Consumers use more energy if they don't see the bill

Consumers in the US tend to use more electricity if they subscribe to an automatic payment system for their bills, according to new research from Duke University.

Billing records from Santee Cooper, a publicly owned South Carolina utility, were studied from 1994 to 2010 and it was found that residential customers using an automatic bill payment (ABP) system consumed up to 6% more power than those who did not, while commercial customers used 8% more.

ABP allows consumers to sign up for recurring automatic debits from their accounts to pay utility bills such as power or water without viewing them.

Study author and faculty fellow with the Duke University Energy Initiative Stephen Sexton believes that increased power consumption linked to auto-paying would be around 15.8 billion kW hours, equivalent to the annual electricity use of 1.5 million typical American homes, if those behaviours were widespread across the country.

The convenience of APB for customers and its lower visibility lead to what economists call “reduced salience” of electricity costs.

“Being less aware of the costs causes an increase in demand,” said Sexton.

“By boosting the salience of electricity prices, utilities could reduce demand to a large extent, and more cheaply than many of the demand-reduction programs being pursued.”

He said the burgeoning field of behavioural economics recognises that attention itself is a scarce resource and increasing awareness of product attributes, including price, can affect purchase decisions.

One solution, Sexton said, may be to implement a one-click bill payment system requiring the consumer to open an email, click to a website or read a text message at least monthly in order for a transaction to be processed.

“It still doesn’t require very much attention or time from the consumer but it could increase price salience,” he said.

Sexton’s findings appear in the May issue of the journal Review of Economics and Statistics.