Unpaid Utility Bills Soar, as Does Need to Protect Black and other Vulnerable Ratepayers

11 Mar 2021

Private and public utilities across the country are grappling with the pandemic-driven surge in unpaid utility bills. In California alone, arrearages from last February through December exceeded $1 billion for the private utilities, more than double pre-pandemic levels.

“Clearly the energy crisis was already staring us down before the pandemic,” Gabriella Sandoval, The Utility Reform Network director of strategic investments, said. The problem of unpaid utility bills “is structural and systematic,” she said during a March 10 meeting of the Power Association of Northern California on the pandemic and utility bill crisis. Addressing the inequity of the arrearages, as well as power shutoffs, is critical, she added. “Blackness is the single most significant predictor of a shutoff.”

Another 38 states are wrestling with how to cover this gaping income hole while avoiding driving struggling customers further into the red.

Utility Disconnection Moratoria by State–Current Status

Source: National Regulatory Research Institute

Many state regulators and lawmakers are seeking “soft landings” for customers, including plans to repay the money stretching from six months to three years, according to Elliott Nethercutt with the National Regulatory Research Initiative.

Some state regulatory commissions and cities have returned customer deposits, expanded eligibility for low-income assistance and postponed bill increases, including the City of Redding. Redding has seen a 446% increase in unpaid utility bills the last year, soaring to nearly $3.2 million, utility director Don Beans said. 

The state of Washington went further; it refunded increases that had appeared on customer bills.

Repayment plans

The California Public Utilities Commission is weighing a move that includes both a two-year repayment plan, and $200 bill forgiveness for customers who have unpaid bills totaling $1,000 or more. In addition, the state legislature approved a bill last fall, AB 913, allowing the private utilities to recover missing payments with ratepayer-backed bonds. This securitization is less expensive than traditional utility financing.

Most states have prohibited power shutoffs due to non-payment, because of pandemic-caused hardships, including job losses. Last March, 26 states approved shutoff moratoriums. In April, the CPUC was among four states that also prohibited shutoffs. That was extended to the end of June 2021.

In June 2020, at the urging of TURN, the CPUC ordered the investor-owned utilities to cut the number of shutoffs in half by 2024. The approval, requested in late 2018, also prohibits the utilities from requiring deposits and adding reconnection charges. They also must provide payment plans for impacted low-income customers.

The challenges of tracking pandemic expenses

In California and many other states, utilities are required to track their pandemic-related losses. But determining which are legitimate utility expenses caused by the pandemic versus business as usual is challenging for regulators. That is largely because there is no comparable baseline, noted NRRI’s Nethercutt. NRRI is the research arm of the National Association of Regulatory Utility Commissioners. He said one way to address that issue is to hire a third-party auditor.

Other issues to be resolved include the amount of allowable cost recovery, and how long to allow utilities to recover the arrearages.

The speakers also addressed the current inequity in California of fixed costs being folded into energy consumption. The more energy used the higher the fixed charges to cover a wide variety of policies and programs. But the fixed charge is unrelated to the amount of energy used.

When you buy groceries, no one expects your neighbors to pay your tab, Sandoval said. In place of strapping other ratepayers with the cost of the arrearages, as well as other rate drivers, she and others called for income-based taxes and other non-rate options. So too did others at a Feb. 22 CPUC hearing.

The utility can’t continue to be “the cash cow,” added Redding’s Beans.

Nethercutt pointed out the previous gas tax in California that was used to repair roads. He said a similar tax could be imposed to cover specific technologies, such as renewables and energy storage, in place of including the costs in fixed utility bill charges.

Elizabeth McCarthy

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