Utilities Challenged by Shortfall From Unpaid Bills

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As many as 179 million Americans are at risk of losing utility services as the country heads toward winter, and electric and gas utility companies are looking at $24.3 billion in unpaid bills, according to an analysis released Oct. 1 by the National Energy Assistance Directors' Association (NEADA).

Many utilities at the start of the COVID-19 pandemic suspended service shutoffs and allowed customers to continue receiving electricity, gas, and water despite non-payment of bills, as states quickly recognized the economic fallout of the coronavirus. The pandemic resulted in millions of lost jobs and an unemployment rate not seen since the Great Depression. At present, though, just 21 states and the District of Columbia have bans on disconnections in place.

This map shows the actions taken by states regarding moratoriums on utility bill payments. Courtesy: National Association of Regulatory Utility Commissioners

The NEADA tracks utility data. The group and others who look at state regulatory commissions said Thursday that utility customers in nine more states will lose their non-payment protection beginning Oct. 1, and continuing through the next several weeks as utilities begin restarting service shutoffs. NAEDA in its number of at risk" utility customers includes those in states who no moratorium on shutoffs, meaning anyone who does not pay a bill could have their service disconnected.

Utilities usually do not disclose the number of customers who are behind on payments. Some utilities already have discussed raising rates, and some have put off infrastructure upgrades, as a way to offset some of their revenue shortfall. Industry analysts have said utilities also may need to lay off or furlough workers, much as other companies have done to weather the economic downturn.

Less Money for Grid Upgrades

Bill Page, senior portfolio manager at Essex Global Environmental Opportunities Strategy, told POWER, Electric utilities overall have the balance sheets, rates and reserves to make it thru the COVID storm, even when considering the lower electricity sales in the past two quarters to commercial and industrial customers. However, an important trend that utilities need to contend with ... is the fact that utilities need to spend on upgrades given demographics and clean-tech disruption."

Page said utilities already have staffing issues, due to shifts in demographics with retirements of staff, [and] with a shortage of qualified engineers for hire. We believe a spending cycle is at hand for advanced meters, management diagnostics. and customer interface analytics. Importantly, and as demonstrated by superstorms and wildfires, utility customers are increasing spending for edge-of-network generation assets such as solar, coupled in many cases with backup power generation and/or battery storage. This will further drive utility spending on analytics and services."

Khalil Shahyd, a senior policy advocate at the Natural Resources Defense Council, echoed Page's concerns about utilities' need to spend on upgrades, telling POWER, The impact on utilities is part of the reason why it's been difficult to enforce the shutoff moratorium, because utilities rely on customers to pay for and support the preservation of the grid. What we pay the utility helps support basic [electricity and gas] infrastructure."

Shahyd has said the impact of the pandemic on U.S. households brings the risk of a consumer debt time bomb," as moratoriums on paying bills expire and Americans face the choice of paying rent, mortgage, or for utility services. He said, You can't really underestimate the burden of that debt on families. It's also going to have wider ramifications for our economy and our ability to recover from this crisis."

As for utilities, Shahyd said revenue shortfalls present a serious threat, with much deeper and longer-term impacts, both for the utility and their solvency, and to all of us for reliable grid power. The longer this lasts, the longer that's a threat."

Unemployment Remains Concern

A recent survey by the U.S. Census Bureau found about a third of U.S. adults say they are having difficulty paying their usual household expenses. And while some workers have returned to their jobs, or found new ones during the pandemic, the federal government on Thursday reported 837,000 new unemployment claims for the past week. The Labor Dept., which released the September jobs report on Oct. 2, says more than 26.5 million Americans are out of work.

The Friday report showed an unemployment rate of 7.9%. The decline in the unemployment rate came along with a 0.3 percentage point drop in the labor force participation rate to 61.4%, representing a decline of nearly 700,000 jobs.

The NAEDA looked at utility regulatory filings in its analysis of data. As an example, in Wisconsin, about 30% of electric and gas utility customers missed payments in August, totaling $235 million, according to state records. That was more than double the amount for the same period in 2019, according to a presentation from a recent regulatory proceeding.

Wisconsin regulators in September extended a moratorium on shutoffs, with officials saying they do not want families, including students, stuck at home without utility service. The state's Public Service Commission (PSC) voted to extend the current moratorium on disconnecting the service of utility customers to Nov. 1, when the annual winter moratorium on cutoffs begins. That moratorium runs to April 15.

Rebecca Cameron Valcq, PSC chairwoman, told the Milwaukee Journal Sentinel that she and her two fellow commissioners are really in this kind of unenviable position of trying to strike the perfect balance between public safety and the continued financial health of our utility companies. From the smallest municipal water utility to the largest investor-owned utility, we are trying to strike this balance, and it is hard."

Tim Echols, a commissioner with the Georgia Public Service Commission (PSC), told POWER, We suspended disconnects here in Georgia for about four months. As we were making our decision about how to resume some sort of normalcy, our Commission tried to come up with the most flexible plan that we could. We decided that folks could take their arrearage, and pay that out over six months starting Oct. 1 and all late fees were waived."

Echols said that the state has charity programs that the PSC has directed millions of dollars toward to help low-income ratepayers: These organizations help the poor and put money directly onto their utility account," he said.

Shutoff Moratoriums Ending

Shahyd noted that Oct. 1 is the day many of the last shutoff moratoriums are set to expire. About 76 million households that do not have a moratorium in place are threatened, without state-mandated shutoff protections. This covers electric utility, natural gas, and water." Shahyd said that, Cumulatively, some estimates have shown that the debt that's being accrued is $6.5 billion to $7 million a month across electric, gas, water, and broadband internet."

Alison Alvarez, CEO of Blastpoint, a Pittsburgh, Pennsylvania-based data analysis company, told POWER that her group's predictive analytics enables various utilities such as Peoples Natural Gas and Duquesne Light to pinpoint households at the highest risk of defaulting on payments, so they can inform these households about available assistance programs. This is particularly important as the end of the shut-off moratorium' looms for residential gas customers.

For example, with Pennsylvania's poverty at around 12%, but the number of people accessing assistance programs at less than half that, it's clear that many people who are struggling with utility bills are eligible for relief," said Alvarez. She noted that a BlastPoint analysis of late customer payments throughout the pandemic shows that the more money a customer owes [or the more months that go by where no payment is made], the harder it will be for that customer to recover financially. On the other hand, if they can continue to make some payments to keep their overdue balances under about $300, they're more likely to survive pandemic-related financial setbacks. However, once a customer's balance tops $1K [$1,000], our data indicates they will be less likely to pay anything at all."

-Darrell Proctor is associate editor for POWER (@DarrellProctor1, @POWERmagazine).

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