Utilities lend support to no-interest bill plan

But say debts must be paid before heating season

April 08, 2009|By Liz F. Kay | Liz F. Kay,liz.kay@baltsun.com

Utility company representatives said Tuesday that they support a proposal to offer no-interest payment plans to customers behind on their bills so long as the debts are repaid before heating bills start increasing again next winter.

"When you start pancaking a payment plan on top of a very cold winter period, that's when customers get far behind," Wayne Harbaugh, Baltimore Gas and Electric's vice president for regulatory affairs, told state regulators during a hearing.

The utilities want to recoup the costs of providing these plans, which Harbaugh described as "basically a no-interest loan" to customers. BGE and representatives from other companies urged the Maryland Public Service Commission to lift the temporary prohibition on suspending customers' utility services that was put in place last month to allow time to work out the details of the payment plans.

Commissioners, who will have the task of issuing an order on payment plans, first began investigating growing numbers of terminations and past-due balances in January. They later expanded their inquiry to review thousands of complaints of skyrocketing utility bills. Last month, the regulators ordered a work group of consumer advocates, utility companies and commission staff to sort out the details of payment plans that would aim to help people catch up.

Much of the discussion on the group's report during Tuesday's daylong hearing at the commission's Baltimore offices focused on the length of the payment plans. The utilities proposed plans that would be no longer than nine months for large investor-backed electric utilities and six months for other utilities.

But Theresa Czarski of the Office of the People's Counsel, which represents consumers, said companies should offer customers at least up to 12 months to pay their bills, if needed. The vast majority will be able to eliminate their balances within a few months, she said.

An official representing both Pepco and Delmarva Power said that the failure rate of payment plans that are 10 to 12 months long was about 80 percent.

The utilities' proposed plans could also require down payments of up to 25 percent, and up to 50 percent for customers with previous defaults or who had built up a balance before the winter, when bills skyrocketed because of low temperatures and other factors.

In addition, those disconnected from service could reconnect by paying 75 percent of what they owe and the remainder on a payment plan rather than the full amount up front, as currently charged.

Advocates for consumers and low-income residents disagreed with the companies about how much these plans would cost them. Czarski said that companies seeking "cost recovery" should file a case with the commission so the new charges could be examined in context with other expenses.

A commission attorney recommended that companies charge late fees rather than interest. Commission staff members also recommended against rate changes that would affect all customers.

"The cost of the plan should be paid by the beneficiaries," said PSC assistant staff counsel Annette Garafalo.

Charging late fees "brings it back to each individual customer without burdening any other party that only benefits that particular customer," said Philip Vanderheyden, director of the PSC's electricity division.

Czarski and Baltimore Chief Solicitor Matthew Nayden pointed out that companies would ultimately benefit from collecting some money from customers rather than terminating them and absorbing the cost of the unpaid bills.


* 208,000 BGE customers have outstanding balances ranging from two days to several months

* 84,000 BGE customers are in danger of getting a termination notice

* 100,000 Pepco customers risk a termination notice

* 40,000 Delmarva Power and Light customers are in collections

* 98 percent pay their bill after getting a cutoff notice

Source: Utility companies

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