Disconnecting the pain of payment

Bill shock can sour the relationship between a business and its customers. In response, one energy retailer has introduced what they claim is a ‘game changer’.

De-coupling the pain of payment

The “Predictable Plan” is Origin Energy’s latest behaviourally geared initiative. It follows their “Don’t Waste Your Roof” campaign that used loss aversion to stimulate interest in solar power.

Origin forecasts a household’s usage for the year and then bills a fixed amount every month or fortnight. The product is a response to customer dissatisfaction with the unpredictability of energy costs.

Aside from signalling it listens to its customers, Origin stands to benefit in a couple of ways. The plan not only smooths revenue and cash flow but Origin is de-coupling the usage from the payment.

The mental connection between consumption and cost thereby recedes even further in the minds of consumers. This “set and forget” direct debit standard payment means energy bills will no longer grab our attention. Like a mortgage, energy will be processed by our System 1 “snooze function” rather than our critical thinking System 2. Instead of poking the bear with bill shock, Origin is aiming to let sleeping dogs lie.

No incentive to reduce usage

Origin is making the case this provides certainty for customers. The bigger issue is people will have no incentive to reduce their use of energy.

Let’s say I am consuming less energy than last year. Thanks to the “endowment effect” I will feel that I am not using that to which I am entitled. And much like an all-you-can-eat smorgasbord, my tendency will be to pig out.

Indeed, in the US people who discovered they were using less power than their neighbours increased their consumption. Regression to the mean – a function of norming behaviour – suggests the same may happen if people feel they are paying for power they haven’t used. The lure of a cheaper plan next year will not be enough to stop consumption creepage in the present.

Added to this, there’s no cap or penalty for over-use (until a re-contracted plan price the following year). That means no short-term financial reason to curtail usage. In fact, energy will start to feel like it’s free. Origin could therefore be promoting lazy energy-use habits that will be hard to break down the track.

In short, Origin has come up with a way to drive a consumption habit without penalising customers in the short-term. While their promise of “no nasty surprises” might appear to be good for the consumer, I hope that goes for the planet too.

Bri Williams runs People Patterns, a consultancy specialising in the application of behavioural economics to everyday business issues.