Regulators warn utility disconnection moratorium ‘is not sustainable’

More than two months after state regulators imposed a ban on utility disconnections for nonpayment of bills in response to the COVID-19 crisis, the State Corporation Commission is warning that the current situation “is not sustainable on an unlimited basis.”

While acknowledging “the hardships faced by many Virginians as a result of jobs lost” due to the pandemic, the commission in a May 26 order warned that an ongoing moratorium could not only lead to customers being burdened with higher bills in the future but put smaller utilities like electric cooperatives at risk of running out of cash. 

For utilities both large and small, the costs of unpaid bills, the SCC noted both Tuesday and in an earlier April 9 order, do not disappear but are instead shifted to other customers within the utility base because of these companies’ right to recoup certain costs. 

“If allowed to increase indefinitely,” the SCC said, unpaid bills “could affect the ability of (smaller) utilities to continue providing vital services — electricity, natural gas, water and sewer.”

Instead of reversing the moratorium in place until June 15, however, Tuesday’s order seeks comment from the public and officeholders on three questions: how long the disconnection ban should last, how the costs of unpaid bills should be defrayed in the event of an extension and whether voluntary measures could replace the current mandatory restrictions.

The filing illustrates the struggle officials have faced in instituting relief measures without a clear timeline for when the current crisis might abate — a balancing act easier to negotiate in the early days of the pandemic when many still believed things would return to normal within weeks.

The initial moratorium on disconnections for nonpayment issued by the SCC on March 16 was embraced by larger utilities, including Dominion Energy, Appalachian Power Company, Virginia Natural Gas, Columbia Gas and Virginia-American Water Company. 

Besides pledging full support for the measure, all of these companies had previously instituted their own disconnection moratoriums, with some also voluntarily reconnecting accounts that had been cut off.

“Throughout the pandemic, we’ve been focused on continuing to provide customers with safe, reliable energy,” wrote Dominion spokesperson Rayhan Daudani in an email. 

But some smaller utilities showed qualms from the start. 

In a March 17 filing, the Virginia, Maryland and Delaware Association of Electric Cooperatives noted that while the cooperatives “want to be helpful to the relevant public authorities,” such an extended and sweeping order would “cause unintended negative consequences.”

Of most concern to the cooperatives was the moratorium’s effect not only residential customers, but nonresidential ones — businesses, which are invariably a utility’s largest accounts. 

“As the commission is well aware, the cooperatives have only our own member-consumers from whom to recover costs; there are no separate investors, no tax credits and no other sources of revenue for a cooperative,” the organization wrote. “There are simply fewer ratepayers, and many fewer nonresidential ratepayers over which to spread the burden when a customer fails to pay an electric bill on time. No cooperative will be able to bear an ‘electric bill holiday,’ even in consideration of the current public health emergency.”

While the VMDAEC has not yet calculated the full losses its 13 Virginia members have incurred as a result of unpaid bills since the pandemic began, association counsel Sam Brumberg said in an email that outstanding bills over 30 days old “are already rising beyond historically normal levels at some cooperatives.”

“As not-for-profit utilities, owned by those we serve, we have to strike a balance between ensuring our member-consumers who may be facing a coronavirus infection or a job loss have the assistance they need, while also ensuring the economic and operational stability of the cooperatives,” he wrote. 

The SCC will accept comments on the moratorium until June 5.