If you paid your utility bills in cash, you'd use a lot less energy.

If you paid your utility bills in cash, you'd use a lot less energy.

If you paid your utility bills in cash, you'd use a lot less energy.

The Hive
Collective wisdom.
March 1 2010 2:37 PM

The Enemy of Energy Efficiency

If you paid your utility bills in cash, you'd use a lot less energy.

Utility bills. Click image to expand.

In this project, " The Efficient Life," Slate is seeking your best ideas for helping people use less energy at home and save money. You can read Daniel Gross' explanation of The Efficient Life here, his article about compact fluorescent light bulbs here, his article about utility bills and peer pressure here, and his passionate exhortation that you get a home energy assessment here. You can submit your proposal here and scan all the proposals submitted by readers so far. Over the next six weeks, readers and judges will choose a dozen finalists, the top five ideas, and a winner.

Since moving to this house nearly eight years ago, I've consumed plenty of energy, but I've never paid an energy bill. That is to say, I've never written out a check, placed it in an envelope, put a stamp on the envelope, and then mailed it to the electric company or the heating-oil company. Both bills are paid electronically and automatically—the electricity bill is deducted each month by the utility, and during the heating season the oil company deducts a fixed amount from my bank account each month.

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This makes sense for the energy consumer and the energy provider. Electronic payments, which are cheap and easy for the companies to collect, guarantee they'll get paid on the same day every month. The cost of heating gets spread out over the year, not concentrated in December, January, and February. It saves me the (small) annoyance of writing a check and the (small) cost of mailing it. Each monthly bill paid electronically saves you nearly $5 a year on postage. It's good for the environment, and it's efficient.

But is this efficiency the enemy of energy efficiency? Historically, you had to pay for energy with cash as you consumed it. In the olden days in urban gas systems, people would put coins into gas meters in order to purchase energy. If paying were more of a hassle, and if we experienced bill payment as a more conscious act—whether by writing a check or handing cash over to the oil deliveryman—would we use less energy? Classical economists would say no: Money is money, regardless of how it trades hands. And people always seek to maximize their profits. But the work of behavioral economists—and my own personal experience—teaches us otherwise.

The physical act of removing bills from a wallet or purse and handing them to another person makes consumers more careful. Don't believe me? Try paying for every good and service you consume with a debit or credit card for one week. The next week, try paying for every good and service you consume with cash. I'd wager $50 in cash that you'll spend less the second week.

When you pay electronically rather than with cash, you make different mental calculations. In New York City, a study showed that tips, for example, on taxi rides paid for with credit cards were more than double tips paid on rides paid for with cash. As the New York Times noted a few years ago, the adoption of electronic payments for tolls made people less likely to notice when prices increase. The very act of sitting down and writing a check each month probably makes you aware of the cost in a way that tallying transactions on a bank statement three weeks later doesn't. Imagine if, at the end of each day, you had to put cash in an envelope equal to the amount of electricity and heating oil you'd used. I'd wager another $50 in cash that you would think more about how to live a more energy-efficient life.

Of course, doing so would mean ignoring some of the efficiencies that make our lives easier. One alternative to forgoing modern payment-processing technology would be to upend the relationship between you and your energy provider. Rather than pay for the amount of energy you use, why not use the amount you pay for? Texas-based First Choice Power is offering customers pre-paid electricity service. People who sign up are given a smart meter. If you've decided to spend $100 a month on electricity, and $90 is gone in the first three weeks, you might be more vigilant about turning off lights, or disconnecting the computer at night so it's not drawing power, or going without air-conditioning for a few hours. Or maybe you'd feel more compelled to switch to compact fluorescent bulbs.

So here's the question: How can we make ourselves more aware of the daily costs of our energy consumption? Would a daily update on how much you've spent on electricity on any given day, or any given week, be helpful or annoying? What if your furnace pinged you each time it burned through five gallons of oil? What habits have you developed to make yourself aware of your daily use of energy and its cost? Please tell us about them below, in the comments section.

Slate is seeking the best ideas for helping people use less energy at home and save money. You can submit your proposal here, see the 10 most-popular reader proposals, and scan all the proposals submitted by readers so far. At the end of March, when we choose the top ideas, I'll commit to making changes in my use of energy. And over the course of the next year, I'll provide progress reports on whether my efficient life is living up to its promise.

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