by Penni McLean-Conner, Eversource Energy
Arrears management programs (AMPs) are financial assistance programs for low-income customers with overdue utility bills. Although these programs are not commonplace today for customers, it seems that the interest to offer them is growing among utilities, regulators and interested stakeholders. My last column explored the business case for offering arrears management. With a well-constructed arrears management model, these programs provide customers with the opportunity to gain a fresh start with their utility bills. For utilities, arrears management programs offer the opportunity to transform the relationship with the customers into one that is new and positive. The best programs are comprehensive and operate in a regulatory framework that makes sense for customers and utilities.
Arrears Management Model
Successful arrears forgiveness programs are designed to target customers that, with the right training, assistance and support, can move from needing some sort of assistance to self-sufficiency. These programs are comprehensive and offer customers budget counseling, payment plans, arrears forgiveness, energy efficiency programs and education, and links to other financial grants and assistance. This cost-effective suite of programs is designed to service customers who will benefit from a reduction in their electric and/or gas bill arrearage with the ultimate goal of having the customer independently manage bill payments more effectively. For utilities considering implementing an arrears forgiveness program, following are some key structural components for an effective model:
“- Customer qualification: Successful
models clearly define customer qualifications so administrators can efficiently screen candidates. Qualifications to participate in the program might require that customers agree to budget counseling; take advantage of energy efficiency programs; have some minimum amount in arrears; and qualify for a discount rate.
“- Administration: Utilities may administer a program themselves, but many are transferring administration to the social service experts at low-income agencies. This latter approach allows the customer onestop shopping. A good administrator will screen qualified candidates for the program, ensure the customer participates in the energy efficiency programs offered to reduce ongoing usage, provide budget counseling and link the customer with other applicable assistance or grants.
“- Procedures: Best practice in arrears forgiveness is to reward good behavior. By that, customers are given arrears credits each time they make a payment on the account. These programs also offer frequent communications and reminders on their status and payment commitments.
“- Quality assurance: It is critical for a quality program to provide training and support to agencies and administrators. The training should include customer qualifications, processes and procedures. The utility should provide reports and regularly review program performance with administrators to identify improvement areas.
“- Evaluation: The evaluation confirms the value of the program to the customer and the utility. This evaluation looks at the program design and implementation, and will include surveys with the agencies and customers, along with a review of customer utility records on arrearage and recovery write-off.
Utilities working collaboratively with low-income advocates are designing rates that are positive for credit-challenged customers, as well as the utility. These lowincome rates generally are discounted below normal rates for eligible customers. This discount then is typically recovered from all other customers.
In some states, such as West Virginia, the discount is paid from the state’s general funds. In some states, the discount is paid by other customers. In these states, there has been discussion about identifying the amount paid by other customers so those customers can classify that amount and claim it as a tax deduction.
Programs that incentivize customers to improve their credit-managing ability by rewarding them with debt forgiveness are uncommon. Recovery of these costs, net benefits derived by the utility, is made the same as the low-income discount.
While the costs of the debt forgiveness and incremental administrative costs are easy to identify, tangential benefits, such as having a creditworthy customer in the future or reducing the debt forgiveness for debt that would have been written off without this the program, are much harder to identify. In fact, to truly analyze the impact of the programs, it is best to monitor the performance over several years.
The good news on arrears management is that many of these programs are demonstrating positive benefits. The mature programs are showing success with customers learning to manage their energy usage and their bills. For utilities, the programs provide a positive alternative to offer customers who are struggling with their payments. Overall, these AMPs, when well designed, are a win-win for customers and utilities.
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.