meterLooking to cut your electric consumption?  One way to do so — and save money to boot — is to avoid automatic bill payment programs.

That’s the conclusion of Duke University economist Steven Sexton, who finds in a new peer reviewed study that enrollment in automatic bill payment programs can increase residential electricity consumption by 4 percent to 6 percent.

For commercial customers, consumption increased by 7.3 percent to 8.1 percent, he found.

“Inattention to accounts serviced by (automatic bill payment) programs may increase — reducing the price salience of products,” Sexton wrote in his report. He said this potentially prompted energy consumption “above levels that would be chosen with full attention to price.”

The report appears in the May 2015 edition of the Review of Economics and Statistics. You can view it here.

Sexton examined monthly consumption by residential and commercial customers of a South Carolina electric utility over a 16-year period.  The researcher reviewed data from 658,000 residential accounts and 167,500 commercial accounts, looking specifically at consumption before and after customers joined automatic-payment programs.

Extrapolating from that data, Sexton calculated that automatic bill payment programs induced nearly 16 billion kilowatt-hours of incremental consumption in the United States in 2010. That incremental consumption resulted in an aggregate cost of $1.8 billion.

Automatic bill payment plans also led to an incremental addition of 8.6 metric tons of carbon dioxide emissions, at a social cost of $181 million, according to Sexton’s calculations.

Sexton found even more incremental consumption — 9.4 percent — among customers with energy efficient homes. He speculated that such customers may believe they already consume electricity in an efficient manner, and so are “even less disposed to view electricity bills than standard homeowners.”

He likewise found that programs that help low-income customers smooth the seasonal variation in their monthly bills results in a 6.7 percent increase in electric use.

One way to encourage more efficient energy usage by automatic bill payment customers is to require them to complete monthly transactions online, wrote Sexton. That is, utilities can remove some of the automatic-ness of automatic payment programs.

In this way, “the customer has to at least look at the bill before the payment is transmitted,” he wrote.

— R.A. Dyer

What is the Texas Coalition for Affordable Power?

TCAP is a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

 

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