CUSTOMER PAYMENT ASSISTANCE IN SMALL SYSTEMS
All of the strategies and practices identified in the business process model of customer payment assistance programs can be applied in small utility systems—with appropriate scaling to meet the inherently different circumstances. In fact, some practices may actually be much easier to apply in the context of a small community.
Much depends upon the both the size and demographics of a community. A small community has a smaller base across which to spread the costs of assisting others. Outside assistance from private or governmental sources can help to ease this burden. In cases where small community utility systems exist within pockets of extreme poverty, the case for outside assistance may be compelling.
In the course of this research project, the strategies and practices comprising the business process approach to customer assistance were presented to a seminar audience consisting of field representatives of the Rural Community Assistance Partnership from programs located in impoverished areas of Ohio, Kentucky, Wisconsin, Indiana, South Carolina, Michigan, New Mexico, and New Jersey. Compared to the 1-to-3% level of uncollectible utility bills reported as typical in the survey of water utilities summarized in Chapter 3, members of this group believed that the communities they serve sometimes face uncollectibles problems that are ten times as great, constituting a true threat to financial sustainability.
Where demographic factors allow, many small systems can succeed in applying the strategies and practices of the business process approach as appropriate to their circumstances. This chapter reviews the major components of the model from the perspective of application to small systems.
OBJECTIVES
While most of the organizational objectives of a customer assistance program are similar at small scale, a small utility is likely to have a more personal relationship with its customers. A small water system is a clear benefit to a community. Many rural residents in impoverished areas can still remember when there was no central water and sanitation service. As many as half a million people in impoverished rural areas still lack such basic services today (RCAP 2004).
One of the biggest differences in a small community is related to the old saying that everyone knows everyone’s business. Inability to pay utility bills can be an embarrassment to the customer and present the water system administrator who has to inquire about the missing payment with a sensitive task. By contrast, when a customer in a large city is confronted by a large and impersonal utility bill collection department, there is less at stake for the reputations of
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both the customer and the utility. In the anonymity of the big city environment, people do not feel as if their every move is being carefully watched and judged.
Another concern involves program implementation consistency. If word spreads that someone got a special break on paying their utility bill, others will want similar treatment or they will see things as unfair. But even when the small utility is as even-handed and fair as it can be in trying to resolve nonpayment issues, a single disconnection can provoke a backlash and spread an impression that the utility is unfair and uncaring to disadvantaged families.
Nothing can be done to alter the realities of small town life. On the plus side, there may be much greater opportunity to target or customize some types of assistance efforts because the smaller number of customers makes it more tractable to do so. Some highly effective practices that might only reach a fraction of the target subgroup of customers in a large city might reach a much larger proportion of a small community, partially because it is easier to identify program target recipients and conduct the needed outreach. In the end, the small utility wants to achieve the same objectives in customer assistance programs—to help people, to keep the utility sustainable, to give the utility a positive image, and to help the community.
STRATEGY 1—SHRINK THE BILLS
Conservation retrofits to reduce water consumption (Chapter 7) is a prime example of a practice that is very appropriate for a small utility system. If there are meters to indicate which customers have higher than average consumption, it is easy to target such customers for outreach. Unlike the big city, outreach does not have to be limited to an impersonal bill-stuffer promoting conservation. In a small town, it is possible to contact customers directly and talk to them about it personally. If installing conservation fixtures is impeded by constraints of household finances, subsidized assistance by the utility can be a good bargain since conservation retrofit has only a small fixed cost and produces a lasting impact on reducing bills and improving collections.
Customization of billing practices (Chapter 8) represents another tool that may be particularly appropriate under small system conditions. Some rural residents may be more likely to have seasonal variations in their water use and/or employment and income patterns. These factors can be accommodated with customized forms of budget billing intended to better align cost recovery with available household income. This may be a disadvantage to a small system that uses billing software with limited flexibility. However, manual handling of a targeted subgroup of accounts might not be too great a burden, especially if it offsets later collections activities.
