How long can utilities continue operating with moratoria on disconnections due to non-payment?
When the full impact of the COVID-19 pandemic started to become clearer earlier this year, many utility companies across the world were quick to reassure consumers that they would not be disconnected for non-payment of bills, nor would they be penalised for late payments.
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However, this is not a situation that can continue indefinitely – and we are starting to see utilities refocus on collecting outstanding revenue.
Across the US, utilities have started giving notice that they will be collecting dues from July – although some are unclear as to when or if disconnections will result for non-payments. It is clear however, that the number of consumers behind on their utility bills is far higher than at any other previous time.
In Loveland, Colorado, for instance, the number of accounts awaiting suspension number 1,427 – compared to an average of between 250 and 400 on a monthly basis. This is a situation being seen across not only the United States but the world.
In addition to resuming attempts to collect outstanding revenue, utilities have to deal with the reality of lower demand across the board with drops of up to 20% reported in various countries. In many cases, these utilities have also lost a fair proportion of their biggest customer base – namely commercial and industrial concerns. There is an additional concern that smaller utilities may end up without sufficient cash to continue operations.
Utilities now have to determine where and by how much they are likely to experience a shortfall in revenue, determine the best way forward to recovering the outstanding funds and assess the impact on operations.
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Already, discussions have turned to how and if it is possible to retrieve some of the outstanding revenue by increasing tariffs or adding riders to rates in order to make up the shortfall. However, in the United States, for instance, unemployment has skyrocketed, with more than 30 million people filing for unemployment during the first weeks of the pandemic. Globally, it is predicted that up to 305 million jobs may be lost in 2020 as a result of the pandemic while 1,6 billion ‘informal’ economy workers may find their lives “massively affected.”
So, while riders and rate increases may be a standard ‘business as usual’ response, the feasibility of this response needs to be questioned when coupled with the scale of unemployment, as does the reality of the impact on those who are now unemployed. How will this impact the ability of utilities to continue with planned expansion or rehabilitation projects? What will the impact on credit ratings mean for funding expansion or rehabilitation works through other funding mechanisms mean for consumers down the line and how will utilities now prioritise projects? Will government stimulus packages provide for the smaller utilities which may be in greater need of help?
We’d love to hear from you if you have any thoughts on the questions above. Do you have a solution which addresses these concerns or are you looking for some answers too? These are just some of the questions we’ll be exploring in the months to come so be sure to check in with us on a regular basis.
Wishing you well.
Until next week!
Claire
