20021125_319.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LA W
BILL EASTLAKE
LOU ANN WESTERFIELD
RANDY LOBB
DON HOWELL
NANCY HARMAN
BEV BARKER
TONY A CLARK
GENE FADNESS
WORKING FILE
FROM:LISA NORDSTROM
DATE:NOVEMBER 22, 2002
RE:IN THE MATTER OF THE APPLICATION BY AVISTA UTILITIES,
INTERMOUNTAIN GAS AND PACIFICORP TO IMPLEMENT A TWO-
YEAR PILOT WINTER PROTECTION PROGRAM THAT ESTABLISHES
MINIMUM MONTHLY PAYMENTS DURING THE WINTER MORA-
TORIUM, AND WAIVER OF WINTER MORATORIUM RULE 306, IDAP A
31.21.01.306. CASE NO. GNR-02-
On October 11 , 2002, the Commission received a joint Application from A vista
Corporation, Intermountain Gas Company and PacifiCorp (Applicants) seeking authorization to
implement a two-year pilot "Winter Protection Program" that establishes minimum monthly
payments during the winter moratorium period. Since February 2002, the Applicants
Commission Staff, Department of Health and Welfare, and Community Action agencies have
sought to address payment arrangement issues that culminated in this joint Application. Given
their desire to implement the pilot program prior to this winter s heating season, the Applicants
requested this Application be reviewed under Modified Procedure and become effective
December 2002 through November 30 2004. On October 31 , 2002, the Commission issued a
Notice of Application and Modified Procedure regarding the proposed program and solicited
DECISION MEMORANDUM
comments on the Application. Order No. 29145. Given concerns raised about the timing of this
Application, A vista filed a Notice to Withdraw from the case on November 20, 2002.
THE WINTER MORATORIUM
In 1978 , Congress enacted the Public Utility Regulatory Policies Act (PURP A) which
required this Commission to consider whether it was appropriate to adopt certain federal
standards concerning the termination of utility service to customers of gas and electric
compames.In 1979, the Commission implemented a "winter moratorium program" that
prohibited electric and natural gas utilities from disconnecting service to certain residential
customers during the winter heating months if those customers failed to make payments for
energy servIces. The program has been amended over time, but the essence has remained the
same.
Under Utility Customer Relations Rule 306 (and its predecessors), the utility service
of certain residential customers cannot be terminated during a three-month period ttom
December 1 through February 28 if customers fail to make payments for energy service. IDAP
31.21.01.306. Service may not be terminated for residential customers who declare they are
unable to pay their electric or natural gas bills and whose households include: (1) children -
under the age of 18; (2) elderly - above the age of 62; or (3) "infirmed persons" - those who
would be adversely affected by the termination of service for health or safety reasons. In
addition, all customers are encouraged to make reasonable payment plans in the event they were
unable to fully pay their monthly utility bills. The moratorium does not excuse customers ttom
paying their utility bills; it merely postpones the disconnection for failure to pay their bills.
Customers who participate in the winter moratorium plan and do not make payments during the
three-month period usually face large bills on March 1 or disconnection of service when the
moratorium is ended.
THE JOINT APPLICATION
The Application stated that "the purpose of this filing (is J to minimize the impact
winter bills have on customers least able to pay the accumulated winter use at the end of the
winter moratorium.Application at 2. According to the Application, the pilot "Winter
Protection Program" would allow customers, agencies and utilities to provide assistance for
customers to maintain uninterrupted service. The pilot program would also aid customers in
establishing a pattern of consistent monthly customer payments, allowing participating
DECISION MEMORANDUM
customers to avoid disconnection and having to pay the entire past -due balance before service is
reconnected.
The Applicants proposed to change the basic eligibility for participation. Any
residential customer who declared that he or she was unable to pay for service and then applied
for and met the income eligibility requirements for receiving energy assistance benefits under the
Low-Income Heating Energy Assistance Program (LIHEAP) would be eligible to participate in
the Winter Protection Program. Except as provided elsewhere in the Customer Relations Rules
no gas or electric utility may terminate service during the months of December through February
to any customer who participates in the Winter Protection Program. With the exception of
customers who qualify for a postponement under Rule 308 due to a serious illness or medical
emergency, termination of service may occur if customers do not participate in the Winter
Protection Program.
