Complete Guide to Prepaid Electricity: How It Works & Cheap Options

Prepaid Electricity Overview

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Ever heard of prepaid electricity? This can be a great way to get free electricity on weekends and more. We will highlight everything you should know about prepaid electricity.

A Guide to Prepaid Electricity: How It Works & Where to Find the Cheapest Option

Prepaid electricity or pay-as-you-go electricity has been shining a light on the electric panorama of different countries. It has proved to solve electrification problems in certain villages of rural India, as well as being a top option in South Africa’s electrification after Apartheid.

It poses a win-win perspective for both consumers and utilities. On one side, it makes it possible for users to keep track of energy consumption and enables families with low income to access this precious utility.

For utilities, it potentially reduces the number of unpaid bills and power theft, issues that carry important economic losses for suppliers. There are a handful of well-known utilities that offer these services for affordable rates like Direct Energy and First Choice Power of Texas.

The concept is not only limited to developing countries, where in many cases electricity access is restricted to a share of the population, it also applies to first world countries, where a higher rate of energy consumption is registered and it would come in handy to count on passive means to control and narrow power use.

This pay method encourages customers to go for mindful utilization of the service, and move towards the use of more efficient electronic equipment at home or the office, consequently avoiding power waste.

What is Prepaid Electricity?

Prepaid electricity works just as prepaid phone, cable TV, or any other pay-as-you-go service out in the market; you pay in advance for the energy you will be using during the coming period.

As novel as this concept might sound, it has been going on for some time now and it is gaining such popularity that it has been projected to be the next growth market in the prepaid offerings field, according to a forecast made by the Northeast Group LLC, a smart energy infrastructure market intelligence company based in Washington DC.

The firm developed a study that estimates an investment of $11.4 billion in prepaid metering for the coming decade. Indeed, market projections point that prepaid electricity will be a top player in Africa’s electrification by 2020.

Predictions do not only target Africa as a driver of the prepaid service expansion but also foresee a high prepaid electricity penetration taking place in South and Southeast Asia, where the power theft rate is as high as the amount of unpaid bills.

Nigeria, Zimbabwe, Uganda, Kenya, Rwanda, South Africa, Bangladesh, India, and Indonesia are some of the countries where the prepaid modality is already being offered.

Developed countries like Belgium, the US, and the UK have also joined the movement.

How does prepaid electricity work?

The service bases its operation on Advanced Metering Infrastructure (AMI), a state-of-the-art technology that involves systems and networks for measuring, collecting, storing, analyzing and using energy consumption data.

Measurings are carried in a detailed and frequent time-based fashion. Then, data is wirelessly transmitted to the utility company for monitoring and billing. The plan is so practical and flexible that its applicability is not only limited to electricity, it has already extended to other utilities, like water and gas.

Going for a prepaid electric service implies having a remotely operated smart meter in charge of sending your power use information to the electricity supplier.

This means it will not be necessary to have a technician coming by to have your data read every 30 minutes, every day. Hasta la vista, manual meter reading!

The type of meter you already have installed will determine the ease of connection to this service. The process will be quicker and more straightforward in case you already have installed a smart meter that can operate remotely.

If you haven’t gone hype on technology yet and that is not your case, a technician will come to your place to proceed with the installation and configuration of such a device.

See Related: Fronius Smart Meter Review

Does prepaid electricity involve lower supply quality?

A prepaid service does not imply a decrease in the quality of the service delivery or support. On the contrary, clients who have taken that road seem to enjoy better customer service than without a prepaid electricity plan.

This might be due to the flexible way at which the service is being distributed and managed.

So, you have smart–meter already installed and set, now what?

Once the service is connected, what’s left is just as easy as buying stuff online from any other supplier. It is all about going to the service provider webpage, registering your account (user, password, billing information, address) and choosing a prepaid plan, topping-up your account and voilá! you are pretty much ready to go.

Recharging your meter is not a big deal either. It can be done by phone, online, at kiosks, you can set it to be directly drafted from your bank account, or do it by mail, via Western Union or Moneygram, and so on. Some companies are conveniently relying on apps that you can have on your smartphone or tablet to add balance and track your power use.

It is that simple.

