THE fact that it has taken government regulators so long to get near approving prepaid electricity distribution in the Philippines probably speaks volumes about how far we are behind the times. By the same token, the fact that it is only in the last two years or so that the Manila Electric Co. (Meralco) wanted to make this service available to its customers may say something about local business, too.
We are all familiar with prepaid services because of our cell phones. Prepaid cell phones brought that service to millions who could not afford or qualify for a postpaid subscription. More important, prepaid phones gave an alternative to consumers that did not want any sort of flat-rate-usage plan. It also gave parents the ability to limit phone-usage consumption for their children.
Prepaid electricity is common around the world. The United Kingdom has had prepaid for decades, the first being a box where coins were deposited to turn the electricity on. One every few months, someone would come and empty the coin box. From the United States to Jamaica and beyond to South Africa, prepaid electricity has been available for a long time.
Meralco is still waiting for the Energy Regulatory Commission (ERC) to approve installation of a batch of 40,000 prepaid meters. Meralco has already applied for approval on 100,000 more. The company has budgeted tens of millions of pesos for the rollout.
Consumers need this additional choice. Proponents of prepaid say the consumption is lower because customers are more aware of their usage. Further, budgeting becomes easier, because you know exactly how much you are spending each time you need to reload your electricity account.
Meralco gains by reducing costs by a substantial amount, depending on the number of prepaid users. No more billing and no more expenses related to disconnection and reconnection. However, new meters must be purchased and there are other major infrastructure costs to implement the system.
There is, however, a potential downside for consumers. As with prepaid- phone service, the charges are usually higher for prepaid electricity. This may be some of the concern that the ERC has discussed. In many locations in the US, prepaid electricity costs as much as 20 percent more than postpaid. The same is true in Jamaica, although for small users (under 100 kilowatt-hour), the rates are the same.
Nonetheless, this is a positive step to bring more choices to consumers and should be supported by the regulators. The government should encourage innovation in the delivery of goods and service. If the plan of Meralco to replace many postpaid users with this scheme fails, then it should be because the consumers reject prepaid, not because the government hinders this plan.
Image credits: Jimbo Albano