As discussed in Chapter 9, bill discounts may not be legally feasible in all institutional settings. But where allowed, a small system may benefit from this approach and even find it easier to administer if the number of accounts involved is relatively small and eligibility is established through an established social services program.
Alternative rate structures discussed in Chapter 10 may require some upfront analysis to develop the best approach, but lowering the cost of water for essential uses can be beneficial and light on administrative burdens once established.
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STRATEGY 2—SHRINK THE OVERDUE CASELOAD AND ARREARAGES
As discussed in Chapter 11, an effective way to prevent problems of nonpayment of utility bills is to help make customers aware of other social service programs that can decrease their living expenses. This strategy can be even more effective in a small community where there is a manageable number of accounts and where personal appeals can be undertaken, in addition to mass communications.
Chapter 12 describes a number of approaches for effective intervention once a bill has gone past due. Many of these approaches can be adapted by small systems, but if the number of delinquent accounts is manageable, there is a better opportunity in a small system to rely more heavily on the personal touch, increasing the odds that assistance programs will actually reach those in need.
Crisis assistance programs discussed in Chapter 13 are a valuable component of an overall approach to assisting payment troubled utility customers. Crisis situations such as job loss or a major illness are often the reasons why low-income households get behind on utility bills. While resources for a crisis assistance fund may be relatively limited in a small community, other assistance programs may be available drawing on State or Federal sources.
Ultimately nonpayment is resolved through either deferred payment plans or disconnections. Chapter 14 provides a thorough review of the steps involved in developing and managing deferred payment plans. This process entails one-on-one interaction with the customer, so there is no advantage to large scale. The same methods can be applied one customer at a time, regardless of system size.
Chapter 15 provides additional steps that all utilities should remember to include in an assistance program in order to help customers minimize the recurrence of nonpayment problems in the future.
STRATEGY 3—SHRINK THE COST OF COLLECTIONS
Chapter 16 reviews a number of considerations that enter into a utility’s need to continually evaluate its assistance programs from the perspective of optimizing the expenditure of resources in pursuit of delinquent accounts. These issues are identical for small systems and, in fact, costs might be easier to isolate and track in a small scale operation. However, as also discussed in Chapter 16, cost-effectiveness in collections should not be the only objective under consideration. The broader benefits of a customer assistance program to a utility and a community must also be weighed when determining an acceptable level of costs to be borne in customer assistance.
SUPPORT SERVICES
Small system efforts in customer assistance are subject to the legal considerations and constraints described in Chapter 17. Most importantly, it is necessary to involve legal counsel in designing a program containing any new or different elements since local legal restrictions may vary.
Chapter 18 describes training needs for customer service representatives assigned to customer assistance programs. In very small systems, these functions may fall on a very few people. It is essential that these individuals have the necessary sensitivities discussed in Chapter 18 in order to make efforts in customer assistance as effective as possible. While the
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collections function can be more personal in a small system, it is best to view this as a positive opportunity to develop relationships that will help customers find more lasting solutions to underlying causes of payment problems.
Chapter 19 describes database and analytical support requirements to help implement and administer customer assistance programs in large utilities. Many of these needs may be addressed through much simpler means in small systems.
Chapters 20 and 21 describe approaches to communications efforts intended to help spread the word about assistance programs to target subgroups of customers. Many of these ideas may not apply in the setting of a small system.
PERFORMANCE MEASUREMENT AND CONTINUOUS IMPROVEMENT
As described in Chapter 22, the objective of performance measurement should not be to compare one utility against another, but rather to track the year-over-year progress of an individual utility’s customer assistance programs. This enables managers to assess what is working and what is not working, leading to continual improvement of program outcomes over the course of time. The performance measures suggested in Chapter 22 are tractable for any size utility and, in fact, some may be easier to record and track at small scale. It is important to follow through. When a program is implemented without deliberate performance measurement, it suggests a lack of appropriate management attention to the issue of nonpayment. Even if the measures are simple and the results seem apparent in a small system, it is good practice to formally measure and report results.