Public Utilities’ War on the Poor

1. Public Utilities’ War on the Poor Presentation to: National Community Action Foundation (NCAF) Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics

2. Issues to consider • Higher initial blocks rates/customer charges • Higher connect/reconnect fees. • Imposition of new fees. • New/higher interest rates/”late fees.” • Higher disconnect fees. • Direct assignment of collection costs.

3. Higher initial blocks/customer charges • Increases in initial step blocks/higher customer charges. • Purported reason for change: help the low-income. • Real reason for change: isolate revenue from consumption change. • Harm to poor: LI have lower usage--direct income transfer/reduce efficacy of Wx. • Issue to watch for: higher LI usage per square foot vs. lower overall LI usage.

4. Higher connect/reconnect fees • Increased fees/fees apply when changing service (moving). • Purported reason for change: Assign costs to cost-causer. • Real reason for change: Lower percentage rate increase. • Harm to poor: LI have higher mobility/LI are more often tenants rather than homeowners. • Issue to watch for: Embedded cost analysis rather than decremental or incremental analysis.

5. Imposition of new fees • Field collection fees/field payment fees. • Purported reason for change: Assign costs to cost-causer. • Real reason for change: Lower percentage rate increase. • Harm to poor: LI are disproportionately payment-troubled/closed field offices/unbanked customers/huge percentage bill increase. • Issue to watch for: LI impose higher costs and should not receive special dispensation.

6. New/higher interest rates/late fees • Increase late fees/impose late fees on budget billing and/or payment plans. • Purported reason for change: Assign costs to cost-causer. • Real reason for change: Increased revenue, especially if done outside rate case. • Harm to poor: LI more often in arrears/more often on deferred payment plans. • Response: Late fee not cost-based now/interest rates going down/expenses paid through other fees/expenses not incurred. • Issue to watch for: LI exemption tied to LIHEAP, reaching fraction of LI population/late fee “voluntary.”

7. New/higher disconnect/reconnect fees • Move disconnect fees higher/disaggregate disconnect and reconnect fees. • Purported reason for change: Assign costs to cost-causer. • Real reason for change: Cushion political costs of rate cases. • Harm to poor: LI more often disconnected/huge barrier to reconnection/diversion of income. • Response: Disparate impact on LI/late fee not cost-based now/interest rates going down/decremental/incremental cost analysis.

8. Direct assignment of collection costs • Collection costs quantified and directly assigned to customer through a collection “rider.” • Purported reason for change: Assign costs to cost-causer. • Real reason for change: Cushion political costs of rate cases/avoid regulatory review of collection costs. • Harm to poor: LI more often payment-troubled. • Response: No regulatory review (contrary to statute)/”least cost” provision of service/not entitled to cost recovery (only opportunity for ROE)/collection costs should be in base rates (subject to management control and not highly volatile).

9. Affirmative issues to raise • Cross-subsidy now exists from poor to non-poor. • Old and depreciated service drops. • Older distribution system. • Higher density. • Non-cost-based late fee (decreasing interest). • Don’t do fees via “rules” but rather in base rate case. • Offsetting savings • Not guaranteed cost recovery. • Already embedded in rates--double collection.

10. For more information: http://www.fsconline.com (library/news)

11. For more information: roger@fsconline.com