Syracuse, N.Y. – New York utility regulators are considering an unprecedented bailout for hundreds of thousands of households and many small businesses threatened with losing electric and gas service if they don’t pay overdue bills that piled up during the Covid pandemic.
The plan would pay off $672 million in debts that residents and small businesses accumulated prior to May 2022, during the worst of the pandemic. Most of that cost would be shifted to all ratepayers in the form of slightly higher bills.
Among Upstate customers of National Grid, some 70,000 households owe an average of $2,300 from before the May 2022 cutoff.
The new proposal would help customers regardless of income, with no means test or application process. It comes on the heels of a similar program last year that paid off about $500 million owed by customers who were enrolled in low-income programs.
The proposed debt relief is “unprecedented,’’ state officials said, designed to prevent a tsunami of utility shutoffs that could threaten health and safety.
Consumer groups laud the initiative but say utility shareholders should pick up more of the cost.
The seven-member Public Service Commission will rule on the proposal, which was drawn up by PSC staff in collaboration with utilities, consumer advocates and other state agencies. The PSC could vote as soon as its next monthly meeting Jan. 19.
As of September, 1.2 million residential customers and 128,000 small businesses were more than 60 days overdue on their utility bills. They owed $1.95 billion, more than double the normal unpaid debt level in pre-pandemic years.
Of that amount, more than $1.1 billion in unpaid bills dates back to before May 2022.
Staff advisers to the PSC who wrote the bailout plan “strongly’' recommended that the commission approve it. With heating costs rising as much as 39% this winter, the financial burden for utility customers is mounting.
The program “would provide crucial bill relief to struggling customers, and if approved by the commission at an upcoming commission session could be implemented during the peak of the winter heating season,’’ concluded the staff’s report.
If the PSC approves, some 56,000 small businesses and 478,000 households would be relieved of some or all of the utility debts they accumulated before May 2022. Full details of the program won’t be announced unless the PSC signs off.
Consumer advocates hope PSC approval comes quickly, said Laurie Wheelock, executive director of the Public Utility Law Project, a nonprofit group that advocates for low-income customers. But it’s hard to predict because of the novelty of the program.
“We’re in uncharted territory,’’ Wheelock said.
New York has struggled for years to keep gas and electric service affordable and to prevent low-income households from being shut off. Since 2015, the PSC has beefed up utility discount programs for people who qualify for food stamps, federal heating assistance and other income-based benefits.
But the mountain of unpaid bills caused by the Covid pandemic was not limited to low-income customers. The majority of late bills are due from households that would not qualify for low-income programs.
Last year, the PSC asked its “Energy Affordability Working Group” to come up with a plan to address the unpaid bill crisis. The group includes staff from the Department of Public Service and other state agencies, plus representatives from the utilities and consumer groups such as Public Utility Law Project and AARP.
In June, the commission approved a $587 million program devised by the working group to pay off Covid-era utility debts for low-income customers. To pay for it, officials cobbled together funds from the state budget, federal stimulus payments and a ratepayer surcharge. About $500 million has been spent so far.
Now the working group has proposed a second phase for non-low-income customers. The group considered requiring a means test but rejected the idea as cumbersome and costly.
“Everyone suffered, so why don’t we just get this money to people as efficiently and quickly as possible?’’ Wheelock said. “Just get it out there and help people this winter.”
After analyzing the list of non-low-income customers with unpaid bills, the utilities found that more than 95% exhibited at least one sign of financial distress:
For this phase of the bailout, there is no state or federal funding. Utility ratepayers would pay for the program via a surcharge on their bills for between one and 10 years, depending on the utility. The utility companies have agreed to write off more than $101 million in financing charges that would otherwise increase the cost for ratepayers.
National Grid estimated that the surcharges for a typical Upstate residential customer would be 49 cents a month on the electric bill for four years; and 29 cents a month on the natural gas bill for two years. National Grid officials declined to comment.
Consumer advocates who were part of the PSC’s working group support the debt relief plan but argue that utility shareholders should pick up more of the cost. They pointed out that many of the state’s utilities increased shareholder dividends during the pandemic, while customers struggled to pay rates that are already high.
“That was our concern on Phase Two, that there wasn’t a state investment and there wasn’t more money put on the table by the utilities. We wanted more,’’ said Bill Ferris, state legislative representative for AARP.
In the end, consumer groups signed onto the plan, in part because officials estimated that it would cost customers more in the long run to do nothing.
If a big chunk of the delinquent bills is not paid off, the utilities would be forced to write off massive amounts of uncollectible debt – as much as $702 million, the working group estimated. They would seek to be reimbursed for that and for other costs related to unpaid debts the next time the PSC sets their rates.
It turned out to be cheaper for ratepayers to pay to reduce the load of unpaid bills.
“If something wasn’t done, then it would cost more in the future. And everybody — from the consumers to the utilities to the staff — no one wanted that,’’ Ferris said.
Other states, too, have had to confront huge increases in unpaid utility bills stemming from the pandemic, said David Springe, executive director of the National Association of State Utility Consumer Advocates. Some have relied on federal stimulus money alone. Others have sold bonds to offset the debts, which utility consumers pay off over time.
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