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Council to consider new utility debt policy

Thursday, November 20, 2014 by Tyler Whitson

City Council will likely consider a new utility debt policy soon, after learning from staff that customers have accrued about $76 million in electricity debt alone, mostly over the past three years.

Staff also reported that customers owe more than $21 million in water and wastewater bills, more than $9 million in waste management and about $9 million in drainage and transportation user fees.

When consulting utility boards and commissions on the item, staff has provided two primary options for action. One comes from the Low Income Consumer Working Group’s Working Committee — which consists primarily of consumer advocates — and offers customers relatively lenient repayment options compared to other public utilities in the nation.

Staff’s alternatives are more similar to the practices the city employed before it instituted a moratorium on utility disconnects in October 2011 — when electricity debt was about $15 million — as well as similar to the practices of other public utilities.

The Resource Management Commission voted in support of staff’s recommendations Tuesday, though it did not vote on the arrearage program for regular customers.

The Electric Utility Commission voted in support of staff’s alternatives Monday, though there was some disagreement.

The Water and Wastewater Commission voted in support of the working committee’s recommendations for payment arrangements and in support of staff’s alternatives for arrearage management last Wednesday.

Austin Energy’s Vice President of Customer Care Services Jawana “J.J.” Gutierrez said that staff might present the item to Council for consideration and possible action at its final meeting of the year on Dec. 11.

Arrearage management would be a program in which the city helps customers pay off their overdue debt by agreeing to pay the majority of it over time, if customers make smaller payments.

Arrearage would only apply to debt that customers accrued over a “stabilization period” between October 2011 and January 2013, when the city did not disconnect utilities over unpaid debt while it switched over to a new billing system.

The stabilization period debt amounts to $7.9 million for regular customers and a half-million dollars for low-income customers on the Customer Assistance Program, or CAP. Staff says that the working committee’s arrearage recommendations would cost an additional $5.8 million to recover $8.4 million.

Gutierrez pointed out that the 78745 ZIP code has the highest amount of arrearage debt, and that debt is not necessarily more concentrated in lower-income areas.

The city returned to active collections between January and December 2013. Since December 2013, the city has operated under a set of interim collection policies while it develops a new set of policies. Debt has continued to grow.

The interim policy allows regular customers to enter into payment arrangement options that include paying off overdue debt in equal installments while still paying current bills. The city does not require a down payment as part of the arrangement and will not disconnect customers who have set them up, given that they continue to pay on time.

Most customers have a 36-month arrangement term limit, though CAP customers have none. Customers may enter into three arrangements, and the city allows a fourth if the customer can provide a valid reason, such as illness. When a customer fails keep an arrangement, he or she must begin a new one. The city disconnects the utility after four broken arrangements.

There is currently no arrearage program.

The options that Council will consider consist of different recommendations for regular customers and CAP customers.

The working committee consisted of representatives of Austin’s utility departments, advocacy groups such as Austin Interfaith, and other agencies such as Texas Legal Services and the Austin Energy Discount Steering Committee, which includes community organizations that provide direct services to residents.

Staff put its alternatives together in response to the working group’s recommendations. Gutierrez told the Electric Utility Commission that staff believes its recommendations are more “fiscally responsible” than the working group’s recommendations.

The working group recommends that payment arrangement terms for regular customers last up to 24 months, or 36 months if a customer service supervisor allows. Under the same conditions, staff recommends eight and 12 months.

The working group would not change the current number of arrangements for regular customers, but would require a down payment equal to the first month’s installment. Staff would allow only one arrangement, plus a second with valid reason, and would require a 50 percent down payment, with possible exceptions.

The working group recommends that arrangement terms for CAP customers be unlimited, with payments above the current bill not exceeding five percent of the federal income poverty level, or about $48. It also recommends that CAP customers have the same number of available payment arrangements as regular customers, but with no down payment required.

Staff’s recommendations are similar, though it would impose a 36-month maximum arrangement term and allow only two arrangements, plus a third with valid reason.

For the arrearage program, which consists of three trimesters, the working group recommended that regular customers pay 40 percent of debt in the first trimester, 30 percent in the second and 20 percent in the third, with the city paying the rest. The length of the program would vary between 12 and 36 months, depending on how much the customer owes.

The working group does not recommend that the city require regular or CAP customers make a down payment.

Staff does not recommend an arrearage program for regular customers, but a special payment arrangement with a 60-month term limit and two arrangements allowed, plus a third with valid reason.

The working group recommends that CAP customers pay 20 percent in the first trimester, 30 percent in the second and 40 percent in the third. Staff agrees with this recommendation.

Neither the working group nor staff recommends putting an arrearage management program in place for current or future debt.

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