1. When Half a Loaf is Enough: What Utilities Don’t Know Can Hurt Them
Wally Nixon, President
Agents of Change, LLC
Presented at the New Beginnings Conference
Coalition to Keep Indiana Warm
Indianapolis, Indiana
October 11, 2005
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2. agentsofchange@gmail.com 501-831-0364
A modest proposition: Utility companies too often do not know enough about the overall costs and benefits of low-income energy assistance. Hence they underestimate the importance and value to all customers and company shareholders of programs that keep service connected for households in need. Advocates and provider agencies can help utilities learn how energy assistance programs can increase revenues, reduce costs and improve customer service.
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3. Affordability Program Types
Federal (LIHEAP, WAP, and others)
State/Local funds (utility public benefit charges, taxpayer-supported usage reduction programs)
Regulatory programs (rate discounts, percentage-of-income payment plans, innovative energy efficiency initiatives like PAYS)
Charitable programs (fuel funds)
Internal utility initiatives (credit & collections policies and programs, arrearage forgiveness, credit counseling, etc.)
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4. Some things utilities often don’t know
Who their low-income and working poor customers are. (Lack of segmentation research, concern over privacy issues, unsubstantiated myths about who are “bad pay” customers – without this information, it may be easy to lump LI customers in with the so-called “deadbeats” who are often said to cause high un-collectibles and write-offs).
The fact is, most low-income customers – especially the elderly -- pay their bills, on time, in full, and without causing the utility to incur costly collection expenses. In short, they are a profitable segment to serve – too frequently at the expense of their health, medicine, comfort, or nutrition.
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5. Market research can help companies target assistance programs
Through research conducted by LSU in 2004 Entergy determined that its low-income customers, especially the elderly, had better payment records and fewer un-collectibles than other residential customer segments.
Some utilities don’t know enough about the income levels and payment behaviors of their NON-low-income “bad pay” customers who are cost causers. Many are younger, middle-income families who have taken on too much consumer debt and can’t/don’t/won’t pay their utility bills on time.
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6. Some things utilities often don’t know…
How few of their eligible LI customers actually receive any kind of assistance (Since typically <12% receive LIHEAP across the U.S., owing to chronic and worsening funding inadequacy, many utilities do not know the income status of 88% of their low-income customers)
How much revenue the company receives from LIHEAP and how much more would flow to the bottom line if federal funding were increased. (Confront and dispel concerns about “corporate welfare”) Indiana energy providers received $53.9 million in LIHEAP in 2005, enabling assistance to 126,510 households.
What it costs the company to pursue bad debt and uncollectibles, to disconnect and reconnect customers vs. the benefits of avoiding those costs through LI programs
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7. More things utilities often don’t know…
How many of their “bad pay” customers who are disconnected for nonpayment are able to evade collection through fraudulent restoration of service under another name. Collection activities and costs are thus incurred in pursuit of dollars that may be written off anyway.
Story and moral: Learn how to “stop squeezing the greens”
How much weatherization and usage reduction measures could improve the payment performance of their low-income and working poor customers who live in sieves.
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8. Some things utilities often don’t know…
How much it costs to futilely pursue collections from “turnips” and whether the company would be better off with “half a loaf” collected from customers kept on the system under a rate discount, PIPP, credit counseling, or arrearage forgiveness plan.
Whether they are actually able to collect late fees (where applicable) and reconnection fees from low-income customers who truly lack the ability to pay. Since many companies don’t have good data about who is poor and who is not, they cannot easily differentiate by income level those who have poor payment behaviors and cause the company to incur collection costs.
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9. What can be done to boost the appeal of affordability programs?
Recognize that lack of knowledge of the costs and benefits of improving service to the LI customer base and improving their payment behavior can be an excuse for doing too little to provide energy assistance for those in need.
Providers and advocates can educate utilities about their low-income and working poor customers: who they are; how many there are; what their needs and options are; how much revenue they contribute; what would make them better, more valuable customers; what it costs to serve them; what it costs to NOT serve them.
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10. Options Utilities Should Consider
Start a low-income initiative
Engage people in affected company departments: Credit & Collections, Regulatory, Governmental, Customer Service, Community Relations, Public Affairs, Corporate Social Responsibility, Communications
Assess the costs and benefits of improving energy affordability
Partner with agencies to lobby for increases in funding at all levels and help educate regulators
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11. Available Options for Utilities…
Use communications to dispel the myths that are obstacles to effective assistance by educating executives, employees, regulators, legislators, policy makers, and the public at large about the immense unmet need for help and how closing that gap can provide mutual benefits to the company’s bottom line and all of its customers.
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12. Recommendations for utilities
Join, support and become active in NLIEC, NFFN
Energize your credit & collections groups to find the true costs and benefits of LI programs
Learn how LIHEAP and WAP are win/wins for customers and utility shareholders; lobby for $
Support state/local program initiatives through legislation, regulatory action, charitable giving
Get to know your low-income and working poor customers: what they have; what they need; what they contribute; what would make them better consumers;
Work closely with coalition partners to figure out ways to avoid squeezing the greens
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