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Consumer advocates suggest forgiveness for unpayable utility-bill arrears

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Consumer advocates suggest forgiveness for unpayable utility-bill arrears

In light of all the other outstanding debts many U.S. residents and businesses are accruing during the coronavirus pandemic, some consumer advocates are suggesting that utility bill amnesty may be necessary once people no longer have disconnection moratoriums in place to shelter them from the consequences of unpaid arrearages.

"We need aggressive arrearage management programs that recognize that utility service is an essential commodity, that it is not just a public interest good but a human right product," Public Citizen Energy Program Director Tyson Slocum said in an interview. "While, of course, it is reasonable and fair to expect people to pay for those services, when you are in extraordinary times, that calls for extraordinary protections."

Already, customers prioritizing those bills in the coming months seems unlikely, especially at a time when mortgage payment delinquency rates recently reached a four-year high.

Utility bills tend to be deprioritized in times of financial hardship, as indicated by a national energy assistance survey conducted for the National Energy Assistance Directors' Association in 2018. Of 624 people who receive funds from the federal Low Income Home Energy Assistance Program, or LIHEAP, 49% reportedly "skipped paying or paid less than their entire home energy bill" in the prior 12-month period.

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The survey also found that 15% of the responding LIHEAP recipients reported that their electric or natural gas service had been shut off in the previous year due to nonpayment. That marked an increase of four percentage points from 2011 when the survey was last conducted.

Slocum noted that federal stimulus checks have allowed some to keep up with their payments thus far, despite COVID-19. However, Slocum said that unless more funds are approved, we have "got a situation where some of the financial support that the federal government has been providing families is not going to be there, but people's bills are not going away."

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

And residential utility bills are likely to be higher than usual right now, given that many people are spending far more of their time at home. Utility ratepayers in cities such as New York and Philadelphia may see their bills rise as much as 15% this summer over what they normally pay during the season, according to a recent report by Arcadia, an energy and analytics company.

National Association of Consumer Advocates Executive Director Ira Rheingold said utility invoices "are not always the first bill that people should pay."

Rheingold said rent or mortgage should always come first as programs such as LIHEAP are available to assist people with their gas and power bills, and utilities must follow certain codified procedures before shutting off service.

State moratorium extensions are not universal

Utility disconnection moratoriums were instituted in many states soon after the pandemic began in order to provide yet another lifeline for struggling households.

While some states, including Texas, Maryland and Wisconsin, extended their disconnection moratoriums when they initially expired, according to a map published by the National Association of Regulatory Utility Commissioners, many already have expired or were voluntary from the start. For example, the Nebraska Public Power District resumed implementing bill collections and late payments Aug. 1, although the utility said in a news release that it will "work with each customer on their individual situation, including developing a repayment plan to suit them ... to get current with their bill."

Rheingold, however, believes that the end to some disconnection bans may be coming too soon.

"Unfortunately, I think a moratorium is going to need to be in place until maybe [there are] some indicators that it can end," said Rheingold, who suggested that lowered unemployment figures could serve as such an indicator. "And even then, there need to be expansive programs for people who simply are not ever going to get their jobs back."

Missouri Public Service Commissioner Maida Coleman also thinks that the moratoriums should be extended for the immediate future, even if she knows "they can't go on forever, of course."

"We've got to get back to some type of normalcy," Coleman said.

Reasonable payment plans are 'all relative'

Even if those moratoriums are extended further, they eventually will end. And when they do, whether and how customers with monthslong utility arrearages will be able to dig themselves out from under their debt remains unclear. Some advocates have said budget billing, which is the practice of charging a regular fixed amount calculated by looking at average annual usage, could help customers. Others have suggested that reasonable repayment plans may involve giving customers 24 months or longer to pay off their accumulated debt.

But a payment plan that is fair to one person may not always be fair to another, Coleman said, noting that she understands that concept from her experience as a single mother of three who had lost her job and relied on government financial support programs for a period to make ends meet.

Now, as a utility regulator, Coleman said she knows "it's all relative."

"When it comes to reasonable, I really have concerns," Coleman said, explaining that she hopes that utilities will be "a lot more flexible now ... than ever" because repayment plans "may not be the best help they can give a customer."

Should outstanding bill amnesty be on the table?

Given the current high unemployment rates, some form of bill-paying amnesty at least should be considered, according to certain consumer advocates.

"If people are going to be out of work for six months, and we're not providing them with any social safety net and the utility bills are going to [accumulate to] $1,000 ... and they're supposed to pay that back over a period of time, it may not be possible," Rheingold said. He suggested that state utility boards, as well as city and state governments, "consider ... requiring amnesty and then building some sort of subsidy into utility companies to sort of cushion the loss that they suffer."

When asked about bill-paying amnesty, Tanya McCloskey, the acting consumer advocate for Pennsylvania, said in a July interview that her state had "not moved to that yet."

"But I think it has to be a part of what we talk about," she said, adding that "all of these [consumer protection] measures need to be on the table for discussion."

Slocum backed the idea of amnesty, saying "anything is financially feasible" and noting that the national debt currently amounts to trillions of dollars.

But Coleman said that as a state regulator, she "would not want to put [her] toe in that arena," suggesting that the question of amnesty would be best left to legislators.