EEI panel urges utilities to seek soft landing as shutoff moratoriums end
The financial health of the electric utility industry has been relatively robust considering the ongoing coronavirus pandemic and its accompanying economic downturn, but customer arrearages resulting from moratoriums on power shutoffs are a growing concern that will require some deft management.
Utility executives and state regulators are also looking to Congress for support as they work out plans to chip away at delinquent accounts while keeping their customers in their homes.
“State regulators did not have to be prodded to make sure that customers were protected, but some (moratoriums) are expiring and some have already expired,” Brandon Presley, who concluded his tenure as president of the National Association of Regulatory Utility Commissioners (NARUC), said this week on a virtual panel discussion during the Edison Electric Institute (EEI) 55th Financial Conference.
“We all have to come out of this in a situation in which we are all financially sound,” said Presley, who also serves as commissioner for the Northern District of the Mississippi Public Service Commission.
When the stubborn virus began spreading in early spring, it was hoped that closing schools, offices, and other businesses for a few weeks would fend off a major health emergency. Most states in the nation implemented moratoriums for unpaid utility bills as scores of workers suddenly found themselves “furloughed” for indeterminant periods if not laid off permanently.
But as moratoriums in several states begin to expire, the delicate job of collecting on overdue accounts falls on utility companies that have been carrying the debt load for longer than expected. Utilities are urging their customers to set up payment plans so they can begin paying their bills over a period of time, and also apply for aid through state assistance programs.
The National Energy Assistance Directors Association said in October that an estimated “tens of millions” of Americans were at risk of electric and gas utility disconnections as moratoriums expire. And with winter heating season knocking on the door, there is the possibility that these protections will be extended for a few more months, adding more burden to utility finances. The lingering effect of supplying energy to customers who aren’t paying or are behind on their bills has a trickle-down effect on cash flows, which can become a liability when utilities seek out new capital from Wall Street.
Congress and the outgoing Trump administration has the opportunity to ride to the rescue by increasing funding for the Low Income Home Energy Assistance Program (LIHEAP), and they did boost the program by some $2.4 billion in the spring. However, another $4.5 billion was included in the update of the wide-ranging COVID-19 relief bill that has stalled in the Senate.
“It is important for Congress to come together and address these challenges,” said Lisa Barton, executive vice president of Utilities at American Electric Power. “We do need to look at state-specific initiatives.”
Utility leaders are not anxious to start shutting off gas and electricity for nonpayment, but that doesn’t mean the bad debt is going to disappear and rebalance the books.
“We need to be cautious as we go forward,” said Diane X. Burman, a commissioner of the New York State Public Service Commission, “There is growing debt from not paying those bills, so we have to work with customers and businesses that aren’t able to pay.”
So far, there has been an encouraging number of strapped customers who have entered into payment plans.
