20021122Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
RANDY LOBB
DON HOWELL
NANCY HARMAN
BEV BARKER
TONYA 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 MORATORIUM, AND A WAIVER OF WINTER MORATORIUM RULE 306, IDAPA 31.21.01.306. CASE NO. GNR-U-02-1.

On October 11, 2002, the Commission received a joint Application from Avista 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 1, 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 comments on the Application. Order No. 29145. Given concerns raised about the timing of this Application, Avista 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 (PURPA) 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 companies. 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 from December 1 through February 28 if customers fail to make payments for energy service. IDAPA 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 from 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] 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 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 (½) 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 from 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 of the pilot program, the Applicants requested that:
They be exempted from the provisions of Rule 306.01-.06 during the two-year pilot program;

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) from a local Community Action Agency”; and

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.e., 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, Staff’s 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 from December through February. Customers only need to declare eligibility if they are subject to disconnection during that time frame. 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.
Use of LIHEAP Funds
Of Intermountain Gas’ 105,494 moratorium eligible customers, 2,692 received LIHEAP benefits and 463 received financial assistance from 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% of PacifiCorp’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. Staff thought 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.
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 from 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.
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 Staff that 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 from 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 from 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 of 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 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 frame 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 42 53 13 PacifiCorp 0 1 0 Avista Corporation 0 16 1
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’s consideration. Seventeen Avista 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.
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 website, 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 of FY 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
Does the Commission wish to grant Avista Corporation’s Motion to Withdraw?
Does the Commission wish to implement the proposed Winter Protection Program requested by the Applicants?
If so, under what customer eligibility rules, minimum payment amount, program timeframe, and/or effective date?
If not, does the Commission wish to gather additional information or public input?
Does the Commission wish to direct the Applicants to gather additional information during the 2002-2003 heating season for future Commission consideration or review?

Lisa D. Nordstrom

M:GNRU0201_memo2.doc
DECISION MEMORANDUM 9