Moratoria preventing utility shut-offs for Americans impacted by COVID-19 are expiring Nationwide. The deferred payments were critical for many to stay afloat in the months since the onset of the virus, but many Americans are in no better a place now than when it started. Leaving the lingering question— how can utilities recover the upwards of $40 billion owed?
It’s estimated that 51% of the Nation’s residents are covered by either a state-mandated or utility-sponsored moratorium that suspends shut-offs for non-payment through the end of January. Data from the National Energy Assistance Association (NEADA) indicates residents could owe as much as two thousand dollars in back utilities at a time when their monthly bills are increasing due to the need for winter heat. Considering that many of these same residents are still experiencing financial hardship due to illness or unemployment, concerns are being raised over plummeting millions of Americans into debt that they may never be able to pay off.
But the mounting debt isn’t the only concern for residents. If the revenue cannot be recovered utility companies across the Nation could have no choice but to hike rates – exacerbating the issue of affordability while potentially creating a regulatory storm. This puts utility companies in a compromising position; they don’t want to alienate customers or disconnect anyone’s power, a move that impacts revenue as well as residents, but they must have the revenue to function. Stifled revenue creates a trickle-down effect that impacts the quality and reliability of power delivery, delaying maintenance, and upgrades to power grids, resulting in higher costs for customers.
A number of options are being discussed though none pose a perfect solution. The losses could be translated to everyone paying for utilities placing the burden on customers or to investors depending on the structure of the utility. Profits from the sale of state-secured bonds could be diverted to cover the costs incurred during the pandemic but due to their impact on taxes are not likely a popular choice. Transition bonds, or securitization, has already been used in multiple states to cover the impact of things like the California wildfires, or a transition to clean energy. Yet another option would take the form of a Federal bail-out, potentially tied to another COVID-19 stimulus bill – regardless of the method of repayment, the debt will still fall on the shoulders of customers sooner or later, be it on the front-end as service charges or the back-end via taxes.
Some utilities have already chosen to take matters into their own hands. Rather than wait for government intervention, many are taking pains to refer, enroll, or develop assistance programs for their residents. The Low-Income Home Energy Assistance Program (LIHEAP), a federally funded block grant program that provides assistance to qualifying residents in the form of partial payment, is available to those in all 50 states. Strategies from some of the in-house programs being developed by individual utility companies include offering income-qualified bill credits or donation-funded assistance in the form of one-time payouts to residents in need.
Of course, you could still simply have the residents pay what they owe —
The idea of parceling out the debt that customers incurred in the duration of the pandemic over a 12-24 month period on their future bills is also on the table. While it is not a quick fix for revenue recovery, this strategy may help to ensure utilities can anticipate revenue more accurately post-pandemic allowing for better budget planning and resource allocation. The challenge then becomes waiting for residents to return to a place of financial stability in order to be capable of taking the debt, however small. In this instance, utilities may benefit from a financial service partner that already has the resources and established processes in place to manage customer tracking on this scale—
That is, recovering approximately a quarter of what households spent on electricity nationwide last year.
With Professional Credit, utility clients benefit from over 85 years of experience, top-tier industry technologies, and a collection philosophy focused on maintaining positive consumer relationships. Our proprietary robust monitoring tool evaluates accounts daily and triggers follow-up when consumers’ financial situations have improved their ability to pay.