June 27, 2008
PPL Remained Neutral on Shut-Off Law, Now Leads Pennsylvania in Shut-Offs
By David Falchek, The Times-Tribune, Scranton, Pa.
Jun. 27--In 2004, when the utility industry argued for greater ability to shut off service to nonpaying customers, PPL Electric Utilities was on the sidelines.
The Allentown-based electricity provider was officially neutral on the Responsible Utility Customer Protection Act, and said in press releases that the current law was sufficient, and it didn't have the collections problems of its competitors.
Community advocates, meanwhile, opposed Act 201, which they considered draconian. The law made it more difficult for people with health problems, such as those on oxygen, to get a medical designation to prevent utility shut-offs. It allowed utilities to cut power in the dead of winter and dropped a requirement to work out payment plans, allowing utilities to demand security deposits to get reconnected.
Earlier this week, when the Pennsylvania Public Utility Commission released a survey of service terminations of the state's major utilities, PPL led the pack.
From January through May, the utility pulled the plug on 13,327 residential customers, more than double the number it cut off through the same period in 2007. In PPL's Northeast region, which includes Lackawanna, part of Luzerne, Monroe, Pike, Susquehanna, Wayne and Wyoming counties, 1,900 people had their power shut off through May of this year. PPL has about 200,000 customers in the Northeast region.
Throughout PPL's total service area, about one of every 100 customers was disconnected.
The numbers suggest that even though PPL was neutral on Act 201, it is making full use of the expanded ability to cut customers' service.
"Companies such as PPL who were neutral or lukewarm on Act 201 are now utilizing these tools to shut off customers with the same elan as the PGWs and PECOs of the state," said Ian Phillips, of the public advocacy group Acorn in Philadelphia, citing large Philadelphia-based utilities. "PPL's termination increases are far and away the largest in the state."
PPL spokesman George Lewis said when Act 201 was being pushed, PPL didn't have collection problems. Since then, things have changed.
The poor economy, rising unemployment and soaring energy costs have forced more customers to fall behind on their bills. By the end of April, for example, PPL had $86 million in unpaid bills from 222,000 customers in their service area, up 23 percent from the previous year.
With 1.2 million residential customers, that means about one of five PPL customers was behind on electric bills.
"Yes, we are using the regulatory requirements of Act 201 to be as effective as we can in collecting past-due bills," he said.
The region's natural gas utility, UGI Penn Natural Gas, saw its service terminations decrease slightly in 2008 to 2,081 customers.
How power is cut
PPL's Mr. Lewis said termination is a last resort for the company.
Late payers get several notices. Once a customer falls $250 in arrears, they get a shut-off notice in the mail and possibly a phone call. If they are having financial hardship, the collector may refer them to a program to help them pay or try to set up a payment plan. A final shut-off notice goes out. If the customer doesn't try to make arrangements, power is shut off.
To be reconnected, the customer has to pay a portion of the arrears, a $15 reconnection fee and possibly make a security deposit equal to an average of two months of service.
"If someone reaches out to us at any time to make arrangements, the clock stops," Mr. Lewis said. "There are many ways to stop the process."
While one of every 100 PPL customers in the first five months of this year ended up in the dark, about two-thirds of those had power restored, Mr. Lewis said.
But the effect is the same, said Mr. Phillips, whose group is advocating a repeal of some of the pro-utility reforms in Act 201. The Acorn group would like to bring back the requirement for a 48-hour shut-off notice, restoring the winter shut-off moratorium, allowing repayment terms longer than two years and giving the PUC authority to order repayment terms.
UGI spokesman Joe Swope said the PUC had been abusing its discretion in setting orders. In one case, he said, the agency spread out one customer's repayments over 200 years.
Acorn's Mr. Phillips disputes that story, saying the industry often invokes it, but has never offered proof that it's true.
Utilities say they pursue overdue balances not only because it is sound business, but to benefit prompt-paying customers. Uncollected bills are eventually shouldered by all paying customers.
Uncollected bills get piled up in the utility's next base-rate increase and spread out to all customers. In the past, PUC commissioners have urged companies to make an earnest effort to collect unpaid bills. Regulators have threatened to block companies from recouping uncollected money if they get a sense the company isn't trying.
UGI's approach to shutting off customers is largely based on individual payment history. The company shows more flexibility with those who have kept a good payment history.
UGI sends a termination notice, which Mr. Swope described as a "harsh reminder," almost immediately after a customer misses a due date. If the customer does nothing, he or she could receive a three-day shut-off notice, several phone calls and a notice posted on the property. Reconnection can require a payment of past balance, a security deposit equal to the two months' highest bills, and a $37 reconnection fee.
Irwin "Sonny" Popowsky, consumer advocate of Pennsylvania, is trying to figure out why PPL's termination number rose so dramatically as he worries about what is on the horizon. The rise in terminations doesn't bode well for other electricity customers as state-imposed rate caps are lifted at the end of 2009, which could lead to electricity bills rising to 30 percent higher than they are now. Demand, and prices, for natural gas doesn't seem to be going down anytime soon.
"Here we are in 2008, with these increases in the number of terminations, and the rate caps have yet to come off," he said. "Economic pressures from mortgage problems and gasoline prices are only going to be compounded."
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