Staff Comments.doc

LISA D. NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

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.
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CASE NO. GNR-U-02-1

COMMENTS OF THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Lisa D. Nordstrom, Deputy Attorney General, and in response to the Notice of Application and Notice of Modified Procedure issued in Order No. 29145 on October 31, 2002, submits the following comments.
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, Idaho Power, Commission Staff, Department of Health and Welfare, and Community Action agencies 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 be effective December 1, 2002 through November 30, 2004. In Order No. 29145 the Commission issued a Notice regarding the proposed program and solicited comments on the Application. Avista filed a Notice to withdraw from the case on November 20, 2002. Therefore, Staff has limited its comments to addressing the issues raised with respect to Intermountain Gas and PacifiCorp.
BACKGROUND
The Commission has addressed the contentious issue of what restrictions should be placed on utilities with respect to disconnection of service during the winter months in two previous cases, which are summarized in Attachment A. Although the Commission first articulated its policy on winter disconnections in 1978, the final rules did not become effective until 1980. The “winter moratorium,” as it came to be called, restricted disconnection of households with elderly, children or infirm persons who were unable to pay in full for service during the months of December, January and February. The Commission noted that it was possible that “laggards who are capable of paying their utility bills or entering payment arrangements will refuse to do so by holding hostage their minor children, their elderly or their infirm.” Order No. 15344 at 6-7. However, the Commission observed that the length of time during which the potential for this to happen was short. The Commission also allowed energy utilities to charge interest on past due bills to provide additional incentive for customers to pay.
In 1987, the Commission stated its intention to modify its winter moratorium policy with the following four goals in mind: 1) preserve public health and safety by limiting the circumstances under which service may be terminated during winter months; 2) encourage the development of good payment habits by customers; 3) provide relief from impossible financial obligations; and 4) facilitate collection of problem accounts. Ultimately, the Commission decided to retain the existing winter moratorium policy, stating that “the better balance of our four goals is to preserve the basic protections of the current moratorium rules.” General Order No. 177 at 3. To encourage customers to make at least a minimal payment, the Commission required utilities to offer a Winter Payment Plan covering the months of November through March. Although the new plan allowed customers to pay one-half of their level pay amount during these five months, customers were not required to enter into a Winter Payment Plan. A customer who agreed to a plan but failed to pay was still protected from disconnection during the moratorium months of December through February.
For more than two decades, the Commission has encourage customers to pay their bills while at the same time protecting those households with elderly, children and infirm persons from disconnection of service during the winter. Customers who were able to pay but simply took advantage of the moratorium to skip monthly payments were discouraged from doing so with the introduction of a financial penalty (i.e., interest on late payments). The Winter Payment Plan failed to be much of an incentive for payment, however, and very few customers participated. During last year’s heating season, only one PacifiCorp customer was enrolled in the Winter Payment Plan. No Intermountain Gas customers participated.
The Commission is once again faced with the question of whether to depart from its long established moratorium policy. The current moratorium policy focuses on the health and safety of residential households that have a self-declared inability to pay in full. The Applicants’ proposal focuses on customers’ ability to pay and requires some payment to prevent disconnection. Under the proposed pilot program, only residential customers who meet the income criteria of the Low Income Home Energy Assistance Program (LIHEAP) will be eligible to participate. The presence of children, elderly or infirm in households will not be a factor in determining eligibility. Participants will be required to make monthly payments of at least one-half the regular Level Pay amount. LIHEAP benefits will be used to reduce the underlying arrears on accounts and can be used to satisfy customers’ monthly payments. Participants who fail to make their monthly payments will be subject to disconnection. Attachments B and C compare the existing moratorium policy with the pilot program proposal.
STAFF ANALYSIS
Eligibility
Historically, Intermountain Gas asked customers signing up for service for the first time whether they had children or elderly in the home. The accounts of customers who answered affirmatively were coded as moratorium participants at that time. The coding never changed unless the customer contacted the Company for some reason and the Customer Service Representative updated the customer’s information at that time. Potentially, a customer whose children had long since moved away from home would still have their account coded as eligible for protection from winter disconnection. For purposes of this discussion, Staff will refer to these customers as “moratorium eligible.” The cumulative effect of this practice was that many more customers were treated as moratorium eligible than should have been. Intermountain Gas states that fifty-one percent (51%) of the Company’s residential customers were moratorium eligible. 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 there are elderly, children, or infirm persons in the household from December through February. Customers only need to declare eligibility if they are subject to disconnection during that time frame. Staff anticipates that the number of moratorium eligible customers will be significantly lower during this heating season than it has been in the past. Staff estimates that approximately 6,000 Intermountain Gas customers will be moratorium eligible this heating section, as opposed to the 105,494 customers who were coded as moratorium eligible during the last heating season.
