Auto-Pay ‘Perversely’ Results in More Electricity Usage

May 7, 2015 By Linda Hardesty

kwResearch from Duke University’s Sanford School of Public Policy finds that commercial electricity customers who use automatic bill paying use 8 percent more power than those who did not, according to Duke Today.

The results come from a study of billing records from the South Carolina utility Santee Cooper dating from 1994 to 2010. The data contain more than 3 million commercial records of which 3.4 percent of commercial customers were enrolled in auto-pay over the 16-year period.

The study’s author Steven Sexton, assistant professor of public policy and economics at Duke, says the results are “perverse.” Auto-pay is intended to even out electricity costs throughout the year for better budgeting, but actually results in higher bills.

The problem derives from the fact that consumers who are signed up for auto-pay often don’t review their online utility bills and become unaware of their usage, something economists call “reduced salience” of electricity costs.

It’s ironic that as utility data becomes more granular and often available in “real-time” via online dashboards or kiosks, consumers might actually be paying less attention to it. Sexton says, “Attention itself is a scarce resource.” One solution would be to implement a one-click bill payment where the customer must open an email with the energy usage information in order to make the monthly payment.

Photo of electric meter via Shutterstock

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