James Crawford: Notes Socialized Utility Rate Meeting, 10-10-12

Notes Socialized Utility Rate Meeting, 10-10-12By James Crawford

We attended the working group meeting for socialized utility rates the afternoon of 10-10-12. We had a couple hours of spirited discussion but ended up about where we started with not much resolved.

We had another discussion of the nondiscrimination clause which I discussed in my notes from last meeting. The section under discussion and the suggested changes follow:

NMSA 1978 62-8-62 Discrimination

No public utility shall, as to rates or services, make or grant any unreasonable preference or advantage to any corporation or person within any classification or subject any corporation or person within any classification to any unreasonable prejudice or disadvantage. No public utility shall establish or maintain any unreasonable differences as to rates of service either as between localities or as between classes of service. Nothing shall prohibit, however, the commission from approving economic development rates and rates designed to retain load or from approving energy efficiency programs designed to reduce the burden of energy costs on low-income customers pursuant to the Efficient Use of Energy Act.” (Highlighted material to be removed)

At this meeting we had a suggestion from personal communication between Carmela and Steven Michel of WRA and NEE fame for another version. Michel’s version changed the last line above to read. “Nothing shall prohibit, however, the commission from approving economic development rates and rates designed to retain load or from approving programs or rates designed to reduce the burden of energy costs on low-income customers including but not limited to, energy efficiency programs pursuant to the Efficient Use of Energy Act.”

The room quickly rejected the notion of adding “or rates” to the language. Utility representatives suggested the following change to the wording of the last line. “Nothing shall prohibit, however, the commission from approving economic development rates and rates designed to retain load or from approving low income programsas proposed by the utilities designed to reduce the burden of energy costs on low-income customersincluding but not limited to, energy efficiency programs pursuant to the Efficient Use of Energy Act.”

The utilities all seemed dead set against establishing a separate rate class for low income customers. Their main concern was the amount of default or past due accounts that was outstanding. They were most interested in establishing some way to negotiate settlements with delinquent account holders to reduce the total amount of bad debt to be written off. However in all the discussion there did not seem to be a clear cut path to allow them to do that. They were hoping that it could be a “program proposed by the utility” as laid out in the last version of the discrimination clause described above.

Nothing was really agreed to and most of the utilities were unwilling to commit to any idea without more study and legal analysis. NM Gas Company seemed to be the only one willing to offer suggestions.

The meeting was supposed to concentrate on discussion of the disconnect moratorium. We did have some discussion at the end but not in great detail. In my opinion, the disconnect moratorium and its unintended consequences is the root of the problem. However, that has not been clearly defined by the group.

A big share of the past due and delinquent payment problem is because of the disconnect moratorium. It is a moratorium against disconnecting a customer for nonpayment between November 15 and March 15. I think the intent was that customers would continue to pay as much as they could when bills spiked in the winter but could spread the difference out over the summer. However, many customers, with the encouragement of some consumer advocate groups, have viewed it as a payment moratorium instead of a disconnect moratorium and people are paying nothing during the moratorium period. The total past due bill has to be paid off after March 15 and must be paid before November 15 to again qualify for another moratorium season. That makes the utility bill burden even greater for indigent customers and leads to increased total defaults and merely defers disconnects for a few months.

We also heard that the moratorium is of no value in the southern part of the state where utility bills spike more in summer than winter. Default is greater in summer there.

The moratorium statute is found at NMSA 27-6-18 and reads as follows:

A: Except as provided in Subsection C of this section, unless requested by the customer, no utility shall discontinue or disconnect service to a residential customer during the heating season for nonpayment of the customer’s utility bill if the customer meets the qualifications to receive assistance pursuant to the low-income home energy assistance program from the administering authority during the program’s current heating season.

B. The utility shall make payment plan options available to the customer pursuant to rules adopted by the public regulation commission.

C. If the customer does not pay the past due charges from the customer’s utility bill before the beginning of the next heating season, the customer shall not be eligible for protection from discontinued or disconnected utility service pursuant to this section during the next heating season until the past due charges are paid in full.

NM Gas Company proposed the following change to part C.

Proposed C. If the customer does not pay the past due charges from the customer’s utility bill before the beginning of the next heating season and fails to make a minimum payment of $25.00 for current monthly charges during that heating season, the customer shall not be eligible for protection from discontinued or disconnected utility service pursuant to this section during the next heating season until the past due or minimum monthly charges are paid in full.

The idea is for the customer to at least pay some minimum amount after satisfying the past due amount from the last heating season so that the moratorium is not a total payment moratorium. There was a lot of discussion about whether the minimum payment should be a set amount like the sample $25 or a percentage of a normal monthly bill. I don’t think there was any resolution on this but the other utilities were going to take it back home for more study and analysis. I had to point out that “or” in the last line is the wrong word. If I was an indigent customer, I would choose the minimum payment and let the past due bill go. They all agreed that it should say “until the past due AND minimum monthly charges are paid in full”.

