NEW ORLEANS (AP) — Chris Kinney, a resident of Rapides Parish in central Louisiana, has had his power disconnected eight times in the past two years for falling behind on his energy bills at Cleco Power.
His family did everything they could to catch up: pawn their belongings, rack up huge bank overdraft charges, borrow money and apply for energy assistance.
Somehow, Kinney’s outstanding balance kept growing.
While his electricity bills have been approximately $6,400 over the past two years, Cleco Power has also charged him over $1,250 for paying his bills late, including late fees, reconnection and deposits.
“These accusations keep piling up and there’s no way to make up for them. The financial pressure was just insane,” Kinney said.
Americans paid a total of $561 million in late payment fees to electric utilities in 2019.
But how much you pay depends on where you live.
An AP analysis of federal regulatory data found that several large utility companies in states like Louisiana, Mississippi, Kentucky, Florida and Maryland charge customers late fees well above the national average.
Five power companies – Cleco Power, Kentucky Power Co. and three subsidiaries of Entergy Corp. – generated on average more than $17.50 per customer in annual late fee revenue between 2011 and 2020. This is three times the national average of $5.83 per customer over the same period. .
Royalties make up only a small fraction of overall revenue for major energy companies – less than a quarter of a percent on average – but for the people who have to pay them, they can be overwhelming.
Late fees typically punish customers who are least able to pay their utility bill. Poorly insulated homes and damage from natural disasters all contribute to poor residents spending more of their wages on their energy bills. And black and Hispanic households are more likely to experience energy insecurity and face utility disconnections.
For those falling behind, it often means choosing between paying for electricity and affording other necessities.
Mary Boyd, who is 83 and lives in New Orleans, said her expensive energy utility bills from Entergy – a major utility provider in Louisiana and three other Southern states – forced her to choose between medication and other expenses such as repairing the damage to her fence caused by Hurricane Ida.
“I’m sick. I have high blood pressure, asthma and arthritis,” Boyd said. “Now imagine this, this three hundred dollar energy bill takes away food and stuff. “
Power companies, including Entergy and Cleco Power, say late fees are an important tool to encourage customers to pay their bills.
“Ultimately, late payment policies are in place to help protect all customers from potential rate increases caused by uncollected payments,” Entergy spokesman Jerry Nappi said. in an email. The company does not profit from late fees, he said.
But for some large utility providers, including Entergy, late payment fees represent far more than the average business revenue.
Nine companies, including Baltimore Gas and Electric, Central Hudson Gas and Electric, and Cleveland Electric Illuminating Co., derive more than 0.5% of their total revenue from collecting late payment fees from 2011 to 2020, or double or even triple the national average of around 0.24%.
Late charges are intended to cover the cost of collecting a bill or the cost of disconnecting or reconnecting electricity to a residence.
They’re not meant to be punitive, said Odogwu Obi Linton, who sits on the board of the National Association of Regulatory Utility Commissioners.
If a customer pays the bill promptly, the utility doesn’t have to bear or pursue collection of the debt, Linton said. This saves the utility company money on things like stop notices and phone calls to collect late payments.
But advocates say the amount charged does not reflect utility company spending.
“Historically, few, if any, of the late fees charged by our utilities are cost-based,” said Kent Chandler, chairman of the Kentucky Public Service Commission.
Dan Kermode, a former policy adviser at the Washington Utilities and Transportation Commission, said rules on late penalties in many states were decided long before the advent of new technologies and computer systems. Billing software and automated meters have made the cost of late payment collection virtually zero for utilities.
In Louisiana, state regulations allow up to a 5% late payment penalty for all electric utilities. When asked why the late fee penalty had been set at 5%, Public Service Commission press officer Colby Cook said he could not comment because the rules on late fees, which were passed in 1976, did not explain the reasoning behind its adoption. .
“That’s what’s unique about late fees — they’re fees that aren’t meant to collect costs, but to deter late payment,” Kermode said.
Some regulators and consumer advocates question whether late fees even work.
In Kentucky, the pandemic led to a moratorium on late fees for residential customers through the end of 2020. In reviewing the effects of this moratorium, the commission said that “late fees have little effect noticeable on the speed of payments from residential customers for utility service. »
Energy insecurity has disproportionately affected black and Hispanic households, and the ongoing pandemic has made matters even worse, according to Indiana University researchers in an article they published in the scientific journal Nature. Energy.
In New Orleans, an organization called Total Community Action helps disburse federal energy assistance, based on need. Almost all of the group’s 7,000 clients who receive energy assistance are black, although only about 60% of New Orleans residents are black.
In 2017, black households spent 43% more of their income on energy costs than white households, according to the American Council for an Energy-Efficient Economy. The council’s analysis, released in 2020, also found that the energy costs of Native American and Hispanic households accounted for a much larger share of their income than those of white households.
Older homes, including in low-income communities, are generally less energy efficient in the first place – and floods or other disasters can damage these buildings to the point that they are no longer eligible for government weatherization assistance. .
“Homes in Louisiana have been hit by hurricanes and flooding. It makes it so we can’t go in and weather them because it needs a whole new roof,” said Lauren Holmes, who oversees energy assistance programs for Louisiana Housing Corp. “This is outside the scope of weatherization. We cannot come in and insulate an attic if you have a four foot gaping hole in the attic.
In neighboring Kentucky, most homes that ask for such help cannot get it either.
State Civil Service Commission member Kent Chandler said that for every home Kentucky Housing Corp. is able to weather using federal funds, approximately two homes cannot be retrofitted due to underlying health and safety issues that prevent them from receiving this assistance.
And bloat isn’t the only thing that affects fuel efficiency; the way people heat their homes also plays a major role. In rural Kentucky, many homes are heated with inefficient electric heat, resulting in extremely high bills during the winter months, Chandler said.
However, getting financial help to pay those bills can be easier said than done for the unemployed or self-employed.
“When residents receive a disconnection notice, they have just a few days to get help and all the necessary supporting documentation before they are disconnected,” said Selton Jones, Community Services Specialist for Total Community Action for energy services. “If I’m playing in a jazz bar and I’m just on saxophone, I don’t have tax stubs.”
Those receiving pensions, Social Security, or other retirement income have this documentation and are better able to get help paying their bills, but that doesn’t always mean they won’t fall behind. .
Carolyn Peters lives in New Orleans on a fixed retirement income and received assistance from the federal energy assistance program for low-income households. His bill in February from Entergy New Orleans was nearly $500, including late fees that had been charged in previous months.
When asked how she plans to pay her outstanding bill, Peters said she would have to forego another necessity like medication. “It’s a stump,” she said.