Recent utility data shows a surprisingly small number of customers have been applying for energy assistance programs over the past few months. Why is this bad for utilities, and what should they do to fix it? The answer lies in customer education.
The Federal CARES Act, state governments, community organizations and utility companies from coast to coast have been infusing cash into Covid-19-related crisis recovery programs. And termination moratoriums are still in effect in many regions of the country.
This is great news for struggling utility customers. But our energy partners are reporting that fewer-than-expected households are actually applying for the assistance programs that distribute emergency funds.
This could be dire.
If families don’t ask for the financial assistance they need, they won’t get it. If they don’t get it, they could find themselves in a worse financial situation than they’re already in.
If people can’t pay their bills when shut-off moratoriums get lifted, utility call centers will face a flood of inquiries, and service crews could be terminating power for hundreds, or even thousands, of customers.
Why Are Assistance Applications Lagging?
To answer this question, let’s take a step back to understand the typical ebb and flow of assistance enrollment.
We spoke recently over Zoom with our friend Chad Quinn, CEO of Dollar Energy Fund, a nonprofit organization that awards cash grants to customers of 45 utility companies around the U.S. He explained that when utilities are pursuing collections of unpaid customer bills–for example, each April here in Pennsylvania, after annual winter shut-off moratoriums have ended–that’s typically when Dollar Energy call centers see a spike in calls from panicking customers for financial assistance. (You can read more about our conversation with Quinn here.)
People who persistently face economic hardship, Quinn said, understand that they’re relatively ‘safe’ if they choose not to pay high winter heating bills as long as state law prohibits their utility from shutting them off. They may need to pay for food and rent instead of gas or electric bills with their limited incomes until Spring, as they grapple with the age-old heat or eat conundrum that so many vulnerable customers face.
Likewise, now, as shut-off moratoriums are in place due to Covid-19, the millions of Americans who’ve lost their jobs and can’t afford to pay their bills have welcomed the break from accruing late fees. They’re breathing a little easier knowing they won’t be disconnected at the moment, which likely explains the lag in assistance program applications right now.
But many newly-unemployed customers have never faced financial hardship like they’re experiencing now. And, unlike their historically-low-income counterparts who are all too familiar with seasonal billing/moratorium cycles, these newly-vulnerable customers may not know that costly collections, late fees and termination notices lie ahead.
Just like the ending of annual winter moratoriums each April, late notices after Covid moratoriums are lifted will eventually commence, and shut-off warnings will get posted.
That’s when customers will have to leap into action, come up with large sums of money to cover several months’ worth of unpaid bills and late charges, or quickly apply for energy assistance through programs like Dollar Energy or LIHEAP.
Here’s how that plan could go terribly wrong, and why utility companies should intervene now.
Making a Bad Situation Worse
While moratorium rules vary by state, Pennsylvania’s Department of Human Services website explains that, “…Low-Income Home Energy Assistance Program (LIHEAP) will be accepting applications for its Recovery Crisis Program beginning May 18, 2020. The program is scheduled to run through August 31, 2020, or until funds are exhausted — whichever comes first.”
That means the clock is ticking for the 2 million out-of-work Pennsylvanians who should be applying for assistance.
What’s worse, however, is that experts watching the industry here in the Keystone State speculate that Covid shut-off moratoriums could be lifted on September 1–precisely one day after LIHEAP’s crisis funding application deadline passes.
Unfortunately, when that day comes, it will be too late for customers to apply for help through the LIHEAP crisis program. The day the moratorium is lifted in PA will be the day late notices and shut-off warnings get processed.
Remember: that shut-off notice is the nudge many low-income customers wait for before they pick up the phone to ask for help.
What could complicate matters further is that, depending on local rules, some assistance programs require a shut-off notice before a customer is even allowed to apply. So, if a shut-off notice isn’t sent until after the application deadline passes, there’s no logical way people can get the financial help they need.
Whether customers didn’t know they could apply for help or simply couldn’t because of rules by the time the moratorium gets lifted, we can expect with certainty that a billpay crisis will erupt.
Utility customers need to be educated about energy assistance ASAP. Tell them what requirements they need to meet in order to qualify, what documents they’ll need to show, and what steps they should take to apply.
Luckily, utility companies have the power to target, reach and educate their customers about the kinds of programs that are available. And they can disseminate information swiftly and efficiently on how to enroll to the customers who need this information most.
Pay Attention to Two Distinct Yet Vulnerable Groups
In order to mitigate this slow-moving disaster, BlastPoint is advising its utility customers to reach out to two particular groups:
- Customers who are regularly in need;
- Customers who are newly in need.
Customers who are regularly in need
Our data analysis from one region shows that the first group, households that typically pay late or have historically been marked as ‘low income,’ are now showing much higher balances than expected: they owe, on average, a full $250 more at this moment than what they would typically owe at this time of year.
That means they have most likely entered the Yellow Customer Balance Risk Zone, meaning they are at risk of accruing a balance too high to pay off.
This first group is probably already aware of assistance programs. Many of them have likely already been through the process of applying. So the challenge for utilities is to motivate these customers to take action now instead of waiting until the last minute.
Messaging to this group should raise awareness about the limited availability of funds, encouraging them to get their paperwork in order and to apply or reapply for any assistance available right now, before the shutoff notice arrives.
Customers who are newly in need
Our results further conclude that current payment patterns are showing a marked spike in new late payments from households that have never paid late before, and this includes households that typically earn six figures, which outlines just how dire the economic situation has become.
Customers who have never previously needed or been eligible for energy assistance programs require targeted intervention from utility companies. These customers may feel completely lost about where to even begin. They may have basic questions such as:
- Is there any way to get help with my utility bill?
- What programs exist?
- What are the requirements?
- How do I apply?
Identifying these specific households will enable utility companies to reach out proactively with straightforward answers to these questions. Newly at-risk customers will then be able to navigate assistance applications more confidently.
What’s At Stake for Utilities?
The stakes are high for engaging effectively with customers in need. So far, our analysis of one region shows the total amount of unpaid customer bills is roughly $20M higher than expected–a startling number that should catch the utility industry’s attention.
The Associated Press reports that John Coleman, Pennsylvania Commissioner, wrote in a recent court motion that while natural gas customer accounts that are subject to termination remain at roughly the same levels this year as they were last year at this time, 100K more households and businesses this year over last year are currently subject to electricity, phone and water terminations.
Which means that utility companies will face higher expenses and fewer payments coming in when moratoriums are lifted, leading to potentially record amounts of lost revenue.
Historical payment data shows that once people are enrolled in assistance programs, they are much more likely to pay subsequent bills on time. According to most assistance program guidelines, non-payment can end a customer’s eligibility, so people receiving that assistance tend to make it a priority to pay.
All of this data, taken together, should raise alarm bells. That’s why we believe the time to educate customers about assistance programs and to share information on how to enroll and re-enroll is now, before it’s too late.
Protecting customers with energy assistance is essential, especially during a crisis. It supports their health and financial well-being. But assistance also helps utilities safeguard their revenues–by ensuring they receive timely payments so they can avoid the expense of costly terminations, and by preventing call centers from being overwhelmed in the future.
If you have concerns about at-risk customers in your region or would like help understanding which households in your territory are at most risk, please contact us. BlastPoint uses predictive analytics to help utilities identify which particular households are most in need, which are historically in need, and which are newly in need, and we specify the best methods of reaching those customers. To learn more about this and other Energy Solutions, click here.