Why are Prepaid Electric Companies Called Scams By Customers?

Prepaid electric companies are often called scams by their customers because the rate plans are not fully understood.

I have read through several reviews regarding prepaid electricity plans and have broken down some of the top reasons people become unhappy to the point they call the prepaid electric company a scam.

60 Second Video Explaining Why Prepaid Electric Companies are Considered Scams

Top 5 Misunderstood Aspects of the Prepaid Electric Company

• The advertised electric rate does not always include the TDSP charges.
  • These charges are pass through charges that are non-negotiable
  • TDU fees (TDSP charges) are not the responsibility of the retail electric company
  • The prepaid company passes these charges on to their customers, and so reasonably speaking, any customer that was not aware of this would make their prepaid electric company responsible and hold them accountable for not informing them these additional charges would pass-through to them.
  • Sales people in any company are notorious for sugar coating the product to make it seem worth buying. Prepaid electric company sales people will sometimes tell you the electric rate plan price is the all-in bundled electricity price when it’s not the case. TDSP charges should be included in the price for the price to be an “all-in bundled electricity rate”
  • If you agreed to a terms of service document and an Electricity Facts Label document and then signed your prepaid electricity service agreement then you have legalize working against you. They stated the whole rate in the EFL but the sales person may not have relayed that information.
  • What you agree to with the sales person on the phone and what legalize you sign in an e-sign document are two very different things a lot of time. It’s unfortunate that an electricity service sales person can say whatever they want and sometimes with little recourse but it happens. “The bundled charges” with the TDSP charge being left out of the rate your told is an unfortunate sales tactic. How is it bundled if the TDSP charges aren’t in there? We don’t know either, your not crazy.
    
    

Prepaid Electric Plans Have Extra Fees The Sales People Don’t Explain

• Some plans change based on how much kilowatt hours you use in the month. If you use under 1,000 kWh there are many prepaid electric companies that have different monthly customer service fees that kick in that make your average electric rate higher. In this review it sounds like a $1 gets added if the customer stays under a certain kilowatt hour range. The sales person may not tell you everything the Electricity Facts Label will tell you such as this additional $1 fee.
• The electricity plan price may be different from the gist of what you heard from the sales person talking to you on the phone. Make sure to confirm the price on the Electricity Facts Label before proceeding to sign an e-document contract. If you need bill pay help after exhausting your efforts with your prepaid electric company visit our electric bill assistance page.

True-Ups to Correct Incorrect Estimated Usage are not Trusted

• Many customers are not sure how the “true-up” of prepaid electric service accounts occur. Typically after 3 months of keeping account balance in the green a certain dollar amount (such as $35). After those 3 months an effort to correct any over estimates occur and the correct amount is charged and credits occur back to your account to reflect how you actually use your electricity.
  • The electric usage is predicted as far as what will be used based on how people used electricity in the apartment or house prior to you moving in (historical electric usage). If the house was not inhabited prior to you being there they can go off of weather patterns and comparable houses electric usage similar to the house you will be staying in.
  • With most prepaid electric companies True-ups happen about 3 months after you have been paying on time and keeping the balance in the green at least $35.
  • True-ups credit your account any over charges and allow the prepaid electric company to better estimate future electric usage for your home. The true-up allows the prepaid electricity billed amount to come down in price if the electric usage shows your using less than they estimated the place your staying typically used in the past.
  • If you don’t keep your dollar balance in the green the 3 month period will only ever be true-ups to correct estimated electric usage and not additional steps to get you on a cheaper post-paid “fixed rate“.

Reading this review by Ray who works for Payless Power you can see the prepaid electric companies work a lot differently than they used to. Payless Power uses smart meters to make sure electric usage readings are real time and not estimated.

Smart Meters Insure Your Prepaid Electric Usage Reading Is Very Accurate

In the past if you started service in the spring the estimated electric usage would be based on summer and winter electric usage readings. The dramatic difference in charges could be alarming for many customers as electric bills are cheaper during mild seasons. Many prepaid electricity customers would file complaints about false readings and exorbitant charges because of these historical estimated electric usage billings. Now with smart meters electric usage is read in real time and so the readings are very accurate and the complaints regarding false meter readings fall on deaf ears.

• Prepaid electric companies now simply read your actual electric usage and deduct your agreed upon electric rate (TIMES) your kilowatt hours (PLUS) Taxes and pass through fees.
• If you still have suspicions about your prepaid electric company billing you an incorrect electric usage amount you can actually check the usage yourself by going to this Texas government website called https://smartmetertexas.com and view your meter data for Oncor, Centerpoint, or whomever your electric utility is that services your meter.

Customers are Used to Monthly Payments Not Daily Charges

Traditional electric companies bill you 30 -45 days after you use your electric usage. Even if the prepaid electric customer has never had their own electric provider they know a family member or friend who does and they get an electric bill a good 30 days after they use their service. People have expectations to be treated similar to a friend or family member when ordering electric service. Prepaid electric service is such a different customer experience it makes many customers disgruntled in the process.

• Young people just starting out have the expectation of a monthly bill that is affordable for their utilities not a daily notice of charges and weekly balance request for more money.

• With no credit or bad credit young people or people starting over have to go with something less ideal like a prepaid electric company. The electric rate comparison with other energy companies shows it is not competitive with traditional post-paid electric prices and this is a hard pill to swallow.
• Combine the headache of higher prices being billed weekly towards a small balance and the nagging of “deposit more money” and it gets old fast.

• Many of these prepaid electric customers don’t fully realize their account will be hit up daily to deduct their electric usage and notify them of the daily dollar amount. Seeing $7 – $15 a day being charged towards their balance and seeing a week of electric usage totaling $50 or more is tough to see for people on a fixed budget. Based on our survey 87% of these customers expected paying $100 a month or less for electric service.