Monitoring your consumption

Customers of the prepay service have their meters remotely read every day, and if they want to monitor or check their energy use it is possible to do it by logging into their account on the company’s website, receiving daily notifications by text messages or e-mails, or to your app if your company is more avant-garde.

The notification will show you how much electricity you have consumed and how much is left according to your balance, that way you keep track of your power consumption throughout time.

Typical notifications show:

  • Kilowatt-hours consumed for the day
  • Balance remaining (in the local currency)
  • Savings for the day
  • Estimated days remaining

Some notifications take it even further and breakdown your energy use. They also show you suggestions on the following:

  • how to lower electricity use according to your data,
  • whether that is to turn some lights off while not using them,
  • or raising the indoor thermostat a few degrees up in the summer or down in the winter,
  • turning fans on in the summer instead of the AC,
  • and so on.

See Related: What is Net Metering?

No more wasted electricity or unexpectedly high energy bills

Given that opting for a prepaid service gives you the tools to track your power consumption, it is quite probable that you get more conscious about electricity use. That energy awareness might even motivate you to swap your old incandescent lighting and inefficient electronics in general for more eco-friendly equipment.

The effects of turning lights off when not using them, disconnecting your cell phone charger once your battery is full, unplugging your TV and appliances before going to bed or going out are now exposed to you.

A habit change will occur by taking baby steps towards more conscious and efficient energy use, based merely on self-observation.

Since the electricity is paid for beforehand, you will get rid of bills coming at the end of the month. This involves also to take power overconsumption probabilities off the scene. Expect no more negative surprises thanks to the electricity bill.

What if this month you can make it until the end and finish with extra money in the bank?

Well, thank yourself for having decided to go for prepaid. 

It is not obligatory either to fund the whole cost of the plan. As long as the meter has a positive balance you will count on electricity entering your home, depending on how much is left in your account. Say, you are going on vacation this coming month for 15 days, then you just pay for what you think you will consume during the rest of the month.

Then, grab your luggage and go on holiday without the headache of having to deal with the energy bill once you come back. 

Alternative, consider using Arcadia Power, which will give you completely free clean energy and help you reduce your electric bill.

Use my link and you will get a $20 credit when you link your utility account. Read more about how it works in our Arcadia Power review

See Related: How to Calculate Electricity Usage Costs

What are prepaid electricity plans like?

Choosing a plan is like going to the supermarket and buying the brand of your preference for a certain product. Maybe you like chocolate chip cookies, but you prefer them to be gluten-free, vegan and low–fat. So, you go to the store, find that one, put in your cart and check out. It is the same with prepaid electricity plans.

Service providers design a variety of prepaid electric plans for customers to choose from, according to their consumption and preferences. That way clients have a package that adapts to their necessities and shines a light for them to save on the electricity bill.

Most companies offer customers to enroll in pay-as-you-go plans without a deposit, credit checks, ID or Social Security Number, which will be with no doubt necessary to access utilities by traditional ways.

Getting cheap prepaid electricity will depend on how careful you are while choosing your plan. They vary from no-contract required ones to 36 months long contracts. Month-long plans are also available in some companies.

However, it is strongly recommended to read the small letters at the end of the page, since different restrictions apply for each plan.

Depending on your contract type, the price per kWh can be fixed according to your electricity use, or you could also pay an average price per kWh that is subject to variations. In this case, if the electricity price drops, so will your power bill as well, or at least that is what companies say.

Some companies also include 100% green energy or a share in the total supply. Just make sure that the company offers an energy certificate, so you know you are getting what you are paying for.

For what it seems, getting cheap prepaid electricity is a possible and real thing.

Different research studies showed that customers affiliated to this modality save more electricity than those who are not, reaching up to 14% of electricity savings per customer per day in South Africa and between 5,5% and 14% per user in the US.

Want to know more fun things like these? Check out these interesting facts about electricity

Free nights and weekends

Some companies incentivize the use of electricity during off-peak time through the implementation of free nights and free weekend plans. This concept is known as time-of-use rates or TOU rates.

Under this concept, consumers are motivated to defer certain activities, like household chores, to those times when electricity is meant to be “free”.

