Los primeros años de la telefonía

SHRINK THE OVERDUE CASELOAD AND ARREARAGES: CRISIS

ASSISTANCE PROGRAMS

The operation of a crisis intervention fund is often used as a mechanism through which to deliver assistance to customers beset with temporary financial crises stemming from illness, job loss, or family distress. Crisis intervention funds are commonly utilized by regulated gas and electric distribution companies. A crisis intervention fund can deliver real benefits not only to payment-troubled water customers, but also the utilities that serve those customers.

FUNDRAISING FOR CRISIS ASSISTANCE

The fundamental fundraising decision for a crisis intervention fund involves the degree of discretion to be given to customers over whether they contribute to such a fund. A continuum of choices exists, as illustrated in Figure 13.1. At one end of the continuum lies a mandatory system benefits charge (SBC). The mandatory nature of this type of charge is based on the observation that addressing the nonpayment issues of payment-troubled customers is a system-wide problem, the resolution of which generates system-wide benefits. When the payment troubles of chronically delinquent customers are reduced or resolved, the utility reduces a wide range of costs, ranging from the working capital associated with carrying arrears, to the bad debt associated with ultimate nonpayment, to the staff and transportation expenses associated with the credit and collection cycle. To the extent that payments into the crisis fund are not mandatory, the utility runs the risk of free-ridership, with some customers benefiting from the reduced costs but refusing to support the fund that generates those cost reductions.

A second level of discretion lies in using an opt-out mechanism for generating participation in the crisis intervention fund. An opt-out mechanism provides that a consumer will be charged a monthly fee to support the crisis intervention unless the consumer specifically indicates that he or she does not wish to do so. Placing the impetus on the customer to take action to opt-out is justified by the observation that the customer has been compensated for the limits on his or her discretion through the receipt of the reduced expenses that are allocated to all consumers through rates.

Enrollment Opt-in choice Mandatory SBC Opt-out choice

Figure 13.1 Continuum of customer discretion in crisis fund payments  

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At the opposite end of the continuum from a mandatory fee is the completely voluntary opt-in charge to support a crisis intervention fund. Unlike the mandatory or opt-out charge, the opt-in fee has the look and feel of a charitable contribution. Rather than being viewed as a charge to help the water company address the business problems of nonpayment, the opt-in mechanism is styled as a “contribution” to the “needy.” Since such payments are considered contributions, there is no expectation that the payment will be matched. Accordingly, no need exists to identify and isolate the cost savings generated to the utility through the distribution of the crisis funds so that those savings could be passed through to the customers financially supporting the effort that help generate the savings in the first instance.

A middle ground is increasingly being used to support crisis intervention that walks the line between the opt-in and the opt-out approaches. Pioneered by State telephone assistance programs in Illinois and Pennsylvania, these crisis intervention funds “enroll” customers in a contribution program. Once enrolled, however, the customer thereafter is affirmatively billed for the support payment unless and until the customer asks to be removed from the program. Under this “enrollment” process, the payment in support of the crisis intervention fund becomes a part of the underlying bill until the customer subsequently opts-out of paying it. The program enrollment funding mechanism provides the customer discretion of the opt-in mechanism while also providing the funding stability of the opt-out mechanism.

CUSTOMER CONTRIBUTION OPTIONS

A utility seeking to collect funds for a crisis intervention program has multiple ways through which the customer might select how much to pay. Common mechanisms that are used include:

• A round-up program. Through a round-up program, the customer agrees to allow the company to round up a bill for current service to some designated level. Rounding up a bill to the next whole dollar is perhaps the most common approach, while allowing the option of rounding up to the next $5 or $10 level might also be used. Under a round-up program, the utility would need to take the initiative to track the payments that are received and to transfer those payments to the crisis intervention fund on a monthly basis.

• An add-a-dollar fund. An add-a-dollar program allows the utility’s customer to make a selected payment each month to the company’s crisis intervention fund. While solicitations for payments of $1 to $5 are common, research shows that customers, if given an open-ended selection choice, choose to increase their contribution frequently enough to make it worthwhile to provide the open-ended selection.

