Coming soon: Prepaid electricity

MANILA, Philippines – Phone and electricity services will soon have something in common: prepaid.  

The country’s biggest power distributor Manila Electric Co. (Meralco) has plans to launch its prepaid electricity service before end-2012 and as soon as the pilot tests are completed, according to Alfred Panlilio, Meralco senior vice president for customer retail service.

Panlilio said the pilot tests, which are awaiting Meralco board approval, will take 4 months to complete. “If we start March or April, it will be complete in four months and hopefully we could officially launch by the last quarter,” he recently told reporters.

The results of the test will be incorporated in the power retailer’s strategy to roll out the first prepaid electricity service in the country. “We want to begin the pilot test soon so we can get insights on how consumers adapt to prepaid electricity service and how to package it as well,” Panlilio added.
 
Cash-flow management

A recent consumer analysis research by Meralco and General Electric showed that buying ‘tingi’ or sachet-style of distribution is ingrained in the Filipino lifestyle.

Panlilio said most of customers are inclined to avail of prepaid electricity as they cited managing appliance use and matching the timing of their household expense with their income.

“Many wage earners receive daily or weekly pay, so they would prefer that their expenses – from mobile to Internet and yes, to electricity – be also on a tingi basis,” Panlilio said.

The prepaid scheme also enables consumers to bridge the timing of their cash outflows instead of being constrained with cashing out for an entire month’s bill. “With the prepaid scheme, electricity, thus, becomes more affordable for some segments of our customers,” he explained.

The Meralco study also noted that consumers are interested to use prepaid system as a budget tool, teaching other household members to save, and sharing expenses with other members of the household.
 
The Meralco study showed that if customers are able to effectively manage their electricity consumption through a prepaid scheme, the respondents said it could actually lead to savings.

Power of choice

“This prepaid innovation is meant to give our customers power of choice,” the executive said, echoing a similar line from makers of shampoo, toothpastes, cooking oil, cigarettes, and other consumer products that package and distribute their wares sachet-style.

The same prepaid scheme has catapulted another basic service – the mobile phone – to greater heights. When prepaid mobile phone credits were introduced to Filipinos at the turn of the century, the number of subscribers soared, growing by up to over 100% in over 5 years.

Prepaid mobile phone credits made communication accessible and affordable among majority of Filipinos who couldn’t produce a credit history and fat bank accounts required for postpaid plans. This industry phenomenon virtually killed the landline service, which was crappy for decades, and was unable to reach most residents in far-flung islands in the Philippine archipelago.  
 
Smart Communications, which introduced the prepaid mobile phone credits in early 2000’s, is a sister company of Beacon Asset Holdings Inc., the majority owner of Meralco. Both Smart and Beacon are part of the Philippine-based conglomerates of Hong Kong-based First Pacific Ltd. led by businessman Manuel V. Pangilinan.

The group of Pangilinan acquired a controlling stake in Meralco in 2009 after a bitter boardroom battle. Another Meralco shareholder, local conglomerate San Miguel Corp., is also engaged in telecommunication services. – Rappler.com