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Utility Disconnections Handbook Summary

Core Content

This report provides an in-depth analysis of utility disconnections in the United States, highlighting the scale, causes, and consequences of nonpayment-related disconnections. It emphasizes the role of public utility commissions (PUCs) in implementing regulatory reforms to address energy insecurity and disconnection risks.

Key Findings

• Utility Disconnections: Millions of households lose access to electricity annually due to nonpayment. At least 6 million households are disconnected each year, with 1.98 million reported in 2023 across 22 states and Washington, D.C.
• Economic Impact: Disconnections are financially burdensome, often involving late fees, reconnection charges, and loss of essential services. They can lead to cascading effects, including eviction, foreclosure, and child protective services involvement.
• Health and Safety Risks: Disconnections expose households to extreme temperatures, increasing the risk of heat-related and cold-related illnesses, medical emergencies, and even preventable deaths. For example, during extreme heat events, households without electricity may face life-threatening conditions.
• Energy Burden: Defined as the percentage of a household's income spent on energy, energy burdened households (those spending 6% or more) are at higher risk of disconnection. Low-income households have an average energy burden of 11.5%, compared to 2.7% for non-low-income households.
• Energy Insecurity Dimensions: Energy insecurity is categorized into three dimensions:
  • Physical: Inadequate heating and cooling infrastructure.
  • Economic: High energy costs relative to income.
  • Behavioral: Coping mechanisms such as forgoing food or medicine to pay energy bills.

Main Policy Options

The report outlines three main categories of disconnection reform options:

1. Broad Disconnection Protections

• Lifeline Electricity: Provides discounted rates to low-income households.
• COVID-19 Moratoria: Temporary protections that halted disconnections during the pandemic.
• Permanent End to Disconnections: Prohibits utility companies from disconnecting service for nonpayment.

2. Targeted Disconnection Protections

• Procedural Requirements: Mandates clear notice and due process before disconnection.
• Extreme Weather Protections: Ensures continued service during heatwaves or cold snaps.
• Vulnerable Customer Protections: Offers safeguards for households with children, the elderly, and those reliant on medical equipment.
• Performance Mechanisms: Encourages utilities to improve service and reduce disconnections through performance metrics.

3. Affordability Programs

• Percentage-of-Income Payment Plans: Allows customers to pay bills based on their income.
• Low-Income Discount Programs: Offers reduced rates to eligible households.
• Arrearage Management Plans: Helps customers manage and pay off outstanding balances.
• Low-Income Energy Efficiency: Provides energy efficiency upgrades to reduce bills and improve comfort.

Implementation Strategies

• Regulatory Venues: PUCs can advance disconnection reform through rulemaking, investigative dockets, rate cases, and integrated distribution planning.
• Cost-Benefit Considerations: Regulators should evaluate the financial impacts on utilities alongside the societal and household costs, including the potential for alternative collection practices.
• Phased Roadmap for PUCs:
  1. Understand the policy and legal context.
  2. Analyze disconnection trends.
  3. Define reform goals.
  4. Collaboratively design policy.
  5. Monitor implementation.

Conclusion

Utility disconnections are a growing crisis that disproportionately affects low-income and vulnerable households. They have severe health, safety, and financial consequences. PUCs have a critical role in reforming disconnection policies to ensure equitable access to energy and to prevent the cycle of energy poverty. The report advocates for comprehensive, multi-faceted reforms that include both broad protections and targeted interventions, as well as affordability programs.

Key Stakeholders and Roles

• Governors and Legislatures: Can direct and implement reforms.
• Utilities: Can partner with PUCs to propose and implement new disconnection policies.
• PUCs: Are uniquely positioned to drive comprehensive disconnection reform through regulation and policy.

Data and Trends

• Arrearage Growth: By September 2024, national arrearages totaled over $20 billion.
• Regional Disparities: Energy burdens are highest in the Southeast and Southwest, with states like Alabama, Louisiana, Mississippi, South Carolina, and West Virginia having the highest electricity burdens.
• Demographic Trends: Disconnections disproportionately affect low-income households, communities of color, and those with children or elderly members.

Call to Action

The report calls for urgent action by PUCs to implement comprehensive disconnection reform. It highlights the need for greater transparency, better affordability programs, and stronger protections for vulnerable populations. The ultimate goal is to create a more resilient, equitable, and just energy system.