Kentucky House gets bill to protect utility late fees and service cutoffs during emergencies
A panel of Kentucky lawmakers advanced a bill Wednesday to protect utilities’ right to charge late fees and terminate service to customers who fall behind on their bills during a declared state of emergency, such as the COVID-19 pandemic.
“The last thing we want to do is cut off a single mom. But what we don’t want to do is subsidize and charge all customers for the other ones who are choosing to buy TVs or whatever else instead of paying their water bills,” John Dix, president of the Kentucky Rural Water Association, told the House Local Government Committee.
House Bill 272, which proceeds to the full House, targets the Kentucky Public Service Commission, which last year imposed temporary moratoriums on utility late fees and cutoffs because of the economic recession caused by the pandemic.
The moratoriums expired by year’s end. But the PSC in recent months has told four water districts and electric utility Kentucky Power to stop charging a late fee. After studying data collected from a broad swath of utilities, the PSC concluded that late fees create “a hardship” for poor people already struggling with their bills but show “no material effect on the percentage of customers paying on time.”
The House bill would prevent the PSC from using future states of emergency to impose a moratorium on utility cutoffs or late fees. It also would prohibit the regulatory agency from interfering with the state’s 105 water districts as they collect late fees on water and sewer bills. Districts would not be required to justify the fees to the PSC.
The bill’s sponsors said there is little incentive for people to pay their bills on time if they know they won’t face a penalty. That denies utilities the reliable cash flow they need to operate, the sponsors said.
“If you advertise that you don’t have to pay your bill, and hey, they can’t do anything to you, then yeah, logic will suggest you’re gonna have a lot more people who will stop paying their bill on time,” said state Rep. Derek Lewis, R-London.
Dix said penalties make a difference in prodding customers into opening their checkbooks. At the Simpson County Water District, for example, the total monthly sum owed on past-due accounts hovered between $500 and $2,000 before the pandemic and the PSC’s moratorium on late fees and cutoffs, he said.
“That ballooned 900 percent during the (moratoriums) on late fees and terminations,” Dix told the committee. “It actually peaked at $19,000.”
Linda Bridwell, the PSC’s executive director, asked lawmakers to not strip the agency of its authority to protect consumers. By law, Bridwell said, the PSC is supposed to make sure that rates are “fair, just and reasonable.”
Apart from the fact that late fees typically serve no useful purpose, Bridwell said, other customers sometimes end up absorbing their cost when the fees can’t be collected and utilities write them off as bad debts. That’s an expense that gets passed along “to everybody else,” she said.
“In looking at it, we just didn’t see the data that the assessment of the late fees was doing anything other than be a punitive practice of social engineering that’s affecting customers who are unable to pay for service,” Bridwell said.
Also, the House bill fails to recognize that public relief programs for utility assistance specifically require people to fall behind on their bills in order to qualify for aid, said Tom FitzGerald, director of the Kentucky Resources Council.
“For low-income customers, this makes no sense whatsoever,” FitzGerald told the committee.
“So we’re now going to slap them with a $10 late fee on top of the fact that they can’t pay the underlying bill?” he asked. “This bill does nothing for these people to incentivize on-time behavior, because they purposely can’t pay on time or else they can’t access the funds.”
This story was originally published February 10, 2021 at 3:59 PM.
