20071004Howat direct.pdf

Brad M. Purdy
Attorney at Law
Bar No. 3472
2019 N. 17th St.
Boise, ID. 83702
[phone]
FAX: [phone]
bmpurdy (gJ hotmail.com
Attorney for Petitioner
Community Action Partnership
Association of Idaho
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ZfiO1 SEP 28 Pr'l 2: I 3
ICiAHO PUBLIC
UTILITIES COMMISSIOI!
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF ROCKY
MOUNT AIN POWER FOR
APPROV AL OF CHANGES TO ITS
ELECTRICAL SERVICE SCHEDULES
CASE NO. PAC-07-
COMMUNITY ACTION PARTNERSHIP ASSOCIATION OF IDAHO
DIRECT TESTIMONY OF
JOHN HOWAT
PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS
ADDRESS.
My name is John Howat, and I am a Senior Policy Analyst at the National
Consumer Law Center, 77 Summer Street, 10th Floor, Boston, MA 02110.
FOR WHOM ARE YOU TESTIFYING IN THIS PROCEEDING?
I am providing comments and testimony on behalf of Community Action
Partnership of Idaho ("CAP AI").
BRIEFLY DESCRIBE YOUR BACKGROUND AND QUALIFICATIONS.
I have been professionally involved with energy program and policy issues since
1981. Prior to joining the Advocacy Staff at National Consumer Law Center, I
consulted with a broad range of public and private entities on issues related to
utility industry restructuring. Previously, I served as Research Director of The
Massachusetts Joint Legislative Committee on Energy, responsible for the
development of new energy efficiency programs and low-income energy
assistance budgetary matters; economist with the Electric Power Division of the
Massachusetts Department of Public Utilities, responsible for analysis of electric
industry restructuring proposals; and Director of the Association of Massachusetts
Local Energy Officials. I have a Master s Degree from Tufts University
Graduate Department of Urban and Environmental Policy and Bachelor of Arts
Degree from The Evergreen State College.
At the National Consumer Law Center over the past seven years, I have managed
a range of regulatory, legislative and advocacy projects across the country in
support of low-income consumers' access to affordable utility and energy related
c2.
services. I have been involved with the design and implementation of low-income
energy affordability and efficiency programs and outreach efforts, low-income
regulatory consumer protection, rate design, issues related to metering and billing,
development of load profiles, energy burden analysis and related demographic
analysis. In addition to work in the instant proceeding, I work or have worked on
behalf of community-based organizations or their associations in Massachusetts
Arkansas , Arizona, Louisiana, Mississippi, New Jersey, Utah, Washington State
Pennsylvania, Rhode Island, Texas and Washington State. I also work or have
worked on low-income energy matters on behalf of the National AARP and state
AARP chapters in Texas, Vermont, lllinois, Louisiana and Kansas. I have
worked under contract with the U.S. Department of Health and Human Services
Oak Ridge National Laboratories, the National Energy Assistance Directors
Association, and the Office of the Attorney General in Nevada on projects related
to the design of universal service programs, metering, and regulatory consumer
protection issues. I have presented testimony before utility regulatory agencies in
Massachusetts , New Jersey, Rhode Island, Pennsylvania, Nevada, California
Vermont, and Louisiana. I am a regular presenter at conferences of National
Community Action Foundation, National Low Income Energy Consortium
National Energy Assistance Directors Association, National Association of
Regulatory Utility Commissions, and National Association of State Utility
Consumer Advocates.
WHA T ARE THE PURPOSES OF YOUR TESTIMONY?
The purposes of my testimony are to respond to the PacifiCorp (also referred to as
Company" or "Rocky Mountain Power ) proposed change to Regulation No. 10
regarding payment of collection agency costs, and to comment on the effects of a
range of credit and collection costs on low income customers.
PLEASE DESCRIBE THE COMPANY'S PROPOSAL REGARDING
PAYMENT OF COLLECTION AGENCY COSTS.
The Company is proposing to add language to Regulation 10R.8 to that would
specify that individual customers will be responsible for "any reasonable costs
associated with the collection of unpaid accounts, including but not limited to
court costs, attorney s fees, and/or collection agency fees." The Company
indicated that it paid collection agencies about $24 000 in 2006.
