Another potential complication that may arise in bill discount programs is an issue of equity between low-income households that pay a water bill for an individual residence versus low-income households that rent housing and do not pay directly for water. In situations where the water utility is a department of the city government, a bill discount program can appear unfair to half of the low-income population. Some cities have addressed this issue by providing the same dollar amount of discount as a credit on energy bills that, unlike water bills, are typically paid by renters. This only works, of course, when the city also runs the local energy utility. Other cities have tried simply mailing checks to low-income renters, but this involves an obvious administrative burden. A final complication which may arise if checks are provided to low-income renters is that some offsetting income adjustment provisions in other social assistance programs would adjust other payments accordingly and leave the target households no better off. As discussed in Chapter 1, the issues of equity for low-income tenants and of tenant rights in the situations created by nonpaying landlords deserve special attention and development of an entirely separate set of best business practices.
The main administrative task involved in a bill discount program is the determination of eligibility. The primary options for accomplishing this include:
• Meeting a particular income requirement (for example, income less than 150% of the FPL)
• Qualifying for an income-based assistance program (such as food stamps or discounted school lunches)
There are obvious advantages to determining eligibility via cross-matching customer account data systems with other client data systems of public assistance programs. When this is possible, the eligibility determination can be approached as an automated process whereby customers identified by the computer match are notified by mail that their bills will henceforth reflect the low-income discount.
Additional client data systems that are accessible within the public domain include those identifying elderly and disabled customers. All of the same principles of affordability thresholds often apply to customers with these characteristics when they appear in databases indicating the receipt of benefits from Social Security, Medicaid, and related programs. In fact, there are probably many more water utility bill discount programs for elderly and disabled customers than there are for low-income customers.
Other studies have done a commendable job of summarizing the types of bill discounts that some utilities use to help low-income customers shrink their bills (Beecher 1994, Saunders et al. 1998, AWWA 2000). Two major types of bill discounts have been used by water utilities:
• Discount on total bill. Some utilities offer a percentage discount on the total bill of a low- income customer. Examples have bracketed a wide range, varying from a 20 to 50% discount off the total bill.
• Discount a particular portion of bill. Some utilities offer a discounted customer (or meter) charge to qualifying customers (for example, low-income customers pay a customer charge that is 50% lower than the typical customer charge). Some have in fact waived the customer charge altogether. Other utilities discount the consumption charge for a certain quantity of water for qualifying customers (for example, the first 5,000 gallons of water may be provided to eligible customers at a price that is 20% lower than
52 | Best Practices in Customer Payment Assistance Programs
the typical charge). In areas where water scarcity and conservation is a particular concern, there is a preference for discounting the fixed customer charge and leaving the price signal of the variable usage charge intact.
The type and level of bill discount to offer is a decision that can be helpfully informed by a detailed segmentation of customer account data for the target group of customers. Analysis of a utility’s experience with repeat patterns of nonpayment and disconnections will help to judge whether it is more efficient to have a narrow definition of eligibility coupled with a generous discount or a broad definition of eligibility coupled with a smaller discount. An additional alternative is the development of a tiered discount structure that attempts to have it both ways, albeit with additional costs in administering eligibility.
One last type of bill discount program is called a percentage of income payment plan (PIPP). Some energy utilities have adopted these programs to set the amount of the total bill for low-income customers to be a set percentage of the customer’s income. For example, a utility may set the bill for a nonheating customer to be equal to 2% of the customer’s income and the bill for a heating customer to be 7% of the customer’s income. A PIPP frequently carries with it a requirement for the customer to participate in a conservation program and to keep its consumption within a predefined range. The one-on-one administrative costs of this approach are certainly much steeper and although it is often discussed as a discount program, it has more of the administrative characteristics of managing an extended payment plan (discussed in Chapter 14). It could perhaps be rationalized as a type of continuing after care program for customers who have successfully completed extended payment plans to retire arrearages.