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Austin Energy bad debt increases (corrected)

Friday, April 24, 2015 by Sunny Sone

Austin Energy’s customer debt is skyrocketinghas risen. From September 2014 to the end of March, the electric utility’sAustin Energy’s bad debt — or bills unlikely to ever be collected — increased more than 300 percent, from $20.8 million to more than $85 million.

The rapid increase is due to a policy, put in place two years ago, allowing multiple payment arrangements, said Robert Cullick, director of communications for Austin Energy.

“It was hoped that providing more opportunities for repayment and reducing down payment requirements would increase the payback of money owed the City of Austin,” Cullick said in an email. “Unfortunately, the opposite has occurred and the provision of multiple opportunities for repayment has increased the size of the debt people owe the city, which is not good for the debtors or Austin.”

As of March 31, the total accumulated debt more than one month past due for inactive electric customers was $85.8 million, almost 70 percent of all inactive debt for all city utilities, which include Austin Water Utility, Austin Resource Recovery, the Watershed Protection Department and the Transportation Department. Inactive customers are those who have left the area or otherwise ended service. Cumulative active debt for electric services rose to $8.3 million, almost 60 percent of all debt for all city utilities.

Austin Energy calculates bad debt by three criteria: all customer debt from inactive accounts more than 30 days past due, all active customer debt more than one year past due and 50 percent of active customer debt six months to one year past due.

Cullick said staff recommended returning to previous policies, which covered down payments and offered fewer opportunities for payback. The utility has had to expense a portion of the debt, meaning it does not expect to recover it in the short-term. This has translated into budgeting for more debt expense than in previous years.

City Council has also requested a task force to help low-income active customers repay their debt.

“I want to make it clear, though, that the money is not owed only by low-income residents,” Cullick said. “In fact, the debt is spread out over the entire city and ratepayer base.”

The city calculated all accumulated debt from inactive accounts into the utility’s bad-debt considerations. Because the utility is legally barred from forgiving past due balances, officials say inactive debt calculations reflect decades of accumulated delinquencies.

This story has been corrected to note that AE’s bad debt did not rise by 300 percent.

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