An Analysis of Consumers’ Perceptions and Attitudes Towards Pay-As-You-Go Electricity Plans

Abstract

Pay in arrears electricity has been the traditional and most common method for purchasing power in New Zealand for a long time. As a result, both retailers and consumers are subjected to a number of problematic issues. These include bad debt exposure for retailers and lack of information and control for consumers. Pay-as-you-go electricity plans have the potential to overcome these issues. Therefore, Mercury Energy are interested in exploring its viability within the mass market of New Zealand. In order to do this successfully, the project utilised a mixed methodology to uncover factors that would potentially limit or enhance the diffusion of modern pay-as-you-go electricity plans. The qualitative component employed Mercury Energy’s recent trial product “Advance”, allowing a realistic examination of participants’ behaviours and perceptions. The quantitative component employed a survey that was intended to gain insight into the broader issues of introducing an alternative electricity plan.

The findings of the research uncovered five key barriers that seemingly limit the diffusion of pay-as-you-go electricity plans. These barriers were mainly consistent with consumers’ apathetic treatment of new alternatives, association with undesirable electricity plans, social risk, and the discontinuity of attributes. The conclusions suggested that most of the barriers could be overcome, in time, with an extensive marketing push strategy. However, the discontinuity of paying in advance was considered detrimental to the likely success of any new alternative. It was thus recommended that paying for usage in advance should not be the central offering of any new alternative. Instead it should be kept as an optional feature initially where it can be introduced in a continuous fashion over a relatively long period of time.