A big thumbs down. That’s what an Austin-based consumer advocate has to say about the value of pre-paid electricity service.

A new report from a consumer group raises questions about prepaid electric service.

A new report from a consumer group raises questions about prepaid electric service.

“Prepaid electric service is substandard and creates a new subclass or residential customers who are expected to pay up front,” wrote Carol Biedrzycki, director of Texas Ratepayers’ Organization to Save Energy, in her new report on prepaid service.

Texans in 85 percent of Texas can shop for electricity, with products varying by price, contract length and a few other factors. Under most electricity deals, customers pay for service after it’s rendered to their home. Under prepaid plans, the customer pays in advance of service.

Consumers should think twice before agreeing to a prepaid plan, says Biedrzycki. She says prepaid plans often lead to unexpectedly higher bills, quick disconnections and other very unpleasant surprises. In her recent report, Biedrzycki compared a half-dozen pre-paid plans and found all of them wanting.

For instance, the price of electricity in prepaid deals often can change quickly and without advance notice.  “Increasing prices are likely to cause customers to run out of money in their account earlier than expected and they may or may not have the money to add more funds to the account to avoid disconnection,” she wrote.

Other problems with prepaid service, according to Biedrzycki’s report, include:

  • Unwanted and onerous fees, including credit card processing fees, account balance refund fees and even “daily” fees that are assessed on customers, whether they use electricity or not.
  • Extra charges for disconnection and reconnection of service. Biedrzycki says this is particularly objectionable given that the electric distribution utilities that actually conduct the disconnections and reconnections are prohibited from charging these fees to prepaid customers.
  • A lack of certainty for service, and relatively quick disconnection times. By contrast, “when the customer pays a standard electricity bill they know they will have electricity for 30 days or more,” she wrote.

In her report Biedrzycki also includes a number of proposals for reform, including a proposed ban on fees for reconnections and disconnections, new requirements for the reporting of terms of service and additional customer education efforts.

You can read the full report here.

— R.A. Dyer