Industry Insights
Utility Under-Collections During COVID-19: A National Crisis that Congress Must Address
August 27, 2020
As summer temperatures rise and the economy cools, millions of Americans are out of work and struggling to pay their utility bills. In many parts of the country, air conditioning is not a luxury, but a matter of life and death, especially for our most vulnerable populations.
To their credit, most utilities have voluntarily suspended shutoffs to customers for non-payment during this pandemic. Additionally, most state public service commissions have instituted moratoriums on economic shutoffs, but as the summer progresses, some of those initial moratoriums are reaching full term and are not being extended.
As a result of these voluntary or state-mandated moratoria, utilities across the nation are facing an ever-growing deficit in their receivables – i.e. under-collection. This is straining their balance sheets and risks putting a financial burden on their other ratepayers at a time when revenues for utility services are already struggling. In some cases, these under-collections have reached acute levels.
The National Association of Clean Water Agencies, which represents water utilities, estimates that the magnitude of their members’ accounts in arrears during the pandemic could reach $366 million nationwide. One utility in the Mid-Atlantic told their state commission that in the first three and a half months of the pandemic, their under-collections from electric customers totaled more than $116 million. And in the span of just a month, a California utility saw an increase of nearly 150,000 customers who have fallen behind on bill payments. Clearly, this is a national crisis that warrants congressional action.
One existing federally funded program that is being discussed on Capitol Hill as a means to help utility customers during this pandemic is LIHEAP (Low Income Home Energy Assistance Program). LIHEAP is a federal block grant program that provides financial assistance to the states to help low-income families with energy-related bills and home repairs. This critical program provides heating and cooling assistance to the nation’s most vulnerable populations in times of need.
In normal years, LIHEAP receives roughly $3.4 billion in funding from the federal government, which is allocated to the states based on need and population. Earlier this year, Congress passed the CARES Act (COVID-19 relief) which provided an additional $900 million in supplemental funding for LIHEAP. Good… but not enough.
State LIHEAP directors across the country are urging Congress to include $4.3 billion in LIHEAP funding in the next phase of COVID-19 relief legislation, which is expected in September. In a recent letter sent to Senate and House leadership, seven energy industry trade associations urged Congress to fully fund LIHEAP at a level of $5.1 billion. We concur.
In the regulated utility world, there are not many issues that unite state regulators, consumer advocates and utilities, but LIHEAP funding assistance for low-income customers is one of them – during normal times and especially during times of national crisis. No one should be forced to make the difficult choice between paying their utility bills or buying groceries.
At Itron, we support our customers’ customers and their regulators, and we urge Congress to provide supplemental LIHEAP funding in the next phase of COVID-19 relief legislation. Additionally, Congress should consider authorizing a LIHEAP-like program for water and wastewater customers.
To their credit, most utilities have voluntarily suspended shutoffs to customers for non-payment during this pandemic. Additionally, most state public service commissions have instituted moratoriums on economic shutoffs, but as the summer progresses, some of those initial moratoriums are reaching full term and are not being extended.
As a result of these voluntary or state-mandated moratoria, utilities across the nation are facing an ever-growing deficit in their receivables – i.e. under-collection. This is straining their balance sheets and risks putting a financial burden on their other ratepayers at a time when revenues for utility services are already struggling. In some cases, these under-collections have reached acute levels.
The National Association of Clean Water Agencies, which represents water utilities, estimates that the magnitude of their members’ accounts in arrears during the pandemic could reach $366 million nationwide. One utility in the Mid-Atlantic told their state commission that in the first three and a half months of the pandemic, their under-collections from electric customers totaled more than $116 million. And in the span of just a month, a California utility saw an increase of nearly 150,000 customers who have fallen behind on bill payments. Clearly, this is a national crisis that warrants congressional action.
One existing federally funded program that is being discussed on Capitol Hill as a means to help utility customers during this pandemic is LIHEAP (Low Income Home Energy Assistance Program). LIHEAP is a federal block grant program that provides financial assistance to the states to help low-income families with energy-related bills and home repairs. This critical program provides heating and cooling assistance to the nation’s most vulnerable populations in times of need.
In normal years, LIHEAP receives roughly $3.4 billion in funding from the federal government, which is allocated to the states based on need and population. Earlier this year, Congress passed the CARES Act (COVID-19 relief) which provided an additional $900 million in supplemental funding for LIHEAP. Good… but not enough.
State LIHEAP directors across the country are urging Congress to include $4.3 billion in LIHEAP funding in the next phase of COVID-19 relief legislation, which is expected in September. In a recent letter sent to Senate and House leadership, seven energy industry trade associations urged Congress to fully fund LIHEAP at a level of $5.1 billion. We concur.
In the regulated utility world, there are not many issues that unite state regulators, consumer advocates and utilities, but LIHEAP funding assistance for low-income customers is one of them – during normal times and especially during times of national crisis. No one should be forced to make the difficult choice between paying their utility bills or buying groceries.
At Itron, we support our customers’ customers and their regulators, and we urge Congress to provide supplemental LIHEAP funding in the next phase of COVID-19 relief legislation. Additionally, Congress should consider authorizing a LIHEAP-like program for water and wastewater customers.