is interested in exploring prepaid metering, but only as an “opt-in” solution that would not be forced on any customer. She made it clear that customer service, not collections, is the group’s interest.

Haug said municipal utilities are interested partly because of a coming need for electric vehicle charging stations. The charging will essentially be prepaid meters, and the state needs to begin working on regulations to prepare for that, Haug said.

A leading opponent is the Iowa Community Action Association. It represents the state’s community action agencies such as the Hawkeye Area Community Action Program based in Cedar Rapids. In a thick utilities board filing, group said accepting prepaid meters would forego existing legal rights to repayment agreements for bills in arrears, the right to receive a pre-termination notice, the right to be provided time to seek energy assistance, and the right to seek protection from shut-offs due to health issues.

PayGo Electric writes software for “smart meters” that allow them to talk through wireless connection to the billing systems of electric utilities.

Sewell, a partner in the company, says prepaid meters are widely deployed in many European and African nations, and are winning over customers in places like the big Phoenix utility, Salt River Project. About 12 percent of Salt River’s 1 million customers opted for prepaid meters, he said.

PayGo believes prepaid meters should never be mandatory and shouldn’t be allowed for customers with life-threatening medical conditions, Sewell said. He believes consumers will flock to the option if it becomes available, however. That’s because it will overcome one of the biggest negatives of traditional billing — opening up a shocking monthly bill that the customer can’t afford.

PayGo offers utilities multiple options for notifying customers when their account balance is running low, including automated telephone calls, emails and text messages. Customers can also monitor their account status via a website. The company even plans to offer electric power gift cards. The prepaid cards could be used by social service agencies to help low-income customers establish service.

McKim, of the state’s energy bureau, isn’t expecting the issue to be resolved easily.“This is going to get nasty, I can guarantee, before it gets over with,” said McKim.

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