As the season changes and the virus does not, there is a growing concern about families with financial difficulties paying utility bills. As the days get shorter there is no light at the end of the tunnel; no idea how long the tunnel is, even with encouraging news of a vaccine Monday, November 9.
Utility companies proactively put a moratorium on utility payments when COVID slammed into the public. Utilities deserve credit.
State officials followed. This map is from the National Association of Regulatory Commissioners, shows the status of state utility bill moratoria and when they expire. Says NARUC, “Utilities in many states with expired moratoriums have continued suspending disconnections for non-paying customers on a voluntary basis. …regulatory authority of a commission varies by state. In most states, utility commissions do not have regulatory authority over cooperative and/or municipal utilities.”
Now one op-ed asks, Delinquent electric bills from the pandemic are coming due – who will pay them? (image right) That question is from Theodore J. Kury, Director of Energy Studies, University of Florida. More on his answers in a bit.
Families with payment delinquencies are estimated to owe close to $800 now on the utility bills. “By the end of winter, that could rise up to $1,700,” says Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. “So at the end of March, since all signs point to a continuing weak economy, there could be millions of families owing more than a year’s worth of energy bills.” There is $24 billion in debt now and by March, that number could nearly double. (Source)
Delinquent payment issues are significant, too:
- In Wisconsin 31.3% of customer accounts were in arrears as of August compared to 12.2% same time last year.
- In Michigan the two biggest utilities have reported that between 38-47% of customers are behind on their bills.
- By the end of October 82 million households (68%) were expected not to have shutoff protections.
- 11 million of those households were below the poverty line before the pandemic began this year. About 10 million unemployed people live in those states.” (Source)
Kury’s op-ed says there are four scenarios for handling this family utility debt. Here are snippets of the op-ed.
- Charge the delinquent customers. The first and probably most straightforward option is to directly assign debts to the customers that incurred them, usually through an additional charge on their future utility bills over the next 12 to 24 months.
- Charge all ratepayers. Utilities work differently from conventional businesses that can set prices at whatever they think customers are willing to pay. Because utilities are delivering services that are deemed essential, they report to state utility commissions or local regulators. These authorities decide which costs of providing electricity or water are ultimately included in the rates that customers pay. (Note from ECC: Co-ops or public power systems are typically on their own, though they may shadow what regulated utilities do.)
- Turn bills into bonds. Some states have talked about securitizing these unpaid charges. This means taking a set of assets that can’t easily be converted into cash and turning them into a financial product.
- Make utilities take the hit. Some advocates argue that utilities should foot the bill for customers who can’t pay during the pandemic. But neither governments nor corporations have money of their own: Governments get it from taxpayers, and utilities get it from their customers and investors.
The op-ed goes on about point 4: “On the surface, requiring utility investors to absorb the cost of unpaid bills might seem like a clever way to protect customers. But the reality is far more complicated. First, as data from North Carolina show, a significant number of people in arrears are customers of municipal utilities, which are owned by cities and states, or cooperative utilities that are owned by their customers. These types of utilities don’t have outside equity investors whom they can ask for money to cover unpaid bills.”
Here’s a twist: Deregulated electric companies do not have the same oversight as a regulated utility when it comes to customer protection. The state public utility commissions have some say for free-range providers, but not like a fully regulated system. Processes differ by state.
Texas has unregulated retail sales of power. The state has had headlines for some pricing and supply issues over the past several years. Its public utilities commission placed a surcharge on all electric bills to help cover the problem, extending it to companies that are “sales-only” electric providers. (In other words, they are not true utilities.) The Texas plan adds a $0.33/megawatt hour rider charge by transmission distribution utilities (TDUs).
Even in tough times, businesses must bring in cash to operate. Reliant Energy sells electricity in Texas. It notes that not every disconnection is a result of COVID “’We do have to move forward as a business,’ said spokeswoman Megan Talley. ‘That being said, we are certainly being very supportive of our customers that need help, especially when it’s related to COVID or they’ve been laid off.’” (Source)
Delinquent electric bills from the pandemic are coming due – who will pay them? Good question. Electric consumers can expect a debate in each state between state regulatory, elected officials, and utility officials. That’s the “who.”
The “what” that has to be debated is about how to recognize genuine family financial needs and the need for strong electric power organizations increasingly called on to make significant investments for the future.