Did you ever consider what happens when some people are unable, unwilling, or simply don’t pay their utility bill? Ultimately we all pay. Utilities are companies that operate as businesses just like any other business, except that unlike many businesses they deliver their product first and then ask for payment later. That makes it even harder to recover their costs. Unpaid bills ultimately are just another cost of doing business. And, these costs are passed on to all paying utility customers.
In today’s economy, with high unemployment, home foreclosures and many people simply unable to make ends meet we are experiencing significant levels of unpaid utility bills. The industry refers to this as arrears, bad debt or uncollectible accounts. Recently we estimated that industry-wide there are $3.5 billion in unpaid utility bills, affecting more than 10 million U.S. households.
Many factors play into the issue of uncollectible accounts. In most cold weather localities utilities are required by law to provide electricity and natural gas from October through March, regardless of whether a customer pays his or her bill. During this time many customers get so far behind on their bills that they simply never get caught up. We also know that the utility bill is often the last bill to be paid monthly and if there isn’t enough money to pay all the bills it is the one that goes unpaid.
Utility companies work hard to identify those who should be able to pay their bills through data analysis known as “behavioral scoring.” This methodology helps the utility work with specific customers in ways to encourage payment. Additionally, some utilities report unpaid accounts to the credit bureaus, which can have an adverse affect on a customer’s credit. Ultimately, the best solution is increased personal financial responsibility. For example, discretionary spending on non-essentials should be curtailed so that bills for essential services, such as those utilities provide, can be paid.
LIHEAP Helps Customers Who Cannot Pay Their Utility Bill
For many people, paying their monthly bills is an ongoing challenge. Fortunately our nation is full of people who are willing to share the burden of those who are unable to pay. In many localities one way of helping those who cannot pay their energy bills is the local fuel fund. For example, in the Washington, D.C. area there is the Washington Area Fuel Fund. This fund is administered by the Salvation Army. Contributions are made by local individuals and companies, and funds are distributed to needy customers of the local natural gas and electric utilities. You can also visit the National Fuel Funds Network for information on similar programs.
Weatherization is an additional method of assisting low-income households. The recent federal stimulus provided $5 billion of low-income weatherization funds, which are used to increase insulation and in some cases provide higher efficiency furnaces and water heaters. These methods decrease the energy burden for low-income families.
Ultimately the greatest contributor to households needing energy assistance is LIHEAP, the Low Income Home Energy Assistance Program. In 2008, thanks in great part to AGA’s efforts on Capitol Hill, Congress appropriated a record $5.1 billion for LIHEAP, but even with that level of funding we still find $3.5 billion in unpaid utility bills, due in great part to our stalled economy. It is clearly time to increase LIHEAP funding once again to ensure that needy households continue to have warm, safe homes.