DO YOU SUPPORT PCAIFICORP'S PROPOSAL REGARDING
PAYMENT OF COLLECTION AGENCY COSTS?
No.
WHAT ARE YOUR CONCENS WITH THE COMPANY'S PROPOSAL?
I have several concerns with the PacifiCorp proposal. First, the Company
proposal, if approved and implemented, would have disproportionate, adverse
impact on low-income customers. Further, as proposed, there are no limits or
controls on the credit and collection costs that would be passed along to
individual consumers. Finally, the proposal would eliminate Company incentives
to minimize and control specific credit and collection costs.
I Direct Testimony of Carole A. Rockney at 2; Rocky Mountain Power Exhibit No. 36 at 1.
HOW WOULD THE COMPANY'S PROPOSAL HAVE ADVERSE
DISPROPORTIONATE IMPACT ON LOW INCOME CUSTOMERS?
The Company s proposal is to shift onto individual customers a set of costs that
have traditionally been spread throughout the ratebase. A disproportionate
number of these individual customers would likely have low incomes. As
Soi
reflected in Exhibit No. X, results of the u.S. Census Bureau s Survey of Income
and Program Participation ("SIPP") demonstrate that u.S. households in the
lowest income quintile are nearly 10 times more likely than those in the highest
income quintile to experience electric or gas service loss. Assuming that the
relationship between household income and loss of utility service the Company
service territory is consistent with the national relationship, low income customers
of the Company are far more likely than their higher income counterparts to lose
electric service because of non-payment of bills.
It follows that if low-income customers are more likely to lose service because of
non-payment, they are also more likely to have their accounts referred to a
collection agency. These customers are thus more likely than higher-income
customers to pay attorney s fees and collection agency fees as contemplated in the
Company s proposal.
The PacifiCorp movement away from traditional ratemaking treatment of these
credit and collection costs reflects a "blame the victim" approach that fails to
recognize the economic realities faced by low-income households. The
prospective collection charges would increase the likelihood that low income
households would suffer protracted loss of necessary service and decrease the
general energy security of these households.
PLEASE DESCRIBE YOUR CONCERNS REGARDING LACK OF
CONTROLS ON COSTS PROPOSED BY THE COMPANY TO BE
PASSED ALONG TO INDIVIDUAL CUSTOMERS.
There are no controls specified in the Company s proposal on the level of the
collection costs and fees that could be charged to an individual customer. In the
proposed Regulation 1OR.8 language, PacifiCorp references "any reasonable costs
associated with the collection of unpaid accounts..." However, even with the
reasonableness' reference , there are no dollar limits placed on prospective
attorney s fees or collection agency costs that may be charged to customers.
Conceivably, "reasonable" attorney s fees and collection agency costs could be
several times greater than the amount of an individual customer s outstanding
arrears. The Company s proposed Regulation 10R.8 includes no definition of
who will be the arbiter of "reasonableness" in assessing credit and collection costs
that are passed along to individual customers. Further, as discussed below
collection agency fees paid by the Company in 2006 represents an insignificant
proportion of base revenues. However, payment of an uncontrolled collection
agency or attorney s fee may place excessive financial burden on a low income
household such that it would be precluded from regaining access to a necessary
utility service. Finally, The Company would be able to incur and pass along costs
that it might otherwise try to avoid under the traditional ratemaking approach.
There is no incentive to the Company, under its proposed Regulation 1OR.8, to
strive to minimize collection agency costs or attorney s fees associated with credit
and collections.
HAS THE COMPANY JUSTIFIED THE NEED FOR NEW CHARGES
FOR COLLECTION AGENCY COSTS AND ATTORNEY'S FEES?
No. While Ms. Rockney indicated that the Company incurred approximately
$24 000 in collection agency fees in 2006, the Company has not demonstrated
that revenues from late payment charges, security deposits and reconnection fees
are insufficient to cover collection agency fees and attorney s fees.
DID COLLECTION AGENCY FEES PAID BY THE COMPANY IN 2006
REPRESENT A SIGNIFICANT PROPORTION OF ITS BASE
REVENUES?
