The Canary Stops Signing: 20% + of Utility Bills are Behind by mid 2008

The 2008 National Association of Regulatory Utility Commissioners (NARUC)
Collections Report came out this week. This association of state regulatory agencies surveys public utilities - 41 state agencies took part - to document payment problems experienced by residential energy consumers. The Summary Report is online, as well as a state by state tabulation. The headline is 1 in 5 consumers are behind. The share of utility bills that are behind is up a little bit between mid 2007 and mid 2008 (the survey took place earlier this year) and all evidence suggests things are worse now. Utilities may not cut off service in the winter and some sophisticated consumers might exploit this to pay off other bills first and pay utilities later...when spring comes and termination is threatened. Nevertheless the amount past due is also rising, as well as terminations and write offs, all of which are signs of distress.

The major policy at the federal level is LIHEAP (low income heating energy assistance program). This is about $5 billion block granted and distributed at the local level. This NARUC survey suggest less than 5% of gas consumers, and 2.5% of electric, get any help from this program.

Data from MortgageKeeper.org, which tracks what services mortgage default counselors are referring clients to, suggests as many as half of callers with referrals are looking for utility bill help. As winter sets in the trend is very predictable, especially in the Midwest.

There are only so many consumer dollars available to pay off monthly obligations. Proposals to boost LIHEAP or similar programs may have merit not only to help people in a recession but help prevent more mortgage defaults.

This issue highlights the need to better understand how many consumers manage their budgets. Financial education may help, but for some a pattern of trading off bills and late fees due to delinquencies may be rational and deliberate--but risky. Utility companies have robust data on payment patterns, including the form of payment (for example: money orders or cash = unbanked). Moreover utility company data offers information on consumers at all levels of income. Paying more attention to consumers in this market is likely to yield key proxy indicators of what is going on in the economy overall - yet another canary in the coal mine.