By Andrea Jakubas
This post is part two 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 examined government grants and policy; part three will discuss clean energy initiatives that promote efficiency and reduce consumption. This post discusses how incentivizing and changing consumer bill-paying behavior could help address the uncollectibles problem.
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, 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.
Changing bill-paying behavior requires first that customers have at least some ability to pay their bills, but there are several options to help bills become more manageable.
Deferred Payment Arrangements
A deferred payment arrangement (DPA), for example, allows the customer to pay later for services used now. It does not waive the customer’s obligation to pay; rather, it allows them more time to pay their bills, often with at least part of the past due amount due each billing cycle.
This arrangement may work for short term problems, such as a sudden job loss. But with high unemployment rates and an economic recession making it uncertain when or if customers can pay their bills, a DPA may not be very useful in the long term. Further, once the DPA time limit is up, customers often need to pay the whole sum, which is daunting, if not impossible, for some customers.
DPAs are included in many state Public Utility Commissions’ provisions for customer relief during COVID-19. At least 20 states have included provisions for DPAs or other flexible payment options. Illinois provides for DPAs of 18-24 months—hopefully a sufficient period that will allow customers to get back in a position ready to pay. However, if disconnections are also suspended, then customers may not enroll immediately in deferral programs, opting instead to not pay at all.
Flexible Payment Cycles
Traditionally, utility bills are charged to customers on a monthly basis, with payment for an entire 30-day period due at once. For some customers, this is too much at one time.
More flexible payment cycles and the ability to make payments when customers have extra funds may be one way to whittle down debt in a manageable way. One company, PayGo, offers both prepaid utility services (so customers don’t overuse) and the ability to pay on a daily billing cycle, as an alternative to one large bill received at the end of the billing cycle. Both of these options require smart meters, which provide real-time consumption details.
A move away from a traditional payment schedule can be especially helpful to workers who are not paid on a regular schedule. For example, drivers working for the ride service Lyft receive payment after each ride. Utilities should consider offering alternatives to monthly billing, because paying in smaller, more frequent installments is one option to make customers’ amount of debt more manageable, which in turn reduces the uncollectible burden.
Unlike deferred payments, which kick the proverbial can down the road for customers to deal with later, debt forgiveness is a way for customers to start anew. Ameren Illinois, for example, introduced their Fresh Start program in response to COVID-19. The program offers income-eligible customers a credit of up to $700 on their accounts.
Of course, debt forgiveness requires either utility funding for the program, or the ability to recover costs from other programs like government grants. But wiping out large amounts of debt for some customers can help them get back on track to regular payments, reducing the total amount of uncollectible debt going forward.
Changing how and when customers pay their utility bills can help customers get on track to make more regular payments, and to reduce the amount that will ultimately be socialized across other customers.
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.
 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) [hereinafter Map].
 Order, Illinois Commerce Commission (No. 20-0309), https://www.icc.illinois.gov/docket/P2020-0309/documents/300566.
 How PayGo Works, PayGo, https://www.paygoutilities.com/why-paygo/how-it-works/ (last visited Oct. 16, 2020).
 COVID-19 Economic Hardship Recovery Program, Ameren, https://www.ameren.com/illinois/residential/energy-assistance/recovery/financial (last visited Oct. 16, 2020).