The Applicants proposed that participants in the Winter Protection Program must
make a minimum payment to remain in the program. Currently, eligible residential customers
are not required to make any monthly payment to avoid disconnection. Eligible low-income
customers would have to make a minimum monthly payment equal to one-half (Y2) the average
monthly bill during the three winter months of the plan as computed under the Level Pay Plan in
Commission Rule 313.06. Level pay plans are based on any existing arrearage plus the
anticipated monthly bills for a 12-month period. In other words, large heating bills ttom the
winter months are "levelized" over the entire year with the intended result of making the
monthly bills more affordable.
The Applicants proposed that customers who participate in the Winter Protection
Program may avoid termination of service by making up a missed monthly payment. To be
eligible to participate in the Winter Protection Program in the following year, customers must be
current on prior winter payments. Customers may use any source of funds/grants to satisfy the
payment requirements of the Winter Protection Program and are required to apply for LIHEAP
and encouraged to seek assistance from other programs such as Project Share.
To facilitate implementation ofthe pilot program, the Applicants requested that:
1) They be exempted from the provisions of Rule 306.01-06 during the two-
year pilot program;
DECISION MEMORANDUM
2) Winter Protection Program eligibility be defined as "any residential
customer who declares that he or she is unable to pay for utility service
during the specific months of December, January and February and whose
household qualifies for energy assistance (LIHEAP) ttom local
Community Action Agency ; and
3) The three-month winter moratorium from December 1 through February
28 be replaced with a minimal monthly payment plan equal to one-half
(1/2) of the Level Pay Plan amount. The Level Payment Plan amount will
be calculated according to Utility Customer Relations Rule 313.06.
The Applicants requested that this case be processed under Modified Procedure, i.
by written submission rather than by hearing. IDAPA 31.01.01.201-204. The Applicants also
requested the pilot program be effective December 1, 2002 through November 30, 2004.
STAFF COMMENTS
Moratorium Eligibility
Historically, Intermountain Gas coded customers who indicated they had children or
elderly in the home as moratorium participants at the time they signed up for service. The
coding was not generally updated to reflect changes in resident composition. Consequently,
Staffs comments referred to these customers as "moratorium eligible.Staff believes the
cumulative effect of this Intermountain practice was that many more customers were treated as
moratorium eligible than should have been. Whereas Intermountain Gas stated that fifty-one
percent (51 %) of the Company s residential customers were moratorium eligible, Staff noted that
no other Idaho energy utility had a moratorium eligibility rate above 3%.
As of the 2002-2003 heating season, Intermountain Gas will follow the same practice
as other Idaho energy utilities and require customers to declare eligibility for the moratorium by
notifying the Company if elderly, children, or infirm persons reside in the household ttom
December through February. Customers only need to declare eligibility if they are subject to
disconnection during that time ttame. Staff anticipated that the number of moratorium eligible
customers will be significantly lower during this heating season than it has been in the past.
Staff estimated that approximately 6 000 Intermountain Gas customers will be moratorium
eligible this heating section, as compared to the 105 494 customers who were coded as
moratorium eligible during the last heating season.
DECISION MEMORANDUM
Use ofLIHEAP Funds
Of Intermountain Gas' 105 494 moratorium eligible customers, 2 692 received
LIHEAP benefits and 463 received financial assistance ttom Project Share during the 2001-2002
heating season. Interestingly, 1 282 customers received LIHEAP benefits but were not coded as
moratorium eligible. Only 2.6% of last year s heating season moratorium eligible customers
would be eligible for the proposed pilot program, but the 1 282 LIHEAP customers who were
not moratorium eligible would qualify to participate in the pilot program. Although these
potential participants may be low-income customers who do not have children, elderly or infirm
customers in their households, it is also possible that Intermountain Gas ' records do not
accurately reflect the status of these customers' households.
