Innovative Rate Programs for the Entergy Jurisdictions Roger

Innovative Rate Programs for the Entergy Jurisdictions Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics Belmont, MA November 2002

The Need for a Toolkit Approach “When your only tool is a hammer, you tend to see every problem as a nail. ”

Different Problems Require Different Solutions b Slow pay: Pick-a-Date b Can pay but don’t: Late fees b Seasonal no-pays: levelized budget bills b Marginal inability-to-pay: EITC b Chronic poverty: IDA assistance

Low-income Rate Relief : Two Problems to be Addressed b Payment troubles b Paid but unaffordable bills

Payment problems: b “Hopelessly behind” /irreducible arrearages b Recurring pattern of disconnect/pay plan/reconnect b Patterns of payment avoidance

Paid-but-unaffordable bills • More than 12% reported going without food for at least one meal a week. • More than 20% reported going without medical care, by either not filling prescriptions, taking prescription medicines in lower than prescribed doses, or by skipping or postponing doctor’s appointments. • Nearly 10% reported not making their rent or mortgage payments in order to pay their home heating bills. Iowa Department of Human Rights

The “fixed credit” rate program b Rate relief for current consumption b Combined with arrearage forgiveness b Combined with crisis component

The necessary components of a “fixed credit” program b Target customer base: customers with bills as excessive burden of income. b Affordable bill set at 6% of income b Conservation incentive b Combined with arrearage forgiveness/customer copayment b Combined with crisis assistance

Illustration: Customer A b Situation: • • Electric bill: $900 Income: $12, 000 Affordable bill: $720 Beginning arrears: $100 b Benefits: • Fixed credit: $15/month ($900 - $720 / 12) • Forgiven arrears (2 years): $0

Illustration: Customer B b Situation: • • Electric bill: $500 Income: $9, 000 Affordable bill: $540 Beginning arrears: $180 b Benefits: • ‘Fixed credit: $0/month ($500 - $540 / 12) • Forgiven arrears (2 years): $5/month

Illustration: Customer C b Situation: • • Electric bill: $840 Income: $6, 000 Affordable bill: $360 Beginning arrears: $240 b Benefits: • ‘Fixed credit: $40/month($840 - $360 / 12) • Forgiven arrears (2 years): $10/month

Sources of funding for innovative rate program b Redirected current operating expenses b Redirected bad debt/working capital expenses b Redirected rate refunds b Deferred cost recovery b Program savings b Rate revenue

The Concept of Net Back Without Rate Program $100. 75 $ 85 $ 50 $ 35 Bill Collection rate Amount collected Cost of collection Net back With Rate Program $ 75 , 85 $64 $15 $49 Bill Collection rate Amount collected Cost of collection Net back

For more information: roger@fsconline. com