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Automated Electric Bill Payment Increases Power Consumption, Automatically

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stromkosten-533818_1280Going for paperless billing is good for the environment because you kill less trees for paper, no fuel is burned to deliver your bill, and you don’t get a mini heart attack when you open your mailbox. However, it also helps you lose track of your electric bill as it gets covered in mounds and mounds of spam.

Avoiding a mini heart attack by going paperless for your electric bill sometimes results in a more stressful situation when the lights go off because you fail to pay for it. And many who have gone paperless probably think that once you go black, you never come back, to paper bills that is. So many of these progressive consumers take the next step and go for automated bill payment. Unfortunately, that turns out not to be a very progressive move according to a study by researchers at Duke University.

Steven Sexton from Duke’s Sanford School of Public Policy found out that power consumers on automated billing used more electricity than those who didn’t. Commercial consumers used 8 percent more than their less high tech counterparts. Residential consumers, on the other hand, used 4 to 6 percent more electricity than those who weren’t on automated bill payment. It was even worse among low-income residents on automated billing, they consumed 7 percent more than their non-automated counterparts.

“It’s a perverse consequence of a well-intentioned program that low-income people enrolled in budget billing programs actually spent more than they would have otherwise,” Sexton said. This comes about as a consequence of what economists call “reduced salience” of power costs. In layman’s terms, “out of sight, out of mind”. Turns out that in this case, what you don’t know actually hurts you, and ultimately hurts the environment too as you use more electricity.

It’s a bigger issue than you think, around two-thirds of power consumers in the US avail of automatic payment to the staggering amount of $23 trillion a year. While it helps consumers avoid late payments, it actually makes power utilities happy because their transaction costs go down as consumption goes up.

Sexton says that utilities should increase salience to encourage consumers to save electricity. This could be done by requiring consumers to open an e-mail or read a text message at least once a month so that the payment will be processed.

In other words, require people enrolled on automated bill payment view a pop up ad. But with millions of revenue on the line, it would take regulatory action for a proposal like this to see the light of day.  If it will result in lower power consumption and reduced greenhouse gas emissions, maybe we should click on an annoying button like that.

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