In contrast to Intermountain Gas' experience , less than 1 % ofPacifiCorp s residential
customers declared eligibility for the moratorium. Thirty-three (33) moratorium eligible
customers received either LIHEAP benefits or financial assistance from Project Share during the
2001-2002 heating season. A much larger number of customers (1,117) received LIHEAP
benefits but did not declare moratorium eligibility. Staffthought it possible that these customers
were low-income but did not have elderly, children or infirm in their households. Alternatively,
since PacifiCorp requires customers to declare eligibility for the moratorium each year, it may be
that these customers would have been eligible for the moratorium but simply did not declare
eligibility. Even though less than 1 % of PacifiCorp s residential customers were moratorium
eligible during the 2001-2002 heating season, 3% of the Company s residential customers
received LIHEAP benefits. In other words, more customers would be eligible for the proposed
Winter Protection Program than declared eligibility for the existing moratorium.
Payment History and Disconnection
To put the moratorium eligible payment performance in perspective, Staff looked at
the residential customers payment performance as a whole.Eleven percent (11%) of
Intermountain Gas' residential customers and 25% of PacifiCorp s residential customers had a
past due balance as of March 1 , 2002. A relatively small number of customers were
disconnected during the heating season until March 2002. In March, Intermountain Gas
disconnected 2 539 residential customers and PacifiCorp disconnected 98. Of the 2 539
disconnected by Intermountain Gas, 2 062 (81 %) were moratorium eligible customers. Of the 98
customers disconnected by PacifiCorp, only 6 (6%) were moratorium eligible customers.
DECISION MEMORANDUM
Of Intermountain Gas' 105 494 moratorium eligible customers, 7 518 (7%) made no
payment during December, January or February of the 2001-2002 heating season.This
represented an increase from the prior year when only 4% made no payments. The increase in
non-payment may be related to the higher rates in effect during the 2001-2002 heating season.
Of PacifiCorp s 409 moratorium eligible customers, 101 (25%) made no payment during the
heating season. This represented a decrease ttom the prior year when 33% made no payments.
During March, April and May 2002, 5 040 (5%) of Intermountain Gas' moratorium
eligible customers were disconnected for non-payment.The cumulative amount owed
Intermountain at the time of disconnection for those three months was approximately $974 000.
Forty-eight percent (48%) of these Intermountain customers were reconnected within ten days of
disconnection, presumably after paying their balance in full or making suitable payment
arrangements. Of the 2 616 customers who remained disconnected, 2 182 still had not paid or
re-established service 90 days after disconnection. Approximately $414 000 remains unpaid at
this point. This amount represents only 25% of total write-offs for residential customers during
this time period. Although Intermountain Gas does not have precise figures, it estimates that
70% of customers whose accounts are written off after the heating season ends did not come
back on service within the year under the same name and social security number.
From March through May 2002, 6% of PacifiCorp s moratorium eligible customers
were disconnected for non-payment. This represented 24 customers that owed $12 552. Sixty-
three percent (63%) were reconnected within ten days. Due to a disparity in data provided by
PacifiCorp, it is not clear how many customers remained without service 90 days after
disconnection.
The Applicants did not claim that nonpayment of bills by residential customers in
general or moratorium eligible customers in particular threatened their financial health. In fact
the gross residential write off ratio (total residential revenue divided by total residential write
offs) for Intermountain Gas for 2001 was 1.8%. The ratio for PacifiCorp was 1.2%. However
the Applicants noted that moratorium eligible customers who failed to make payments during the
moratorium period often accumulated large bills that they were ultimately unable to pay before
disconnection.
DECISION MEMORANDUM
Pilot Program Eligibility Criteria
Staff agreed with the Applicants that the eligibility criteria for the existing
moratorium does not provide an objective criteria for distinguishing between those who are truly
unable to pay and those who are simply unwilling to pay. Energy utilities have advised Staffthat
while those declaring moratorium eligibility typically have children in the household, it is
unusual for elderly customers to declare moratorium eligibility. "Infirm" customers typically
provide medical certificates pursuant to Rule 308 of the Commission s Utility Customer
Relations Rules. Utilities generally do not know whether customers are low-income or have
other financial difficulties that make them unable to pay in full.