About this point we were done with the meeting and agreed to meet again on October 23 with promises by the utilities to have their study and analysis done and be prepared to finalize a proposal. We were still seriously thinking about how to work in ability to negotiate settlements with folks with past due accounts.

On Thursday, the day after our meeting, Jim Williamson of PRC sent out a note that sent all we had been talking about back to the drawing board. He cited a statute that clearly prohibits any kind of negotiated settlements. The language follows:

NMSA 62-8-5. Adherence to schedules. 

No public utility shall directly or indirectly, by any device whatsoever, or in anywise, charge, demand, collect or receive from any person a greater or less compensation for any service rendered or to be rendered by such public utility than that prescribed in the schedules of such public utility applicable thereto then filed in the manner provided in this act, nor shall any person receive or accept any service from a public utility for a compensation greater or less than that prescribed in such schedules. 

So it appears that neither discriminatory rates nor negotiated settlements are very good options for dealing with indigent utility bills.

In thinking about it, I opined that we have not adequately defined the problem. I tried to do that and offered some suggestions as a starting point for a solution which I sent to the members of the working group. My paper on that is attached as well.

James Crawford: Low Income Advisory Board Alternatives

Low Income Advisory Board Alternatives

By James Crawford October 12, 2012

After two meetings of the Low Income Advisory Board, I think it suffers from the same malady common to many similar groups. We have not done a good job of identifying and articulating the problem.

We started with an assumption that the problem was Section 62-8-6 the non-discrimination clause and that making a few subtle wording changes would allow the utilities to request programs and/or rate schedules specific to a new low income class of rate payers. In other words it would allow for discriminatory rates based on income levels.

Nearly all participants were uncomfortable with that as the problem definition or the needed fix. The utility representatives characterized the problem as one of delinquent payments and felt that the best fix would be to provide a way for the utilities to be able to negotiate settlements with past due account holders so that past due accounts did not become total losses. We spent a lot of time discussing scenarios of how to accomplish that goal.

However, on Thursday (10-11-12) Jim Williamson from PRC sent out a note that throws all the solutions we have discussed so far into a cocked hat. Jim sent us language from 62-8-5 that bars any kind of negotiated settlements.

We then have to conclude that neither discriminatory rates nor negotiated settlements are a solution.

After participating in the last two meetings, my perception is that the problem is related to the unintended consequences from the November 15 to March 15 disconnect moratorium. The disconnect moratorium was intended to keep the utilities from disconnecting customers for non-payment during the winter when lives might be in danger from the cold.

I am sure the intent was for customers to continue to pay what they normally were paying but would be able to defer weather related spikes in their bills spreading payment through the summer. However, one unintended consequence has been that customers, with encouragement from some consumer advocate groups, have interpreted the moratorium as a payment moratorium rather than a disconnect moratorium. After March 15, the total past due amounts come due, compounding further the indigent customer’s ability to pay. All the moratorium really accomplishes is to defer disconnects for a few months. Utility company defaults are increased because of the moratorium.

Another unintended consequence is that it does not do anything for customers in the southern part of the state where utility bills spike in the summer instead of the winter. So we also have geographic discrimination.

The problem presented by the Legislature in HJM13 was how to help indigent customers with utility bills. New Mexico already has a perfectly good program (the Low Income Home Energy Assistance Program, LIHEAP) to do just that. However, every time LIHEAP comes up, the lack of funding is mentioned. The logical thing seems to look at how to fund LIHEAP rather than fooling with the discrimination and negotiation clauses.

I have the following suggestions as possible alternatives:

A: Repeal the moratorium and add a percentage to GRT that goes to fund LIHEAP. Indigent customers can get the help needed to bridge the gap between what they can afford to pay and their total obligation. The rest of us know how much we are paying and for what purpose. All consumers have skin in the game. Utility bills are paid in full and there is no need for discriminatory rates or negotiated settlements. Out of state consumers would also be paying. People subject to tax pyramiding would be paying multiple times. Some people would be paying to cover defaults in a utility that they do not use.

B: Repeal the moratorium and give the utilities the ability to attach a LIHEAP rider to each bill based on experienced non-payment levels. Funds would go to LIHEAP to again bridge the gap between what indigent folks and pay and what they are charged. This would eliminate the seasonal and geographic problem we have now. The rate payers would be able to see how much they are paying and the amount would vary based on experienced payment levels rather than being forever fixed like a tax. Again all customers have an equal amount of skin in the game. Customers of a given utility are only paying to cover defaults within that company. Again utility bills are paid in full and there is no need for discriminatory rates or negotiated settlements. We already have a precedent for this kind of rider with the green energy rider.

English: Jesse Jackson at LIHEAP

English: Jesse Jackson at LIHEAP (Photo credit: Wikipedia) — What Has Happened To Jackson Jr.?