The Financial Pressures Driving Utilities To Reconsider Convenience Fees

Part 1 of our “From Cost Pressures to Customer Trust: The Utility Convenience Fee Debate” series

The utility industry is facing unprecedented financial strain. Rising infrastructure costs, volatile fuel markets, and growing demand for reliable service are putting pressure on budgets. In fact, wholesale power prices are projected to increase by 19% by 2028, forcing utilities to rethink how they recover costs.

One option back on the table: consumer-funded convenience fees.

What Are Convenience Fees in the Utility Industry?

A convenience fee is a small charge added when customers pay with certain methods, most commonly credit or debit cards. These fees help cover payment processing costs that utilities would otherwise absorb.

There are two common models:

• Consumer-Funded Fees – Customers pay the transaction fee, reducing direct costs for the utility.
• Biller-Funded Fees – The utility pays the fee, offering customers a “no-fee” experience, but this increases operational expenses.

Why Are Utilities Reconsidering Convenience Fees Now?

Convenience fees aren’t new. They first appeared in the 1990s and 2000s as digital payments gained widespread adoption. Over time, customer backlash, lawsuits against card networks, and even state-level bans pushed many utilities toward biller-funded models.

Today, however, the environment looks different:

• About one-third of U.S. utilities still charge convenience fees.
• Rising transaction volumes are driving up costs.
• Some utilities, like Richmond’s Department of Public Utilities, are eliminating customer fees in 2025 by offsetting costs with digital efficiencies.
• Others are doing the opposite — reinstating consumer-funded fees as a way to reduce budget pressure.

What Are the Trade-Offs of Consumer-Funded Fees?

Utility Benefits:

• Reduces operational costs
• Enables more predictable budgeting
• Frees up resources for infrastructure upgrades and innovation

Customer Risks:

• Fees may discourage credit card use
• Can lower customer satisfaction
• Risk of being seen as unfair or out of touch with customer expectations

Key Takeaway

Convenience fees are no longer just a minor line item. For many utilities, they’re becoming a strategic cost-management tool in response to growing financial pressures. The big question is not whether convenience fees will return, but how utilities can reintroduce them in a way that maintains customer trust.

This was Part 1 of our “From Cost Pressures to Customer Trust: The Utility Convenience Fee Debate” series. In Part 2, we’ll explore strategies for reintroducing fees while protecting customer satisfaction.

FAQs About Convenience Fees in the Utility Sector

Are convenience fees legal for utilities?
Yes, but regulations vary by state. Some states restrict or prohibit utilities from passing these fees on to customers. Utilities must ensure compliance with state laws and card network rules.

Why do utilities charge convenience fees?
Utilities use convenience fees to cover the costs of processing payments, especially for credit and debit cards. Without them, those costs are absorbed into operating budgets.

Do all utilities charge convenience fees?
No. About one-third of U.S. utilities charge them today, while others either absorb the costs or are reconsidering their approach due to rising transaction volumes.

How much is a typical utility convenience fee?
Fees are usually modest — often between $1.50 and $3.95 per transaction — but they can add up for customers paying monthly bills.