The proposed pilot program uses income criteria for LIHEAP as a proxy for
customers who are unable to pay. Staff believes that this is a reasonable, objective criteria to use
but that it automatically excludes a significant number of customers ttom participation. LIHEAP
customers are asked to make monthly payments equal to one-half of their regular level payment
amount. This amount is reasonable in theory but for customers with large arrearages, one-half of
Level Pay may still be beyond their means. Failure to make a monthly payment may result in
disconnection of service. Under the pilot program, there is no "safety net" for customers who
have children or elderly in the household. Likewise, customers whose income exceeds the
Federal Poverty Guidelines upon which LIHEAP eligibility is based will not be protected ttom
disconnection. This includes the "working poor , who may earn up to 200% of the Federal
Poverty Guidelines. For these customers and others who find themselves facing a financial
emergency, payment arrangements are available and probably will meet the needs of customers
if the utilities are flexible and willing to accept minimal payments in some cases.
STAFF RECOMMENDATION
After reviewing the information available to it, Staff was not convinced that the
proposed pilot program is the best approach. In any case, Staff believed it would be premature to
implement any pilot program during the 2001-2002 heating season because there has been
insufficient time to educate customers on how the pilot program would work and how they
would be affected personally. The Commission Staff has been contacted by a number
customers who are very concerned about the proposed pilot program and want to know more.
Staff was also concerned about the situation Intermountain Gas finds itself in with
respect to its past practices in determining which customers were moratorium eligible. Staff
DECISION MEMORANDUM
thought it would be prudent for the Company to change its practices this year rather than
introduce a totally new program. At the conclusion of the 2001-2002 heating season, the
Company would better know which customers are truly moratorium eligible.
Staff found that a two-year pilot program is the appropriate time ttame for gathering
information to aid in evaluation. However, as stated earlier, Staff maintained that it would not be
appropriate to implement the proposed pilot program at this time. Staff recommended that all
energy utilities be encouraged to gather information during this heating season to aid in
development of other alternatives for the Commission to consider next year.
PUBLIC COMMENTS
Intermountain Gas provided its residential customers with a separately-mailed
individual notice of the Application. PacifiCorp issued a press release and included a message
on customers' bills announcing the Application. As a result of media coverage and the
Applicants ' efforts to publicize the Application , the Commission received 134 public comments
as of November 21 , 2002. The following table depicts the number of comments in favor or
opposed to the Application:
UTILITY IN FAVOR OPPOSED OTHER
Intermountain Gas
PacifiCorp
A vista Corporation
Intermountain Gas accounted for 81 % of the total comments received. Of their 108
comments, 39% were in favor of the proposal and 49% opposed it. The other 12% did not
indicate their position but included their thoughts for the Commission consideration.
Seventeen A vista customers commented and were nearly unanimous in their opposition to the
proposed pilot program. Only one PacifiCorp customer filed a comment and was in opposition
to the Application. Although not a participating utility in the proposed pilot program, six Idaho
Power customers commented as well (one in favor, four opposed and one did not indicate a
preference).
Of the 134 that filed comments, 30 customers indicated that this proposal should be
postponed for at least one year so that more information and input could be gathered.
DECISION MEMORANDUM
FEDERAL FUNDING OF LIHEAP
As has been the case for the last seven years, Congress did not pass a federal budget
before the start of the federal fiscal year. According to the federal LIHEAP web site, the
Department of Health and Human Services (HHS) released $680 million to states under a
continuing resolution to keep LIHEAP programs operating until Congress approves the federal
fiscal year (FY) 2003 budget bills. Under the continuing resolution passed by Congress
September 27, 2002, sufficient funds were made available to fulfill states ' requests for the first
quarter ofFY 2003 (October - December 2002).
As of this date, Congress has adjourned without approving LIHEAP funds beyond the
first quarter of FY 2003. While Idaho s LIHEAP coordinator is confident that Congress will
fund LIHEAP at current levels when it reconvenes in January, no federal LIHEAP funds are
currently allocated for distribution during the winter moratorium months of January and
February 2003.
COMMISSION DECISION
1. Does the Commission wish to grant Avista Corporation s Motion to
Withdraw?
2. Does the Commission wish to implement the proposed Winter Protection
Program requested by the Applicants?
a. If so, under what customer eligibility rules mimmum payment
amount, program timettame, and/or effective date?
b. If not, does the Commission wish to gather additional information or
public input?
3. Does the Commission wish to direct the Applicants to gather additional
information during the 2002-2003 heating season for future Commission
consideration or review?
'Uo/t-(J~Y;;n,J
~ -
isa D. Nordstrom
M:GNRUO20 1- memo2.doc
DECISION MEMORANDUM