by Penni McLean-Conner, Eversource Energy
While there has been a lot of discussion and exploration of arrears or debt management programs, these programs are still relatively unavailable for utility customers. In fact, a review of the most recent American Gas Association/Edison Electric Institute Data Source reveals only 10 utilities offer arrears management programs (AMPs).
This trend may be changing. Charles Harak, senior attorney for the National Consumer Law Center, is a nationally recognized low-income advocate, and author of the report “Helping Low-Income Utility Customers Manage Overdue Bills Through Arrears Management Programs” published in September 2013. Harak later noted that there has been a “noticeable increase in requests by utilities and others for more information on AMP programs since we issued our AMP report in 2013. The Maine Legislature in 2014 adopted a law requiring its public service commission to adopt an AMP. As information about their success becomes available, more utilities and regulators are interested in exploring AMPs for their customers. The reason for the interest is that arrears management programs can provide a win-win solution for customers, utilities and regulatory agencies.”
Arrears management programs offer financial assistance for low-income customers with overdue utility bills. The basic concept is that customers enrolled in an AMP who make the required affordable payments, are rewarded by having their arrears forgiven. The best programs are comprehensive and offer customers training, budget counseling, payment plans, arrears forgiveness, energy efficiency and links to other financial grants and assistance.
In this series of articles I will explore arrears management programs. This first article looks at the business case for implementing an AMP and explores the consumer and utility benefits. Future articles will review the AMP framework and best practices.
Customers participating in arrears management programs receive clear benefits. Those participants gain the protection against service disconnections while on the program and can gain a fresh start by successfully completing an AMP with arrears that are totally canceled.
The ultimate goal of these programs is to move customers from needing assistance to self-sufficiency. These programs have demonstrated success in moving customers from a cycle of building arrears, being disconnected and experiencing write-offs, to customers who can successfully manage and pay for their energy usage. Their ability to pay is enhanced through the programs by providing budget counseling, implementing energy efficiency measures and ensuring fuel assistance is secured. Participating customers can improve their overall credit ratings and better manage other bills. The relationship with the utility changes from one that is threatening disconnection to working with the customers as a partner. Harak’s research additionally showed the participating customers are more likely to continue to pay more after participating in the program than they did previously.
Utilities gain several benefits, too. The costs associated with collection activities on these accounts are diminished as field visits and disconnections are avoided. In addition, AMP customers are paying more towards their bills. Harak’s research provides results from two utilities. The data revealed that in all cases AMP customers, when compared to a group of customers not on AMP, paid more toward their bill. Write-offs are correspondingly reduced, because the dollars billed are being recovered through a combination of the customer payments and forgiveness.
Utilities that have successfully implemented AMPs have worked with regulators to design regulatory recovery and reporting for the program. The AMP costs are allowed to be recovered as part of rate filings.
Utilities transform the relationship with the customer into one that is new and positive. The best AMPs are comprehensive and provide participating customers with energy efficiency advice and services that bring down their total energy usage. In addition, the program encourages ongoing communication from the utility to customers about not only their progress in reducing arrears but also with counseling in situations where customers are struggling to maintain their AMP plan.
Utilities looking to make a transformative change in working with credit-challenged customers should take a hard look at AMPs. These programs combined with discounted rates and energy efficiency programs provide a holistic approach for credit-challenged customers. Utilities will often find that regulators are interested in discussing AMPs, as these programs help them fulfill their mandate of assisting those customers in the greatest need.
For customers, this comprehensive approach helps them achieve self-sufficiency. For the utility, this approach avoids costly field work and can result in reduced write-offs.
For more information, please review Charlie Harak’s entire report at: http://www.nclc.org/images/pdf/energy_utility_telecom/consumer_protection_and_regulatory_issues/amp_report_final_sept13.pdf
For more information on the Maine legislation link to: http://www.mainelegislature.org/legis/bills/getDoc.asp?id=40898
Penni McLean-Conner is the chief customer officer at Eversource Energy, the largest energy delivery company in New England. A registered professional engineer, McLean-Conner is active in the utility industry and serves on several boards of directors including CS Week and the American Council for an Energy Efficient Economy. Her latest book, “Energy Effciency: Principles and Practices,” is available at www.pennwellbooks.com. Reach her at firstname.lastname@example.org.