Use of LIHEAP Funds
Out 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. It is 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.
Attachment D shows the relationship of Intermountain Gas and PacifiCorp’s customers receiving LIHEAP benefits to the total number of residential customers. As noted earlier, the number of Intermountain Gas’ customers who were moratorium eligible is much higher than what Staff expects it to be in the future. However, it is important to note that 51% of Intermountain Gas’ residential customers were moratorium eligible during the 2001-2002 heating season. Only 2% of the Company’s residential customers received LIHEAP benefits during that time frame. Under the proposed pilot program, LIHEAP customers are the only customers who will be eligible. Regardless of whether they were truly eligible to participate in the moratorium in the past, customers have come to rely on the safe haven afforded by the current moratorium policy. Staff anticipates that Intermountain’s new requirement for customers to declare moratorium eligibility will drastically reduce the number of eligible customers.
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
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 represents 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. When faced with higher than expected bills, customers who are unable to pay in full sometimes make no payment rather than try to pay something towards the amount owing. Of PacifiCorp’s 409 moratorium eligible customers, 101 (25%) made no payment during the heating season. This represents 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 owing at the time of disconnection for those three months was approximately $974,000. Forty-eight percent (48%) of these 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.
If service remains disconnected and the customer has not contacted the Company, activated service at another location, or filed bankruptcy within 90 days, the account is “written off” and turned over to an outside collection agency. Collection agency fees vary, but may be as high as 50% of the amount due. If the customer requests service at some point in the future (e.g., a gas space heating customer wanting service at the beginning of the next heating season), the Company will require payment in full before providing service and thus reduce the net write-off. Depending on what action the collection agency had taken to collect the debt prior to the customer requesting service, the Company may still have to compensate the collection agency for its efforts. Although Intermountain Gas does not have precise figures, it estimates that 70% of customers whose accounts are written off after the heating season ends do 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 above data seems to suggest that residential customers in general fall behind in paying their bills during the heating season. While it is clear that some residential customers fall behind in paying their winter bills, it appears that the main issue is when, rather than whether, customers pay. A significant number of customers are prompted to pay only when their service is disconnected.
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.
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 did note 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.
Eligibility Criteria
Staff agrees 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 advise Staff that 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 it automatically excludes from participation a significant number of customers. 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 in some cases, willing to accept minimal payments.
STAFF RECOMMENDATION
Staff agrees with the Applicants that customers should be encouraged to pay their bills and that those who can pay either in full or in part should be required to pay. However, after reviewing the information available to it, Staff is not convinced that the proposed pilot program is the best approach. In any case, Staff believes it would be premature to implement any pilot program during the 2001-2002 heating season. Time has simply grown too short to educate customers on how the pilot program would work and how they would be affected personally. The Commission has been contacted by a number of customers who are very concerned about the proposed pilot program and want to know more.
Staff is also concerned about the situation Intermountain Gas finds itself in with respect to its past practices in determining which customers were moratorium eligible. Staff believes 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 will better know which customers are truly moratorium eligible.
Staff agrees with Applicant’s that a two-year pilot program is the appropriate time frame for gathering information to aid in evaluation. However, as stated earlier, Staff maintains that it would not be appropriate to implement the proposed pilot program at this time. Staff recommends 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.

Respectively submitted this day of November 2002.

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Lisa D. Nordstrom
Deputy Attorney General

Technical Staff: Beverly Barker

LN:i:umisc/comments/gnru02.1lnbab

STAFF COMMENTS 1 NOVEMBER 21, 2002