Automatic Bill Pay Could Be Costing U.S. Electricity Consumers $1.82 Billion Each Year

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Automatic bill pay may be doing more than offering homeowners convenience, new research suggests: It could also be sticking them with higher electric bills.

That’s because when people don’t have to look at their bills and make the appropriate payments, they’re more likely to consume excess energy, according to Steven Sexton, an assistant professor of public policy and economics at Duke University. He found that, on average, enrolling in automatic bill pay leads to an electric bill increase of between 4% and 6%. For some people, that increase might be as dramatic as about 9%.

To arrive at those figures, Sexton analyzed 16 years’ worth of electric bills for about 850,000 customers of the Santee Cooper public utility company in South Carolina. Some of the customers switched to automatic billing over that period, while others did not.

Sexton compared electricity usage for the same customers before and after they switched to automatic bill pay, using customers who didn’t switch as a control group (to account for overall changes in electricity use).

Residential consumers with energy-efficient houses were the group with the greatest increase after switching to automatic payments; Sexton says it’s possible that because these people think their homes are particularly efficient, they feel they have less reason to scrutinize their bills.

Commercial users, too — including many small businesses — were affected by a switch to automatic billing. Sexton found that after enrolling, commercial customers ended up using 7.3% more electricity each month.

By extrapolating his findings to the entire U.S. customer base, Sexton was able to estimate that residential consumers alone waste around $1.82 billion each year on excessive energy use — and cause additional harm to the environment because of that excessive use.

The paper is particularly intriguing given the effort and spending that utility companies, federal agencies and nonprofit organizations have put into educating homeowners to be more mindful of their electricity use.

Another recent study found that inactive devices — ones that pull power even when not in use — cost the average American household $165 each year. And many homeowners resist replacing outdated appliances even though new, energy-efficient appliances outperform their older counterparts even while using far less power (convection ovens, for example, use less energy and cook food about 25% faster than traditional ovens).

Sexton’s full paper has been published in the May issue of The Review of Economics and Statistics.

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