Michael Garrett enjoys the convenience of paying for electricity when he wants to and keeping tabs on his daily usage.

He’s not prepaying for electricity because he moves around a lot or has financial troubles. In fact, he’s had a steady job for years with the utility that offers the program, Georgia Power.

The option of prepaid electricity has slowly been gaining steam for years in the U.S. But most of the pay-as-you-go offerings so far have come from municipal and cooperative utilities.

Georgia Power is one of the largest investor-owned utilities to move beyond the pilot phase and into a full offering for its customers. Despite a quiet rollout so far, customers are eagerly signing up -- including some of Georgia Power’s own employees.

Garrett expects to see the same trend as other Southern cooperative and municipal utilities that are offering prepay programs have experienced: it’s not just low-income customers who will choose the option.

While it can help customers on a budget manage electricity expenses, as it eliminates reconnection fees, the appeal is far wider. A survey by energy consulting firm DEFG found that about one-third of respondents said they were interested in prepaid electric services, a figure that jumps to about 50 percent for the 18-to-34 demographic.

Consumers are generally comfortable with the idea of prepay, as they already use it in many areas of their life, such as subway and train passes, electronic toll programs, and cellphone plans. With electricity, prepayment allows consumers to have a better idea of how much energy they’re using and budget throughout the month. 

A long road to a seamless solution

Georgia Power began looking at prepay options about five years ago as one of the models it hoped to offer after installing smart meters in its territory. Three years ago, those meters had been installed, but prepay options were still a while away.

“After a long discussion with vendors and our IT department, we decided to move into a pilot program,” said Michael Garrett, customer service operations manager at Georgia Power. As with most changes with regulated utilities, things didn't happen at lightning speed.

The utility had to run a pilot to make sure that the vendor, PayGo Electric, could integrate with its backend billing system. Another issue was determining how customers could replenish their account balances in the middle of the night or on a weekend if they lack internet access.

Georgia Power had more than 130 business offices, but those were only useful during business hours. The utility set up about 2,600 payment locations at a variety of retail outlets, such as grocery stores, 24-hour pharmacies and Wal-Mart. Customers can pay with cash at any of those locations or pay online.

Georgia Power provides at least three alerts as balances run low, but customers can choose to set up additional alerts based on their preferred parameters. Georgia Power cannot turn off power during extreme weather events.

Although Georgia Power was waiting for smart meters to offer the program, most of its territory does not have the specific type of meters that are required for prepay options. In order to allow this, the meters need to have a remote connect/disconnect switch. Customers who want to opt in to prepay will receive a new meter with that functionality, and the other meter will go back into Georgia Power’s inventory, according to Garrett.

Meters deliver more choices

The utility's prepay program quietly launched last October. More than 1,400 customers have signed up, even though there has been no marketing so far. Customers are told about the program if they call the utility asking about other issues. The figure is a small fraction of Georgia Power’s more than 2 million customers, but with a marketing push later this year, the number could rise substantially.

“We’re very excited about the customer response we’re getting,” said Garrett. Georgia Power thinks upward of 15 percent of its customers could choose the prepay option in the next three to five years, which would make it the most popular choice besides the standard rate.

The prepay option joins other Georgia Power residential rate plans that are enabled by smart meters, such as a nights-and-weekend program and a residential demand program that charges less overall but far more during peak demand. About 10 percent of Georgia Power residential customers have chosen something besides the standard rate. The prepay option can also incentivize people to save energy, but Georgia Power has not conducted any analysis yet on whether its prepay customers have cut their overall electricity use.

“So far, the satisfaction rate is very high,” Garrett said of the prepay program. Other large utilities, such as DTE Energy, have piloted prepay options for years, but have yet to move forward with a complete offering. If it continues to be successful for Georgia Power, this approach could be rolled out to other utilities that are also owned by Southern Company.