See Related: Electric Meter Reading Guide

What is behind these free nights and weekend plans?

Power companies face the problem of balancing energy production and delivery with power load, that way they keep systems in place and running as smooth as possible. However, the electric demand is not constant in time; it varies depending on several factors, like location, time of the year or time of the day, and other consumption patterns.

Yet, it is still somehow predictable.

High peaks are expected in winter and a smoother curve is more likely during summer when heaters are off.

A similar story occurs throughout the day.

In general, during the daytime, the electricity demand is higher than during the night. Day loads also vary depending on the hour, but again, this is not set in stone and it differs from one location to the other.

This situation is better illustrated by the image below, where both 24-hour power use patterns are shown for summer and wintertime. These two seasons are mostly taken into account due to their opposite nature.

 

Source: https://energymag.net/daily-energy-demand-curve/

Given this yearly repetitive pattern, companies must find ways to balance those high load peaks with lower energy consumption periods, to ensure a stable service without affecting their operation or customers’ comfort. So, they came up with offering “free nights” and “free weekends” plans to partly cope with the problem.

Do household chores at night or early in the morning

Users can balance the system load by using more electricity at nights and weekends, so the high-load is shifted to lower power use times. Thus, suppliers incentivize users to it by offering “free” electricity during those low-load times.

In this manner, customers are brought into the equation to act as a balancing element of the electric system. Clever, ah?

Is it truly free?

Bear in mind that in exchange for free electricity you might be paying a considerably higher rate for your non-free electricity periods. The free nights and free weekends plans will always come with an associated cost at the end, as low as it might be.

Just imagine free nights and free weekends plans as one of those “buy 2, get 1 free” sales. Is that single item really for free?

The table below schematizes, in a relative form, a comparison between the on-peak and off-peak pricing system against the standard electricity rates. Be aware that prices vary according to several factors, and so do the bargain starting and ending times.

 

Source: https://www.engiemep.com/news/using-t-o-u-pricing-to-reduce-electricity-costs/

However, before putting your signature on the contract, think it through and ask yourself if you would feel like running your dishwasher, ironing your clothes and vacuuming after 8:00 or 9:00 PM.

Check the plan’s free time rates and hours and compare it against your schedule and your willingness to do laundry at night, for example.

That is a quick way to sense how much free electricity you can get and whether cheap prepaid electricity can be a reality for you.

Having cheap prepaid electricity will depend on how adjustable your schedule is to the plans your company offers, and how carefully you read the terms of the plan you are going for…

And the small letters at the end, never forget about them!

See Related: How to Calculate Electricity Usage Costs

Prepaid electricity this in the US

It is estimated that by 2021, over 2,62 million people in the USA will be part of the pay-as-you-go electric service. With this in mind, over 200 electric utilities are already offering, or underway to offer prepaid electricity based on AMI.

The service already exists in over 30 states, with prevailing presence in the Southeast and gaining territory in the Midwest, especially in Illinois, Indiana, and Missouri.

In Texas itself, over a handful of competitive electric providers are already offering prepaid electricity plans, some of them are:

Related Guides & Reviews

Cooperatives led the way

Since prepaid electricity took – off, cooperatives in the power business were attracted to it and started to work on the transition. Today, over 170 cooperatives are involved in AMI-based prepay electric programs in the US.

Many small size cooperatives are serving dispersed rural communities. Indeed, they are pioneers in the adoption of prepaid AMI in rural settlements.

Later, larger organizations like the following adopted it:

  • SECO Energy in Florida,
  • Cobb EMC and Greystone Power in Georgia,
  • Energy United in North Carolina, Volunteer Energy in Tennessee,
  • Rappahannock Electric in Virginia,
  • Shelby Electric in Illinois, and
  • Northern Electric in South Dakota, started to join the party and now holds a portfolio that surpasses 100,000 customers.

Public companies, represented by municipal utilities are currently jointly serving over 14% of US prepay customers.

Jacksonville Electric Authority and Orlando Municipality in Florida, Kansas City, Lenoir City and Memphis in Tennessee, Wake Forest Power in North Carolina and Bryan Texas Utilities are some of the already running municipal deployments, and they are joined every day for more companies interested in offering this versatile service.

Related Resources

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