Regulatory Challenges Presented by Smart Grid-Enabled Prepay Offerings

The development of customer-facing applications of smart grid invites the question: How do existing regulatory constructs comport with technological innovation? At first glance, prepaying for energy may appear to be just another payment channel for consumers, where energy is purchased now for consumption later. When supported by smart technologies, prepay may be linked with a two-way communication channel between the supplier and consumer. Energy consumption data is made available to suppliers in regular intervals (fifteen-minute, hourly, daily, etc.), which allows for different types of pricing structures. Consumers may also opt to receive communications regarding payment and account updates, price signals (potentially using dynamic pricing), and energy management options. Prepay enabled by smart grid is thus a billing option with a consistent feedback loop delivered via SMS, email, web-based portal, in-home display, or perhaps a combination of these options. The information flow allows consumers to monitor their usage, creating opportunities to reduce energy consumption and costs. With prepay, moreover, the usage data is tied to the payment transaction in real time, so consumers can directly relate energy consumption with dollars.

Thus begins the newest paper in DEFG’s Series of Regulatory Choices titled, “Regulatory Challenges Presented by Smart Grid-Enabled Prepay Offerings.”  The paper sets forth many issues that regulators must address as they consider the balance between new customer service choices and customer protection.

DEFG believes that all regulatory agencies make a “series of choices” as they go about the business of administering the laws that govern the behavior of players in network industries. DEFG’s Series of Regulatory Choices explores the federal, state and local regulatory decisions that expand the choices available to energy consumers as they construct and inhabit buildings, purchase and maintain energy-consuming devices, purchase energy, or manage their consumption of energy. Greater choice increases efficiency.

It has been stated that prepay electric service is a “killer app” for smart grid — the first customer-facing application of smart grid that will have far-reaching consequences. Read more about our work on prepay or contact us to participate in our prepay working group in 2011.

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