On 2007-01-12, Mary Fisher wrote:

Is that a "real" electric bill or an estimate? Utility companies
routinely overestimate so they can get interest-free loans from their
customers.

But you pay bills in arrears ...

If you pay monthly based on the supplier's supposed estimate of your
annual consumption, the company will overestimate it in order to get
your account to run up a credit balance --- which is effectively an
interest-free loan. This is especially true if you give them a Direct
Debit mandate so they can unilaterally raise the monthly payment:

http://www.guardian.co.uk/guardian_j...478152,00.html

For the companies they are a boon. They dramatically improve their
cash positions, are easy to administer, and significantly lower the
cost of collecting their revenue. They also exploit customer
inertia because studies show they are less likely to switch
suppliers.

But according to one former executive of a utility company who did
not wish to be named, debit payments have become very lucrative for
the companies using them.

"They sell it on the basis that it easier for the customer ---
which is true --- but what they don't tell you is that it is now a
major source of income for them. They always try to sign up
customers to direct debits in spring when usage is at its
lowest. This gives the customer a chance to build up a healthy
balance, which not only improves their cash flow, but it also gives
them a large sum to use to generate an income. Some firms give
customers paying by direct debit a discount, but many don't."



Estimated meter readings are almost always high as well, for the same
reason.