The Value of Targeted Solutions for Post-Pandemic Utility Shutoffs

Since the beginning of the COVID-19 pandemic, utilities have stopped shutting off service to customers who are behind on their payments. Now that economies are reopening in most parts of the world, these moratoria are being lifted. The hard reality is that utility shutoffs are starting to take place. According to a report from the Center for Biological Diversity, the number of pending disconnects exceeds 1 million residences in the US.

This amount is based on data gathered by the regulatory jurisdictions documenting regional disconnect rates. The report forecasts that the actual number of pending disconnects within the US may reach 3.74 million, about 3.1% of all residences. This report calls for an executive order to extend the disconnect moratorium another year as part of the #NoShutoffs Coalition. 

It is easy to imagine that many of these pending shutoffs involve families that were already in financial distress before the pandemic and are in worse situations now, even if the economy is improving. Not all those facing disconnects fit this description, however. There are other factors to consider when proposing solutions.

The Situation Could Have Been Worse

The 3.1% disconnect rate is not dramatically higher than what was normal over the past decade. Each utility closely tracks shutoff rates, but this kind of information is not collected centrally and varies significantly by location. This rate would normally be from 1% to 2% for many utility providers in any given month. A 3.1% rate is higher than normal, but it is likely that stimulus checks kept this from being worse. 

Customers Are Facing Shutoffs for a Variety of Reasons

Additionally, those facing shutoff are not only low income residents. The Water Research Foundation's document, Best Practices in Customer Payment Assistance Programs, lists four categories of overdue customers. One of the four includes low or fixed-income households with inefficient appliances who cannot effectively manage their consumption. This customer segment may need financial assistance with their bills, but retrofits are also needed to prevent the situation from continuing indefinitely. Such programs, including the Low-Income Home Energy Assistance Program, are available. These are more effective solutions than simply extending the shutoff moratorium.

Another category of people facing shutoffs are those who might struggle with money-management skills. Some of these people have good incomes but may have already spent their paycheck on luxuries before it is time to pay for necessities. Others wait to pay their bill until the last minute. 

The amount of those facing shutoffs who fall into this segment varies regionally, but they can account for as much as one-quarter to half of the overdue accounts in some areas. BlastPoint’s report, Understanding the Scope of the Current Billpay Crisis Through Data, shows that customers earning between $100,000 and $124,000 comprise a significant portion of overdue accounts. 

Many Utilities Already Have Tools to Help 

Guidehouse Insights’ report, Market Data: Customer Experience and Management Technologies, reviews the market for solutions that enable utilities to segment customers and offer what the industry calls the next best action, which seek to provide suggestions to help customers manage their demands. 

When a customer is in arrears, these customer engagement technologies look at the history of their account and can suggest the most effective support, be it a referral to an emergency payment assistance program or information on payment programs. More targeted solutions that account for different customer situations will likely be more effective.