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"If it were up to me, I wouldn't have a meter."

— M.L., Toronto, Canada

How Payday Lenders, Online Casinos, and Used Car Salesmen Can Help Utilities Get Lucky: Part One

On May 18 at the Low Income Energy Issues Forum (LIEIF) workshop in Pittsburgh, I presented a new model that I hope will foster a breakthrough in policy discussions. Participants included consumer advocates, regulatory staff, independent and utility program managers responsible for supporting disadvantaged communities. Even though I only had a few minutes to introduce the concept to the group, I was delighted to hear multiple people refer back to “the quadrants” in their subsequent remarks throughout the two days. That validated for me the model works because people could easily apply it in reference to the needs of their customers, policy positions, and programs.


Inspired by conversations at the LIEIF gathering in Dallas last October, this framework was developed for use in a research study sponsored by DEFG, where I examined sales tactics used by industries with predatory participants (such as payday lenders, subprime auto sales, online casinos, reverse mortgage underwriters) that are very successful in targeting at-risk communities. The question we asked: are there ways these tactics can be applied in a supportive and constructive manner? I will write another blog with more detail but the short answer is YES.


To create the framework, I first identified mindsets of financially disadvantaged consumers to reflect varied reasons why people might struggle to pay their utility bills.

  • Desperate: insolvent, no hope of being able to meet basic obligations
  • Changed fortunes: people who had middle class incomes but lost jobs
  • Frugal: husbands limited resources carefully and with great restraint
  • Paycheck to paycheck: income supports existence without reserves to absorb unexpected shocks
  • Resourceful: manages limited resources creatively, barters, bargains
  • Juggler: variable income, “robbing Peter to pay Paul,” i.e. forced to choose medicine vs rent or utility based on cash on hand
  • Dependent: Relies on kindness of strangers, charities or government to survive
  • Under water: would pay if could, may be poor money manager
  • Gambler: manages limited resources badly while trying to game the system
  • Scofflaw: truly delinquent, could pay but spends resources elsewhere
  • Careless: has funds but manages them poorly



I mapped these mindsets by intention vs ability to pay and then simplified the map into solvency segments (“the quadrants”) so distinct policies could be discussed and programs designed to effectively meet diverse needs.



Why a breakthrough is needed

Last week’s workshop reflected the following perspectives that must be reconciled in order to achieve better policies and encourage common ground among stakeholders:

  • Consumer advocates are legitimately concerned about new policies and technologies that utilities and vendors want to introduce.  Advocates are striving to protect overwhelmed vulnerable residents who they fear may not be able to take advantage of the investments in upgraded infrastructure;
  • Disconnection rules are financially justified by utilities to prevent irresponsible customers from taking unfair advantage of protections and seasonal moratoriums which increase costs paid by other customers and shareholders;
  • Investments in Smart Grid-enabled options (pricing, payment, technology) allow positive opportunities for supported and independent low-income consumers as well as offering societal and operational advances (integration of renewables, resilience, outage detection and restoration, efficiency) that benefit everyone.


8 actionable solutions for utilities validated by other industries:

  1. Offer VIP loyalty and incentive programs for people who pay bills on time and discounts for those who pay for service in advance;
  2. Recognize that everyone responds to convenience, respectful customer service, clear eligibility guidelines, and authentic, empathic messages.
  3. Link timely payment behavior to credit rehabilitation and establishment of positive credit scores. Positioned as a carrot on a voluntary basis, this practice would be especially valuable to unbanked and young consumers;
  4. Enable as many people as possible to move from the overwhelmed zone into the supported group by simplifying enrollment in assistance and discount programs;
  5. Connect irresponsible customers with reputable partners identified by the CFPB (Consumer Financial Protection Bureau)  that offer money management guidance and education;
  6. Provide more lenient payment deadlines and arrearage forgiveness terms for those making sincere and consistent efforts to use energy more efficiently;
  7. For the truly needy who can’t shift load or reduce usage due to health constraints or sub-optimal housing, offer hedged flat rates and require only minimal payments by leveraging charitable crowd funding techniques and platforms to offset cost of service;
  8. Use a combination of self-selection, volunteered information, CRM (customer relationship management) systems, and data analytics to facilitate segment visibility and differentiated support.


In listening to the workshop participants describe their most successful programs, it is clear there are examples already in use today that reflect these lessons.  I’m writing a white paper on my research and best practices and will be presenting “Lessons Learned from Other Industries” at the NARUC Summer Meetings in Nashville, TN in July.

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