Thursday, August 27, 2009

A small symptom of monopoly power 

Public Service Enterprise Group, the utility that exerts dominion over New Jersey's electricity and gas, charges a service fee of $5.95 if you pay your bill online with a credit card. Is there a single consumer business in an actually competitive market that does that?

Of course, PSEG is a notoriousy inefficient operation, so it does not surprise me that they would rather you mail in a check that they then have to process at greater expense in labor and float than the bank card fees they could negotiate if they tried. There is no doubt somebody inside PSEG who owns the check envelope-opening turf, and it is his or her mission to maximize employment within that operation, the interests of stockholders and ratepayers notwithstanding.

MORE: The local water company does the same thing, including for electronic checks (which are free through PSEG). Apparently employing a staff to tend envelop-opening machines and handle the paper directly with the delay of physical mail delivery is preferable to automating the front end. I would describe these people as idiots, except that I know that they do not exist for the same reasons that real businesses do, to maximize profits.


By Anonymous Berge, at Thu Aug 27, 08:24:00 AM:

Connecticut Light & Power has a $3.45 "service charge" to use a credit card to pay your bill also.  

By Anonymous Anonymous, at Thu Aug 27, 08:56:00 AM:

PSEG recently replaced my meter, though I was unaware they did it. The installation was incorrect, and they had to return a month later and fix it. Despite my unawareness of their changeover and non-involvement in the istallation, they charged me a several hundred dollar fine for the need to return and fix it plus one month energy use they didn't meter.

Bucks County is so close by...  

By Blogger SR, at Thu Aug 27, 09:26:00 AM:

Just to play devil's advocate. If you use a credit card, there is a fee paid by the payee to the credit card company. The utility is simply passing the cost onto its customers, who I suspect have nowhere else to go for the utility services. I'd be surprised, however, if there wasn't a lower fee way to do it on line by electronic transfer which I've been using for over 20 years to pay these recurring bills.  

By Anonymous Nobrainer, at Thu Aug 27, 09:28:00 AM:

The best I can come up with is gas stations that have the posted price and then a discounted cash price.

Otherwise I've seen this kind of thing with Dominion Power, Washington Gas, tuition payments, and income tax bills.

Communications companies are better in this regard. Sprint and Verizon both take credit card payments. Although I'm sure they're just charging for the privilege without telling me exactly what the cost is.

Plus this makes me wonder if the regulated nature of these utilities effectively forces them to specifically charge for credit card processing.  

By Anonymous Anonymous, at Thu Aug 27, 09:44:00 AM:

Somewhat vaguely, I admit, I had the thought in my head that sellers of goods and services could not charge a premium for payment by credit or debit card, over payment by cash...

Too busy this AM to look it up, too!  

By Anonymous DirtyJobsGuy, at Thu Aug 27, 09:57:00 AM:

Although inefficient by virtue of monopoly, a regulated utilitiy lives or dies by recoverable expenses (pass alongs). The cost of people and bank charges to handle checks has always been recoverable, but I bet merchant fees for credit cards are not.

THis is the consequence of imposing cost plus regulation. You lose any flexibility or convienience.  

By Anonymous vicki pasadena ca, at Thu Aug 27, 10:16:00 AM:

I pay all my utilities on line and do not get charged 1 cent to do it. But, we have self serve gas in California and no difference in price between cash and credit card. Hmmmmm  

By OpenID PeteDrum, at Thu Aug 27, 10:28:00 AM:

In Central Indiana, my gas and electric companies are the only ones of my monthly creditors to charge a fee to use a credit card.  

By Anonymous Anonymous, at Thu Aug 27, 10:41:00 AM:

I would highly recomend you do some research about this before you actually blog about it. Power/utility company's are required to send out bills for their customers, because believe it or not, not every citizen owns a computer. The charge goes to sending out bills. It doesn't take a genius to figure that out.  

By Anonymous Daniel W. Durham, at Thu Aug 27, 11:22:00 AM:

to anonymous at 10:41,

That maybe true in your state and others, but it is not true in Minnesota. My utility company is Xcel Energy and I get my bill online, and I do not pay a fee if I pay online.  

