by Penni McLean-Conner, Eversource Energy
Arrears management programs (AMPs) can provide a win-win solution for customers, utilities and regulatory agencies. My previous columns on this topic have explored arrears management programs from a business case and framework perspective. This final column explores the best practices in arrears management programs.
AMPs are financial assistance programs for low-income customers with overdue utility bills. The basicconcept is that customers enrolled in an AMP who make the required affordable payments are rewarded by having their arrears forgiven.
Utilities considering offering an arrears management program are wise to work with low-income advocates and regulators in their states to design a program that works toward customer, utility and stakeholder goals. This final article explores some best practices in the design of an arrears management program in the areas of offering comprehensive, flexible and efficient programs.
Provide Consumers a Comprehensive Approach
Offering a comprehensive solution that includes discount rates along with energy efficiency for income-eligible customers is a winning design. Energy efficiency programs are powerful tools that can help reduce monthly usage and therefore monthly bills. Add to that discount rates for income-eligible customers and consumers are much better positioned to provide needed support to make the bills affordable.
To provide this comprehensive solution, the best practice is a partnership of utility administration along with community action programs (CAP). Utilities are in the best position to enroll customers. CAP agencies provide consumers with fuel assistance enrollment, along with consumer education and financial counseling. This combination of service delivery provides customers with the best opportunity to use energy wisely and, in addition, be able to make required monthly payments.
Customer Payment Best Practices Flexibility
Utilities considering AMP programs must determine how to handle situations where the customer misses a payment or completes the program only to build up an arrearage again. These decisions require thoughtful analysis and consideration.
Allowing customers to enroll in an AMP a second time is a more complicated issue. There are valid reasons where customers could really benefit from the opportunity to enroll a second time, such as experiencing an unexpected illness or loss of a job. There is concern, though, that a program allowing a second enrollment might create the behavior of building up an arrears knowing it can be forgiven. The National Consumer Law Center recommends utilities use their discretion aided by information from a CAP regarding a client’s circumstances as to whether to offer a second AMP.
Determining how to handle missed payments is another consideration. Massachusetts utilities that have run AMP programs for years have found that allowing customers to make up missed payments during an active AMP plan is positive and efficient.
Leveraging technology and business rules to simplify the AMP process both for customers and the utility makes business sense. Automatic enrollment and short duration forgiveness are two items that utilities should consider in the design.
In designing an AMP program, utilities must evaluate whether customers must request to be on an AMP or whether they will leverage automatic enrollment. Data from Massachusetts, in which both automatic and customer requested designs were in place, show that more customers participate with automatic enrollment, but the percentage that completes the plan is reduced. With automatic enrollment, though, the utility will gain operational efficiencies on customer enrollment processes. Manual enrollment based on a customer’s request provides additional opportunity for a utility to screen the customer and provide valuable information and education on the program to help ensure the customer is a good fit for the program.
During program design, utilities should consider forgiving the arrearages in a short cycle time, such as one year. Customers are more motivated to make payments on a shorter plan. In addition, it helps customers complete the program.
This series has explored arrears management programs that with the appropriate regulatory structure can provide win-win solutions for both utilities and their customers. As utilities consider offering these programs, they must focus on designing a program that is grounded in meeting customer and stakeholder desires while also making sense from a utility perspective. For more information on National Consumer Law Center recommendations, 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
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 serving on several boards of directors including CS Week and the American Council for an Energy Efficient Economy. Her latest book, “Energy Efficiency: Principles and Practices,” is available at http://pennwellbooks.com. Reach her at firstname.lastname@example.org.