No. The Company s base revenues in 2006 totaled nearly $180 million including
sales to Monsanto or over $130 million if sales to Monsanto are excluded?
indicated previously, the Company reported that fees paid to collection agencies
in 2006 totaled about $24 000. Thus, collection agency fees represented less than
two one hundredths of one percent (-::: 0.02%) of base revenues excluding sales to
Monsanto. Their contribution to revenue requirements and the impact on
customers' rates is nearly imperceptible.
WHY DO YOU FOCUS YOUR CONCERNS WITH THE COMPANY'
REGULATION 10R.S PROPOSAL ON IMPACTS TO LOW INCOME
CUSTOMERS?
Low-income residential utility customers, who would suffer adverse and
disproportionate impact from the proposed Regulation 1OR.8, are uniquely
2 Rocky Mountain Power Exhibit No. 31.
situated in that they must devote a relatively high proportion of total household
income to meeting basic household energy needs. In addition, for working poor
households in particular, income and hours of work are often highly unstable, paid
leave is minimal or non-existent, and health insurance is prohibitively expensive
or unavailable. These conditions, combined with the low wages of working poor
households, create difficulties in establishing realistic household budgets, making
regular bill payments, and maintaining regular payments under terms of
traditionally-structured utility payment plans.
Low-income households must continually contend with the challenge of
stretching inadequate financial resources to pay for necessities such as housing,
utility service, health care, and food. Part of this precarious balancing act
inevitably leads to underpayment of bills and, at times, foregoing necessary goods
and services to the detriment of health and safety.
It is important to emphasize that in the vast majority of cases, low-income non-
payment of utility bills is not the product of financial mismanagement, over-
consumption of luxury items or some other stereotyped character flaw. It may be
attributed to the simple arithmetic fact that available household financial
resources are insufficient to meet financial obligations associated with obtaining
basic human needs and participating effectively in society. A study recently
released by the National Energy Assistance Directors ' Association found that a
high proportion of participants in the Low Income Home Energy Assistance
Program ("LIHEAP") take drastic actions to pay their energy bills , including
reduction of expenditures for other household necessities or use of their kitchen
stove for heat. In addition, the survey of LIHEAP recipients found that 32 percent
did not fill their prescription or took less than their full dose of a prescribed
medicine due to energy bills in the past five years, 16 percent reported that as a
result of a home that was too cold, they became ill in the past five years, 19
percent kept their home at a temperature they felt was unsafe or unhealthy, and 18
percent left their home for at least part of the day because it was too cold or too
hot. ("2005 National Energy Assistance Survey: Key Findings" attached as
Sc).;L
Exhibit No.2'.
WHAT IS THE POTENTIAL IMPACT ON LOW INCOME
HOUSEHOLDS UNDER THE PROPOSED REGULATION 10R.
As indicated above, collection agency fees represent an insignificant proportion of
base revenue. Their contribution to the Company s revenue requirement creates a
nearly imperceptible impact on rates. However, for a low-income household that
is struggling to make ends meet and which has already lost access to a vital
service, the requirement to pay collection agency and attorney s fees as defined in
the Company s proposal could determine whether that household will be able to
have necessary service restored. For PacifiCorp customers whose income is
already insufficient to cover the costs of housing, utility service, food, medical
care and other absolute necessities, protracted loss of electric service or forgoing
one or more other basic needs will result from the implementation of the
Company s Regulation 10R.8 proposal.
WILL IMPLEMENT A TION OF PROPOSED REGULATION 10R.S
ENSURE OR MAKE IT MORE LIKELY THAT LOW INCOME
CUSTOMERS WILL PAY OUTSTANDING BALANCES BEFORE
ACCOUNTS ARE REFERRED TO A COLLECTION AGENCY?
I am aware of no evidence that supports the notion that imposition of credit and
collection fees and charges - such as late payment fees, security deposits
reconnection charges, or fees as contemplated in proposed Regulation 1OR.8 -
make it more likely that low income customers will pay electric bills on a more
timely basis.
DO YOU HAVE RECOMMENDATIONS REGARDING MEANS OF
ENHANCING AFFORDABILITY OF ELECTRIC SERVICE FOR LOW
INCOME CUSTOMERS?
