• Require a complete range of conservation assistance, including an in-home audit and subsidized repairs, as part of the conditions for establishing an extended payment plan to work out arrearages and avoid disconnection.
Many communities have already established various degrees of integration of their assistance efforts in water conservation and energy conservation. This is easier when the city provides both services, but most often it requires collaboration between utilities that are distinctly different organizations. Despite organizational hurdles, there is an extremely compelling business case to be made for integrating these activities as tightly as possible. By combining information resources, the targeting of low-income, payment-troubled customers that can derive the greatest benefits from conservation can be greatly enhanced. By combining field resources, a single in-home conservation audit and assistance program can share costs and produce magnified benefits by simultaneously shrinking the bills for water, wastewater, electricity, and heating.
Shrinking all the utility bills at once in a payment troubled household greatly enhances the durability of the solution. Water utilities have the most to gain from such collaboration because water bills⎯despite trends to the contrary discussed in Chapter 5⎯are still the least expensive. Some payment-troubled customers already flagged by energy utilities may not have missed a water bill yet, but may be candidates in the future. Thus, water utilities can obtain advance targeting insights from the collaboration with energy utilities, enabling them to implement targeted conservation assistance initiatives before-the-fact.
The Federally supported Low Income Heating and Energy Assistance Program (LIHEAP) has been implemented through networks of State social service agencies since the early 1970s. In addition to providing direct financial aid to low-income households, there is a parallel weatherization and conservation assistance program implemented by these experienced State networks that has incorporated a degree of water conservation in some instances. Further integration of local water utility efforts in conservation assistance with this very established energy program seems a clear avenue of best practice.
CHAPTER 8
SHRINK THE BILLS: BILLING PRACTICES
Clearly, a first priority in using billing practices to help payment-troubled customers is to eliminate all sources of error and inefficiency in billing practices that will otherwise exacerbate payment problems. Failing meters and flawed billing systems can add substantially to the difficulties faced by payment-troubled customers.
Estimating bills and back billing (that can result from metering errors or malfunctioning customer billing systems) can lead to billing problems that create serious concerns for low- income customers. Estimated bills and back billing can lead to a utility issuing a bill that is significantly higher than a typical bill. When this occurs, low-income customers may be unable to pay the entire bill on time. Some utilities⎯either voluntarily or because of State regulations⎯allow the customer to pay an unusual bill over an extended period of time. For example, in some jurisdictions when a customer is back billed for six months of consumption, the customer will be given the same amount of time (six months, in this example) that the billing period covers to pay the bill.
Moreover, the complications associated with resolving fouled metering and billing practices can present additional communications challenges for customer service personnel in working with payment-troubled customers who may have language, cultural, educational, mental, and physical disabilities that impair their capacity to comprehend and cope with such complexities. Of course, these issues are best avoided through efficient metering and billing practices.
Water utilities have found that some low-income customers are better able to afford to pay bills that are issued more frequently in smaller amounts, even though the total charges on an annual basis may be the same. Beecher (1994) and Saunders et al. (1998) report that customers with low incomes or fixed incomes prefer to receive bills monthly (rather than bimonthly or quarterly) and on the same day of the month. This facilitates the customer’s ability to budget for the utility bill and generally improves the timeliness of payment. In some circumstances, the switch from bimonthly or quarterly billing to a monthly schedule can increase costs of meter reading and billing processes. While these costs are not trivial, and cannot be ignored, many water utilities have found the switch to a monthly billing cycle to be an essential foundation element of a comprehensive approach to improving affordability of water service and ameliorating payment problems in the customer base. One obvious strategy is to be mindful of the value of monthly billing in improving affordability when specifying needs for replacement investments in metering technology and billing software systems, thus folding part of the cost into normal replacement expenditure.
Providing monthly billing options helps many residential customers make payments toward their current bills for electric and natural gas utilities around the country. One additional practice that is prevalent within the energy industry is to allow for levelized budget billing. Levelized budget billing allows a customer to receive equal monthly bills. A variety of options exist on how to implement such programs. Some states provide for a 12-month budget billing
46 | Best Practices in Customer Payment Assistance Programs
with any over/(under)collection being rolled into the next year. Other states provide for an 11-month levelized budget bill, with the twelfth month used as a “true-up” month.
Under a program adopted by the Tennessee State regulatory commission in 2005, customers that begin the winter heating season with current bills are automatically moved to a budget billing plan if they fall behind during the high cost winter months. They may choose to move off budget billing, but only once they have cleared their arrears. While water utilities obviously do not have the winter heating costs, they may have high cost months which budget billing can help levelize.
Beecher (1994) and Saunders et al. (1998) report similar applicability of budget billing programs in some circumstances where it is desirable to smooth out seasonal fluctuations in water utility bills. The major drawback to budget billing programs is that it weakens the price signal that customers receive during the peak demand season (Beecher 1994). If a utility finds that its low-income customers are not significantly contributing to seasonal peak demands, then the benefits of budget billing to customers can be obtained without affecting conservation goals. On the other hand, if budget billing is widely used by the customer base (Saunders et al. note that some utilities have 30–40% of their customers participating in budget billing programs), then such a program may be inconsistent with the utility’s seasonal conservation goals.
While levelized budget billing plans are offered to help make bills more predictable, other billing options can also be considered as well to help make bills fit into the cash flow constraints of constrained household budgets. For example, 11-month billing plans (allowing a customer to skip-a-month) allow customers to plan around months that are known to involve high nonutility expenses (e.g., back-to-school, holidays). Customers that receive fixed monthly income payments (e.g., Social Security) on a day of the month that does not “match” their billing date, and that, accordingly, have historically paid in-full-but-late every month, have been found to be well-served by a Pick-a-Date program (under which they can choose their billing date).
A special type of cash flow hurdle is often introduced at the very beginning of a new customer account relationship with the requirement of many utilities for new account creation fees and cash security deposits to secure bill payment. Factors that are used to establish the creditworthiness (or lack thereof) of a customer for purposes of requiring security deposits are variable from one utility to the next. Since low-income families tend to have to move more often (Colton 1995), they are more likely to be presented with these abnormal cash demands at a time of flux when it may contribute to the development of payment problems right from the start. There are, however, options that can help to facilitate bill payment. For example:
• Exempting low-income customers from the payment of new account fees or cash security deposits helps customers that may not be able to afford to pay such deposits in addition to their current bill. The State regulatory commissions of Minnesota and New Hampshire both exempt low-income customers from the payment of cash deposits.
• Accepting less than the maximum cash security deposit is another means of allowing low-income customers to secure their bill payment while not necessarily exhausting their ability to pay current bills.
• Accepting guarantees (or sureties) in lieu of posting a cash security deposit is one tool to secure payment without exhausting a customer’s cash that might be devoted to payment of current bills. Some utilities impose strict limits on who might be a guarantor.
• Encouraging the provision of a guarantee in lieu of a cash deposit by a social service agency that would otherwise provide cash to help pay a deposit is practiced in several