• Periodic solicitations. A final way to generate funds for crisis intervention is through periodic solicitations. Done through bill inserts or “articles” in periodic utility newsletters to their customers, these solicitations frequently do not use the utility bill itself as a mechanism through which to collect the funds. Those solicitations not using the bill as the payment collection device generally include a return-envelope⎯either to the utility or to a designated local nonprofit—which a customer must return with their donation. Periodic solicitations that are placed right on the bill, with the customer making a choice of whether or not to contribute at the time they make the bill payment, have been found to be much more effective in generating funds than those mechanisms which use a separate return envelope.

Chapter 13: Shrink the Overdue Caseload and Arrearages: Crisis Assistance Programs | 71

While the round-up approach can be implemented through the opt-in, opt-out, or enrollment process, the add-a-dollar approach is limited to the opt-in and enrollment process. FUND DISTRIBUTION OPTIONS

Two choices present themselves to the water utility that seeks to address the payment troubles of some customers through a crisis intervention fund. The first choice involves whether to operate the crisis intervention fund as an in-house program or through an independent third- party. The second choice involves defining the circumstances that merit the grant of crisis intervention support.

THE ADMINISTERING BODY

While some utilities decide to administer their crisis intervention funds internally, the more common approach is to use an independent community-based organization (CBO) as the benefit provider. Keeping the fund distribution in-house allows the utility to maintain the closest control over the grant of benefits. In addition, keeping the fund distribution in-house ensures that the water utility “gets credit” for operating the crisis intervention initiative, rather than simply being one more contributor to a broader community-based effort.

As a general rule, however, these considerations do not tip the scale in favor of in-house distribution. Most utilities decide that their in-house staff have neither the training nor the expertise to perform the intake and income verification needed to operate the crisis intervention fund. In addition, association with a broader community-based “brand name” service provider is generally believed to facilitate rather than to impede contributions. Fundraising efforts directed toward an in-house crisis intervention fund are often viewed as self-serving to the utility rather than as a community service supported by the utility. Moreover, customers who are in debt to the utility, and who face a substantial inability to pay, are more likely to approach a CBO for assistance than to approach the creditor-utility.

Even if distributed through an independent CBO, however, a water utility passing through customer payments in support of crisis intervention has the right to insist that those payments only be used as benefits paid to address the payment troubles of the utility’s customers. (This observation does not hold true if payments are provided by contributors directly to the independent third party as described above.)

The Benefit Payment Trigger

A final decision for the utility involves delineation of circumstances that qualify a customer for a crisis intervention payment. On the one hand, the very nature of a “crisis” intervention fund would seem to indicate that the fund should be used primarily to prevent the disconnection of service due to nonpayment. The use of a crisis intervention fund for this purpose would short-circuit the social problem of a customer losing access to basic water service, while at the same time helping the utility avoid incurring the expense of the disconnect (and reconnect) process.

On the other hand, some crisis intervention funds have reasonably decided that predicating the receipt of financial benefits on the existence of a pending disconnection for nonpayment encourages a customer to push the utility collection process to the point of

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disconnection rather than resolving his or her arrears at an earlier (and perhaps more manageable) stage. While crisis intervention funds are certainly available to stop a pending disconnection of service, in these circumstances, they are not limited to the disconnection situation. These funds distribute crisis intervention grants based upon a combination of factors including income, the level of arrears, and the ability of the fund to resolve those arrears. Whether or not tied to a pending disconnection of service, crisis intervention funds are not intended to be a broad-based rate affordability program. They are, indeed, tied to a resolution of payment difficulties; however, the utility may choose to define those difficulties.

Under either approach above (use of the crisis intervention fund as a shutoff prevention device or use of the fund as an arrears resolution device), the utility may or may not wish to condition its distribution of benefits based on low-income status. While many crisis funds are directed exclusively to “low-income” customers, others may focus outreach on low-income customers, but reserve the authority to distribute funds to any customers when a review of income and expenses reveals an inability to pay the water bill without outside assistance.