Yes. Low income households will better be able to afford electric service and
will thus be better situated to make timely monthly payments through
implementation of effective and enhanced payment assistance and low income
energy efficiency programs to supplement the federal Low Income Home Energy
Assistance Program and the Weatherization Assistance Program.
recommendation entails implementation of an "Affordable Energy Bargain
where low-income households that make regular, affordable utility payments and
participate in energy efficiency and education programs receive a basic block of
service, reduce and eliminate arrearages, and are free from the threat of service
termination. The goal of the Affordable Energy Bargain is long-term low-income
energy security.
Numerous program components are required to achieve the Affordable Energy
Bargain goal of long-term low-income energy security. Affordable Energy
Bargain is a payment structure that makes sense for the individual customer. In
this context
, "
affordability" for low-income households refers to regular monthly
payments that result in an energy burden - the proportion of disposable income
that is devoted to household electricity costs - equal to that of a median-income
household. In other words, if median-income energy burden in a particular
geographic area is 2., the low-income household participating in the
Affordable Energy Bargain should receive a payment subsidy such that the
household's payment results in a like energy burden. Again, the bargain
guarantees a basic level of service, but only for those households that responsibly
make regular, but affordable, payments. Such a construct is currently operative in
the State of Nevada.
Energy efficiency and energy education services are cornerstones of long-term
energy security, and should go hand-in-hand with payment assistance. Payment
assistance in the Affordable Energy Bargain should coincide with availability and
encouragement to participate in education and effective appliance and building
efficiency programs. Existing low-income energy efficiency programs should be
expanded so that all income-eligible households have access to approved
measures and services. It has been often been demonstrated that effective energy
efficiency programs lower energy bills and expenditures among program
participants.
Assuredly, there is cost associated with implementation of the Affordable Energy
Bargain. Ideally, funding the investment in low income energy security should
continue to come from both federal and non-federal sources. Funding needs to be
sufficient and dependable. Sufficiency in this context refers to the number of
program dollars needed to fully fund the Affordable Energy Bargain.
Dependability requires that program funding come from secure, reliable sources.
Non-bypassable, volumetric millage charges on utility bills of all customer classes
could be considered a secure, dependable funding source. Voluntary
contributions, vital as they are in reducing low-income energy burdens and
supplementing volumetric utility bill assessments, do not represent a dependable
long-term funding source.
HOW SHOULD PROGRAM DESIGN DETAILS OF THE "AFFORDABLE
ENERGY BARGAIN" BE DETERMINED?
There are numerous models that have been employed across the country to design
and implement comprehensive payment assistance and low-income energy
efficiency programs. Here, Public Utilities Commission could, as a part of its
Order in this general rate case, provide notice of a separate, collaborative
proceeding in which stakeholders would participate in a set of facilitated meetings
to determine program design and funding parameters. Ideally, participating
stakeholders would within a specified time period develop a set of
recommendations to the Commission for consideration and approval.
WHAT IS YOUR RECOMMENDATION REGARDING PROPOSED
REGULATION 10R.8?
I recommend that the Company s proposed Regulation 1OR.8 be rejected.
DOES THIS CONCLUDE YOUR TESTIMONY?
Yes.
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2005 NATIONAL ENERGY ASSISTANCE SURVEY REPORT
KEY FINDINGS
The Low Income Home Energy Assistance Program (LIHEAP) provided $2.183 billion in heating and
cooling assistance in FY 2005 to more than 4,9 million low-income households, The National Energy
Assistance Directors ' Association (NEADA), representing the state LIHEAP directors , received funding
from the FY 2005 Labor, Health and Human Services and Education Appropriations Act to conduct a
national survey of 1 100 LIHEAP recipients to collect information on the choices made by households in
FY 2005 when faced with high energy bills, The survey was designed to update the information provided
by same recipients as part ofa similar survey conducted by NEADA in 2003,
Among the key findings of the study:
Who Receives LIHEAP?
94 percent have at least one member who is elderly, disabled, a child under 18, or has a single adult
living with one or more children,
82 percent reported an annual income at or below $20 000, and 61 percent have annual income at or
below the federal poverty level.
The average household spent an average of 14 percent of their annual income on residential energy.