By Anonymous Anonymous, at Thu Aug 27, 11:33:00 AM:

American Express requires a check payment for the initial startup fee of a business card. I spent a couple of hours trying to speak with someone that understood electronic transfer,. I reached a local, senior customer service rep who proclaimed "yes, the fee is required by check, even though a debit card is a bucket of money for the taking." I ended up cancelling the card, because checks are obsolete. Are you going to claim that Amex is a consumer business in a noncompetitive market? If so, perhaps there is some trustbusting to do.

As a note, all of my local utilities take an online check service called checkFree, which comes from the same account for me and is, as suspected, free. You might want to try that.  

By Blogger apex, at Thu Aug 27, 12:49:00 PM:

Yes. Ryanair and Easyjet, for example.


By Blogger Purple Avenger, at Thu Aug 27, 01:12:00 PM:

I recently "fired" Florida Public Utilities and told them to come and get their meter.

With a recent rate increase, FPU wanted over $11/month "customer charge" to read the meter and process the billing. FPL manages to read their meters and processing billing for a customer charge under $6/month. I found the FPU charge to be excessive and uncompetitive compared to FPL.

The only thing on gas in the house was hot water, so I picked up a whole house Bosch flash electric unit online for under $300. Don't need any hot water at all during the summer months, so I'll probably only be using that Bosch unit for maybe 4-5 month out of a year, and even then, there's no way I'd spend $11/month on electricity for it...perhaps $4/month.

The Bosch unit will pay for itself in just under 3 years, and takes up a lot less space than a tank based heater.  

By Blogger Georgfelis, at Thu Aug 27, 01:46:00 PM:

Our local county office charges a 50cent per auto "check charge" if you mail in your yearly property tax payment. But if you drive to the office and hand the check to the clerk, there is no additional charge.

Yeah, I know. It doesn't make sense here either.  

By Anonymous vicki pasadena ca, at Thu Aug 27, 01:47:00 PM:

Make fun of California all you want, not here. Water, power, phone, wireless, mortgages, no fees.

Great state!  

By Anonymous Anonymous, at Thu Aug 27, 02:54:00 PM:

Here in Texas, when I register my car in person at the DMV, I pay the indicated fee, cash, check or, maybe, credit card. When I mail in my payment and include my check, I have to add one dollar to the indicated fee. Why? I don't know. A colleague has suggested that the buck goes into a kitty to pay the DMV employees for their loss of the opportunity to steal.  

By Anonymous Anonymous, at Thu Aug 27, 05:50:00 PM:

"There is no doubt somebody inside PSEG who owns the check envelope-opening turf,"

Close. I would say there is somebody... who owns that turf. Maybe not somebody inside PSEG.

"Follow the money" is usually the best rule.

When an entity can reduce a cost but does not, or will not, there is a reason.

Money or unconcern?

Public employees and those in regulated industries may simply be unconcerned; they are employed for life and know it.

The motive may not lie within the utility or regulated entity. There may be a law which constrains. In that case the people who won't change that law have a motive.

Since this is NJ I will guess someone is being paid-off for keeping that billing as it is.

Not that corruption is unique to NJ but there are rumors they do it well there.

K Two  

By Anonymous Anonymous, at Thu Aug 27, 08:32:00 PM:

Australian telecoms company Telstra is going to charge customers a fee for paying bills in person by check or cash. They are trying to push customers towards online or automated phone payment systems. Maybe not a bad idea in principle, but you'd think they would market it better, and call it a "discount" for paying online, rather than a surcharge for paying in person.

They could even tie it into a marketing campaign to sell their Internet services as provided by their ISP arm "Bigpond."


By Anonymous Anonymous, at Thu Aug 27, 11:01:00 PM:

Are you sure about the water company charging for auto-payment via echeck?

I live in Princeton too, I just signed up for auto-pay to the water via echeck, and I distinctly remember being told that they charge for payments via credit card but *not* for echeck payments.

I guess I'll find out for sure when I get my first bank statement on which an echeck to the water company appears.  

By Anonymous Anonymous, at Fri Aug 28, 10:45:00 AM:

For the future: I assume that you will take under advisement the examples of 'financing fail' in competitive industry listed above when exalting the wonders of markets, TH.  

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