By Andrea Jakubas

This post is part one of a three-part series discussing three avenues for reducing the “uncollectible burden”–the inability of people to pay their utility bills during the COVID-19 pandemic. Part one examines government grants and policy; part two will examine incentivizing and changing consumer bill-paying behavior, while part three will discuss clean energy initiatives that promote efficiency and reduce consumption.
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In pre-pandemic times, if utility customers did not or could not pay their bills, the company could generally disconnect their service. But in response to the COVID-19 emergency, many states have issued moratoria against such utility shutoffs for nonpayment,[1] recognizing both that utilities are vital to human health and well-being and that customers are facing daunting levels of unemployment and decreased ability to pay their bills.

These shutoff moratoria are necessary but raise an additional problem: how bills will ultimately be paid. Generally, uncollectible accounts are “socialized” across utilities customers. The rate paid covers not only the customer’s direct consumption but also administrative costs, including other customers’ nonpayment. As the pandemic—and orders against utility shutoffs—drag on, the mountain of “uncollectible” debt will continue to grow, and there are no clear answers on how (and by whom) bills will ultimately be paid.

Pre-Pandemic Government Funding and Programs to Address the Uncollectables Problem

State and federal programs established before and during the pandemic have helped some customers reduce their debt.

Utility bill affordability was an issue long before the current pandemic, especially in lower-income homes. Now, during the pandemic, low-income individuals are more likely to have lost their jobs and are more concerned about being able to pay their bills, with only 23 percent of lower-income families reporting that they have enough emergency funds to last three months.[2]

The Low Income Home Energy Assistance Program (LIHEAP) is a federal grant program that provides states with funds to help low-income families pay for energy.[3] To qualify in Illinois, applicants must already be enrolled in a social service program such as the Supplemental Nutrition Assistance Program (SNAP) (commonly known as the food stamp program) or have an income that is 150 percent below the federal poverty line.[4]

Recognizing that low-income families pay a higher percentage of their income on utility bills—the poorest citizens pay about 30 percent of their income on home energy bills—[5] the Percentage of Income Payment Plant (PIPP) uses LIHEAP funds to help stabilize payment year-round at 6 percent of the customer’s income.[6]

But these programs cannot cover all bills, even before COVID-19. In Illinois in 2019, for example, 1,035,750 households were under the 150% federal poverty line, yet the allocated LIHEAP funds for Illinois “covered” just 194,570 heating and cooling bills for that year.[7]

COVID-specific Grants and Programs

One provision of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act provided most individuals with a $1,200 one-time payment.[8] This money could be spent without restriction, yet more than half of the individuals receiving it said they would use it to pay bills or for something essential.[9]

However, because unpaid utility bills will not result in a shutoff in most states, customers probably spent the funds on other essentials, such as on food. With no end in sight to the pandemic or the high unemployment rates, and without continued monetary support, the federal government is unlikely to play a major role in reducing the uncollectible burden. Further, as a purely intrastate issue, utility payment and debt are matters left to the individuals states, not to the federal government.

State public utility commissions (PUCs), then, will bear the brunt of the responsibility in reducing the uncollectible burden—and in fact, states oppose federally mandated debt collection requirements.[10] Justifiably, however, most utility shutoff moratoria are focused on the immediate needs of the consumers facing shutoff but not necessarily making sure that bills are continued to be paid.

PUCs can still ensure that customers will not be overly burdened with additional costs, which would only exacerbate the amount of uncollectible debt (because bills would be even more difficult to pay). For example, the Indiana Utility Regulatory Commission denied utilities’ request to recover their lost revenue due to decreased energy demand from ratepayers during the pandemic.[11]

With resources already stretched thin before the pandemic, state and federal government programs alone will not fully address the problem, although they can help mitigate the worst effects. Addressing consumer bill-paying behavior and creating green energy incentives, which will be addressed in the next two parts of this three-part series, can also help.
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The author was a Legal & Policy Intern under Chairman Carrie Zalewski at the Illinois Commerce Commission in 2020. Thanks to Alex Bai & Tanya Rabczak, Legal & Policy Advisors to Chairman Zalewski, for their guidance in writing this series.

[1] Map of Disconnection Moratoria, Nat’l Ass’n of Reg. Util. Commissioners, https://www.naruc.org/compilation-of-covid-19-news-resources/map-of-disconnection-moratoria/ (last visited Oct. 16, 2020).

[2] Kim Parker, Juliana Menasce Horowitz & Anna Brown, About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19, Pew Res. Ctr. (Apr. 21, 2020), https://www.pewsocialtrends.org/2020/04/21/about-half-of-lower-income-americans-report-household-job-or-wage-loss-due-to-covid-19/.

[3] LIHEAP Fact Sheet, U.S. Dep’t of Health & Hum. Servs., https://www.acf.hhs.gov/ocs/resource/liheap-fact-sheet-0 (last visited Oct. 16, 2020).

[4] Illinois HEAP, http://www.liheap.us/illinois-heap/ (last visited Oct. 16, 2020).

[5] Fisher, Sheehan & Colton, The Illinois Home Energy Affordability Gap 1 (2020), http://homeenergyaffordabilitygap.com/03a_affordabilityData.html.

[6] Percentage of Income Payment Plan, https://www.illinois.gov/publicincludes/statehome/gov/documents/07%2010%2009%20SB%201918%20FINAL%20PIPP%20fact%20sheet.pdf.

[7] Fisher, supra note 5.

[8] S. 3548, 116th Cong. (2020).

[9] Parker, supra note 2.

[10] National Association of Regulatory Utility Commissioners, Letter re: Federally Mandated Debt Collection Requirements and Service Disconnection Moratorium (Apr. 20, 2020), https://pubs.naruc.org/pub/F436AF40-155D-0A36-31D9-147BB69E6674.

[11]Indiana Regulators Deny Utilities’ Bid for Virus Relief, WTHITV-10 (June 29, 2020, 1:06 PM), https://www.wthitv.com/content/news/Indiana-regulators-deny-utilities-bid-for-virus-relief-571545591.html.