Prepaid Service

Prepaid utility service requires a customer to pay in advance for electric, natural gas, or water services. This is sometimes known as a prepayment program. Utilities offer different means for making payments, including credit cards, payment kiosks, and third-party payment agents. Consumers are often charged an additional fee for using these means of payment. The balance in the customer’s account decreases with usage. Utilities generally provide electronic notification that billing credits are running low. When the prepaid balance is depleted, service automatically terminates. Customers typically receive electronic notifications that they have used up their funds. They do not receive a written notice or a visit from a utility company representative. Service is restored once the account is replenished with additional payment. Loss of service may be delayed if regulations require a grace period. Some states may prohibit termination during extreme weather events. 

Supporters of prepaid service say it helps consumers on limited budgets control their usage. And it allows utilities to limit outstanding debt. However, prepaid service is sometimes more expensive for consumers through higher rates or added fees to purchase credits. And it disconnects them from an essential service when they run out of credit. Prepaid service providers are therefore able to avoid complying with consumer protection regulations related to termination of service. This can potentially affect their health and safety.