Medical and Health Problems
47 percent have a household member asthma, emphysema, heart disease, or stroke
19 percent have a household member that uses medical equipment requiring electricity, most
commonly nebulizers and oxygen machines and 47 percent of those households reported that they
went without medical care due to unaffordable energy bills in the past five years
32 percent reported that they did not fill their prescription or took less than their full dose of a
prescribed medicine due to energy bills in the past five years, This included 41 percent of households
with asthma, emphysema, heart disease, or stroke
16 percent reported that as a result of a home that was too cold, they became ill in the past five years
This included 21 percent of households with a serious medical condition and 26 percent of
households with medical equipment requiring electricity,
Signs of Unaffordable Energy Bills:
73 percent reported that they reduced expenses for household necessities because they did not have
enough money to pay their energy bills
19 percent that they kept their home at a temperature they felt was unsafe or unhealthy
18 percent left their home for at least part of the day because it was too cold or too hot
24 percent used their stove or oven to provide heat
20 percent reported that they went without food for at least one day in the past five years,
Inability to Pay Energy Bills: Many households were not able to pay their energy bills and some
suffered the consequences of service terminations in the past year.
44 percent said that they skipped paying or paid less than their entire home energy bill in the past
year. Households with children (67 percent) and those with income below 50 percent of the federal
poverty level (62 percent) were more likely to do so.
30 percent reported that they received a notice or threat to disconnect their electricity or home heating
fuel. Again, households with children (51 percent) and those with income below 50 percent of the
federal poverty level (51 percent) were more likely to experience this problem,
Exhibit No, 5 q)
8 percent reported that their electricity or gas service was shut off in the past year due to nonpayment
of utility bills, In addition, 16 percent of households with children and 22 percent of with income
below 50 percent of the poverty level reported a service termination in the past year.
18 percent said that they were unable to use their main source of heat in the past year because their
heating system was broken and they were unable to pay for its repair, because they ran out oftheir
bulk fuel and could not afford to pay for more, or because their utility used for heat was disconnected
Households with children (27 percent) and households with income below 50 percent of the poverty
level (36 percent) were more likely to face this problem.
13 percent reported that broken air conditioners or termination of electric service prevented them
from using their air conditioner, Households with a disabled member (19 percent), households with
children (19 percent) were somewhat more likely to report this problem,
Change In Financial Situation and Affordability of Home Energy Bills:
28 percent spent more than $2 000 on energy bills in the past year, compared to 23 percent in 2003.
54 percent reported that their energy bills were higher than they were the previous year
39 percent said that it was more difficult to pay their energy bills than they were in the previous year,
Constructive Actions Taken To Meet Energy Expenses: All respondents reported that they took
constructive actions to reduce their home energy bills, including putting plastic on windows, turning
down the heat at night, keeping shades and curtains closed in the daytime, using fans, washing clothes in
cold water, and using compact fluorescent light bulbs.
Effects of Un affordable Energy Bills of Housing: 24 percent reported that they made a partial payment
or missed a whole rent or mortgage payment in the past five years due to their energy bills , two percent of
respondents reported that they were evicted from their home, four percent reported that they moved in
with friends or family, and two percent reported that they moved into a shelter or were homeless in the
past five years.
Impact and Importance of LIHEAP Benefits for Recipient Households
63 percent said that they would have had to keep their home at an unsafe or unhealthy temperature
54 percent said that they would have had their electric or gas service disconnected, if LIHEAP
benefits had not been available
93 percent said that LIHEAP had been very important in helping them to meet their needs.
Changes Since the 2003 Survey: One of the important findings in this report is that many households
faced more difficult circumstances in 2005 and placed more importance on the receipt of LIHEAP:
23 percent of households reported that their energy bills exceeded $2 000 in 2003 while 28 percent
reported that their bills exceeded $2 000 in 2005
54 percent said that they would have kept their home at an unsafe temperature in 2003 ifLIHEAP had
not been available while 63 percent said they would have done so in 2005
47 percent said that they would have had their electricity or home heating fuel discontinued in 2003 if
LIHEAP had not been available, 54 percent said they would have experienced this problem in 2005,
For further information about this study contact: Mark Wolfe, NEADA, 202-237-5199
mlwolfe(a:;neada,org:,A complete copy of the study is on the NEADA website: www,neada,org