When Half a Loaf is Enough: What Utilities Dont Know Can Hurt Them

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When Half a Loaf is Enough What Utilities Dont
Know Can Hurt Them

• Wally Nixon, President
• Agents of Change, LLC
• Presented at the New Beginnings Conference
• Coalition to Keep Indiana Warm
• Indianapolis, Indiana
• October 11, 2005

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A modest proposition Utility companies too
often do not know enough about the overall costs
and benefits of low-income energy assistance.
Hence they underestimate the importance and value
to all customers and company shareholders of
programs that keep service connected for
households in need. Advocates and provider
agencies can help utilities learn how energy
assistance programs can increase revenues, reduce
costs and improve customer service.
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Affordability Program Types

• Federal (LIHEAP, WAP, and others)
• State/Local funds (utility public benefit
  charges, taxpayer-supported usage reduction
  programs)
• Regulatory programs (rate discounts,
  percentage-of-income payment plans, innovative
  energy efficiency initiatives like PAYS)
• Charitable programs (fuel funds)
• Internal utility initiatives (credit
  collections policies and programs, arrearage
  forgiveness, credit counseling, etc.)

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Some things utilities often dont know

• Who their low-income and working poor customers
  are. (Lack of segmentation research, concern
  over privacy issues, unsubstantiated myths about
  who are bad pay customers without this
  information, it may be easy to lump LI customers
  in with the so-called deadbeats who are often
  said to cause high un-collectibles and
  write-offs).
• The fact is, most low-income customers
  especially the elderly -- pay their bills, on
  time, in full, and without causing the utility to
  incur costly collection expenses. In short, they
  are a profitable segment to serve too
  frequently at the expense of their health,
  medicine, comfort, or nutrition.

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Market research can help companies target
assistance programs

• Through research conducted by LSU in 2004 Entergy
  determined that its low-income customers,
  especially the elderly, had better payment
  records and fewer un-collectibles than other
  residential customer segments.
• Some utilities dont know enough about the income
  levels and payment behaviors of their
  NON-low-income bad pay customers who are cost
  causers. Many are younger, middle-income families
  who have taken on too much consumer debt and
  cant/dont/wont pay their utility bills on
  time.

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Some things utilities often dont know

• How few of their eligible LI customers actually
  receive any kind of assistance (Since typically
  chronic and worsening funding inadequacy, many
  utilities do not know the income status of 88 of
  their low-income customers)
• How much revenue the company receives from LIHEAP
  and how much more would flow to the bottom line
  if federal funding were increased. (Confront and
  dispel concerns about corporate welfare)
  Indiana energy providers received 53.9 million
  in LIHEAP in 2005, enabling assistance to 126,510
  households.
• What it costs the company to pursue bad debt and
  uncollectibles, to disconnect and reconnect
  customers vs. the benefits of avoiding those
  costs through LI programs

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More things utilities often dont know

• How many of their bad pay customers who are
  disconnected for nonpayment are able to evade
  collection through fraudulent restoration of
  service under another name. Collection
  activities and costs are thus incurred in pursuit
  of dollars that may be written off anyway.
• Story and moral Learn how to stop squeezing
  the greens
• How much weatherization and usage reduction
  measures could improve the payment performance of
  their low-income and working poor customers who
  live in sieves.

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Some things utilities often dont know

• How much it costs to futilely pursue collections
  from turnips and whether the company would be
  better off with half a loaf collected from
  customers kept on the system under a rate
  discount, PIPP, credit counseling, or arrearage
  forgiveness plan.
• Whether they are actually able to collect late
  fees (where applicable) and reconnection fees
  from low-income customers who truly lack the
  ability to pay. Since many companies dont have
  good data about who is poor and who is not, they
  cannot easily differentiate by income level
  those who have poor payment behaviors and cause
  the company to incur collection costs.

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What can be done to boost the appeal of
affordability programs?

• Recognize that lack of knowledge of the costs and
  benefits of improving service to the LI customer
  base and improving their payment behavior can be
  an excuse for doing too little to provide energy
  assistance for those in need.
• Providers and advocates can educate utilities
  about their low-income and working poor
  customers who they are how many there are
  what their needs and options are how much
  revenue they contribute what would make them
  better, more valuable customers what it costs to
  serve them what it costs to NOT serve them.

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Options Utilities Should Consider

• Start a low-income initiative
• Engage people in affected company departments
  Credit Collections, Regulatory, Governmental,
  Customer Service, Community Relations, Public
  Affairs, Corporate Social Responsibility,
  Communications
• Assess the costs and benefits of improving energy
  affordability
• Partner with agencies to lobby for increases in
  funding at all levels and help educate regulators

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Available Options for Utilities

• Use communications to dispel the myths that are
  obstacles to effective assistance by educating
  executives, employees, regulators, legislators,
  policy makers, and the public at large about the
  immense unmet need for help and how closing that
  gap can provide mutual benefits to the companys
  bottom line and all of its customers.

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Recommendations for utilities

• Join, support and become active in NLIEC, NFFN
• Energize your credit collections groups to find
  the true costs and benefits of LI programs
• Learn how LIHEAP and WAP are win/wins for
  customers and utility shareholders lobby for
• Support state/local program initiatives through
  legislation, regulatory action, charitable giving
• Get to know your low-income and working poor
  customers what they have what they need what
  they contribute what would make them better
  consumers
• Work closely with coalition partners to figure
  out ways to avoid squeezing the greens