Residential and small business customers are more than $40 billion in arrears; collection actions alone won’t solve the problem.
As the first spike in COVID-19 cases occurred and the pandemic took hold in the U.S. in March of 2020, millions of people lost their jobs, were temporarily furloughed or experienced pay cuts. For many it was the first time in their lives they did not know how they would afford to pay for housing, food, credit or monthly utility bills.
Governments issued mandatory moratoriums on evictions and utility disconnects. In some cases, utilities stepped forward with voluntary programs. Nearly a year later, the National Energy Assistance Directors’ Association (NEADA) says 55 percent of the U.S. population—180 million people—are covered by utility shutoff bans. Thirteen states have annual winter moratoriums that kicked in as temperatures dropped, while 28 states have COVID-19 restrictions that extend from the end of February to May. Another three jurisdictions—New York, Virginia and the District of Columbia—have indefinite COVID-19 moratoriums. Only seven states do not have either winter- or pandemic-related bans on disconnecting customers for unpaid utility bills.
Unpaid bills represent a huge liability for utilities across the U.S. The financial burden also presents a major communications challenge. The depth of the problem is larger than anything companies and municipalities have ever faced, with a growing number of ratepayers in arrears who are unaware of programs designed to help them meet these obligations. Statistics help to illustrate the issue:
- The NEADA estimates that by March residential and small business customers will owe $35 to $40 billion in overdue electric and gas utility payments.
- According to Moody’s Analytics, a study of 12 million renters who have fallen behind on rent and utilities showed they owed an average of $5,850 at the end of 2020.
- In New Jersey, Public Service Electric & Gas estimates that 77 percent of residential accounts that are more than 90 days overdue are customers who previously did not qualify for existing programs designed to assist low-income households.
- Smaller municipal systems are not immune. The city of Pasadena, Calif., reported in January that the number of accounts in arrears 60 days or more was up 816 percent year over year, reaching $7.7 million.
- NEADA said that prior to the COVID-19 pandemic about 26 million American households qualified for some type of energy assistance. Because of job losses caused by the pandemic, the group says another five million households now meet income guidelines, meaning about a quarter of U.S. families qualify for assistance.
- The issue extends beyond electric and gas bills. According to the California Water Boards, one in eight households in the state are behind on water bills, owing $1 billion.
As states begin to lift bans on service disconnects, utilities face a looming collections challenge. Collections actions won’t completely resolve the issue, and utilities risk reputational damage if they are viewed as too aggressive with shutoffs. But if utilities adopt a strategy that views 2020’s unpaid balances as a 2021 revenue opportunity, customer communications and education programs can help with cash recovery objectives.
Utilities should segment past-due customers as part of their communications strategy. First-time in arrears and long-term in arrears are very different audiences with distinct needs. Two specific groups were particularly hard hit by pandemic-related job actions: younger employees who were recent hires and workers aged 55 and above. In many cases, these customers had never been late with utility payments and are not familiar with programs that provide utility bill assistance. Making sure these two groups are reflected in images used to promote utility programs sends an inclusive message.
The tone used to communicate with past-due customers is key. Utilities need to adopt a “we’re here to help” attitude in their outreach. Avoid terms like “income eligible” and “you’re past due.” These consumers often feel ashamed that, after years of paying their bills in a timely manner, the economic slowdown caused them to fall behind, so it’s best to adopt a more understanding tone. Additionally, the channels utilities use to communicate to first-time-in-arrears customers should be different than those who are long-term in arrears. First-time customers are likely unaware that assistance programs even exist, so creating both awareness of and education about these programs is critically important.
How and where utilities communicate will help to reach customers experiencing payment issues. Utilities should consider offering educational webinars on eligibility and how to access available programs, use social media to share helpful tips for reducing energy bills, and provide outbound calls to customers who wish to learn more about bill pay and energy-efficiency programs that can help cut future bills.
Keep in mind that delinquent utility bills are likely just one issue faced by customers who lost jobs because of COVID-19. That means utilities may want to consider adding utility customer advocates who not only provide information on available utility bill assistance, but also can point to programs that might help meet a family’s other needs. Utilities also need to consider where customers are turning to find help. Partnering with faith organizations, food banks and United Way agencies to disseminate information can help reach these customers in a helpful and nonthreatening manner.
Utilities should also review existing programs that offer customers the chance to catch up on past-due balances and look for ways to make these offerings as consumer friendly as possible. With the size of the past-due balances that built up during the shutoff moratoriums, extending the terms of these programs can give customers a more realistic path forward and increase the cash recovery success rates for utilities.
Using some of these techniques for one of Mower’s utility clients, we recently developed a personalized email outreach effort that in a single wave resulted in $500,000 in past-due bills being paid. Looking at the problem as a marketing challenge rather than a collections issue can help utilities and customers put the COVID-19 financial crunch behind them.
To learn more about how Mower can help your utility tackle challenges through innovative communications, contact the head of our Energy & Sustainability specialty, Stephanie Crockett, at firstname.lastname@example.org or 315.413.4355.