In many countries where electricity distribution systems have gone hi-tech, we are increasingly seeing a situation where users have a hard choice to make: between either being put on the prepaid electricity billing system, or remaining on the traditional post-paid systems. Some jurisdictions have actually switched fully to the prepaid system, so that users, even if they wanted, would still have no alternative but to get hooked onto that new, hi-tech prepaid electricity billing system.

It is assumed, for a start, that we are all conversant with the workings of postpaid electricity billing system. This is, after all, the system we always had, even long before electricity distribution systems went hi-tech. It is the situation where you pay for your electricity after having used it. Normally, the working of the system is hinged on a meter installed at the premises where electricity is in use. This is the meter that tracks electricity usage, with a meter reader being regularly sent to take readings from the meter for billing purposes. It is when the bills have been calculated from the meter readings that the electricity user is required to pay them (after having used the electricity); in order to continue being supplied with electricity.

The workings of prepaid electricity, on the other hand, are akin to the workings of prepaid mobile phone systems: where users pay for a service before using it. From a technological point of view, the prepaid electricity system is obviously much more sophisticated than the postpaid electricity system. It comes with a provision for users to purchase electricity units from the electricity company (usually in the form of scratch cards bearing specially generated numbers) which, upon being digitally fed to the meter, procure some electricity units, which the user can then proceed to make use of.

Now most people who have been on postpaid electricity billing system will recall that such systems usually come with a requirement that users pay a deposit, before being hooked onto the grid. On the other hand, many people who have had the opportunity to use the prepaid system will take notice of the fact that most prepaid electricity billing systems don’t make it essential for the users to make a deposit payment before being hooked onto the grid. So, why is this the case? Why is it that most of the ‘no deposit electricity systems’ tend to be of the prepaid nature?

Well, in order to understand why this is the case, it would be essential for us to appreciate the reasoning behind this requirement for deposit payment before connection to electricity grids. This is where it turns out that, in the postpaid electricity supply system, the deposit is charged to serve as a ‘guarantee’ so that in case of the user being completely unable to pay for electricity, the money in the deposit would be kept. Seeing that electricity is paid after use, this possibility of users ‘running’ with money is very real. In the case of prepaid electricity, however, it is not necessary; because electricity is always paid for before usage. There is therefore no risk of the users ‘running away’ with bills, and a requirement for deposit would therefore be superfluous. This is, therefore, the link between prepaid electricity and ‘no deposit electricity’ supply regimes.