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Deposits, Late Fees, and Other Affordability Issues

Deposits, Late Fees, and Other Affordability Issues. Presentation to NASUCA Conference June 2, 2014. Bill Marcus. I am NOT Roger Colton. He has prepared a series of model regulations on deposits, shutoffs, and late charges, which I can make available. JBS Energy, Inc.

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Deposits, Late Fees, and Other Affordability Issues

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  1. Deposits, Late Fees, and Other Affordability Issues Presentation to NASUCA ConferenceJune 2, 2014 William B. Marcus JBS Energy, Inc.

  2. Bill Marcus • I am NOT Roger Colton. • He has prepared a series of model regulations on deposits, shutoffs, and late charges, which I can make available. William B. Marcus JBS Energy, Inc.

  3. JBS Energy, Inc. • Consulting firm serving consumers, environmentalists, government agencies, and renewable energy producers since 1984 • Economic analysis of utility operations, plans, and rate design • Manufacture and sell Aquacalc (handheld computer for surface water measurement) • If you want Mr. Colton’s materials or my powerpoints on this topic or customer charges e-mail me at bill@jbsenergy.com. JBS William B. Marcus JBS Energy, Inc.

  4. Topics • Deposits • Disconnections • Late Charges • Other Credit-Related Charges • All of these issues affect Universal Service and disproportionately harm low-income customers. William B. Marcus JBS Energy, Inc.

  5. Deposits • REVIEW COLTON’S DRAFT REGULATIONS • Limit scope of deposits • Not all new customers • Tie to disconnections and past arrearages • Limit size of deposits • Limit deposits for very low income customers • Give customers time to pay deposits • Transfer deposits between premises • Limit time deposits are held • Pay significant interest on deposits William B. Marcus JBS Energy, Inc.

  6. Disconnections for Non-Payment • REVIEW COLTON’S DRAFT REGULATIONS • Need clear process for disconnection. • Disconnection as last resort. • As many chances for customers to pay or make payment arrangements as possible. • Make sure customers aren’t disconnected for others’ bills or unregulated services. • Medical exceptions (separate Colton draft regulation) William B. Marcus JBS Energy, Inc.

  7. Late Charges • Far beyond compensatory to the utility in many states • Point raised in Colton model regulations • Colton suggests they should apply only to large balances – many states do the opposite. • Arkansas 5% under $30, 2% over $30. • California actually does this largely right. • Problems with payment processing – Colton model regulation calls for grace days or postmark • Maryland and California both had problems with this issue in the past. William B. Marcus JBS Energy, Inc.

  8. Other Charges • Field Collection • Reconnection • Dishonored Checks • Service Establishment in next presentation William B. Marcus JBS Energy, Inc.

  9. Field Collection Charges • Charge when utility wants to disconnect,but a customer can pay at the last minute. • Extremely bad public policy. • Don’t load up the customer with more fees if they can finally pay the bill. • May create more disconnections and bad debt. • Charging for telephone calls to customer is even worse. • No good records and no incentives for field visit. William B. Marcus JBS Energy, Inc.

  10. Reconnection Charges • Public interest in retaining universal service, means that charges, while possibly necessary, should be minimized and not loaded with other fees. William B. Marcus JBS Energy, Inc.

  11. Returned Check Charges • Many utilities set them as penalties, rather than to recover costs. • Real cost is often $10 or less – not $20 or $30. • A fraudster won’t usually write a bad check for a utility bill. • Essentially hits people in financial difficulty. • Compounds problems with bad bank practices on deposits, order of checks to be dishonored, etc. William B. Marcus JBS Energy, Inc.

  12. Issues to Watch Out For • Some states allow these kind of charges to be raised between rate cases with little or no review. • Opposition to increases in rate cases makes it look like consumer advocates are proposing rate increases. • High late fees pay some of the costs of collection charges, so they don’t need to reflect costs. • Get the green eyeshades out! Utilities often get sloppy and overestimate costs. • Poor service quality may exacerbate problems. William B. Marcus JBS Energy, Inc.

  13. Links to Other Parts of Rate Case • Deposits must be considered in capital structure or as rate base reduction. • Late payment charge should be in the revenue conversion factor along with uncollectibles, reducing future rate increases. • The other charges are related to customer activity – recover costs that would be O&M costs charged by numbers of customers. • Many Commissions allocate these costs by total revenue, thereby making residential customers pay twice. William B. Marcus JBS Energy, Inc.

  14. Think about Smart Meters • Reduce costs for disconnection and reconnection. BUT • MAKES IT EASIER TO DISCONNECT CUSTOMERS REMOTELY • Harder to accept last minute payments. • Makes it possible to limit service rather than cut it off entirely. • Prepayment metering is a huge issue. William B. Marcus JBS Energy, Inc.

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