2021 Legislative Update: Action Alert 1 on HB272

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Constitutionally-suspect special legislation will likely further drain low-income assistance monies for customers who can't receive crisis assistance until their waste or sewer bill is late.
KRC opposes House Bill 272, which would allow a water district or water association to impose a 10% late fee on a customer who fails to pay a water or sewer bill and would prevent the Public Service Commission from suspending or disallowing such a fee.
A number of utilities have late fees, and currently, the Public Service Commission can allow, suspend, or disallow such a late charge unless the electric, gas, water, or wastewater utility can justify the fee as being fair, just, and reasonable.  HB 272 eliminates that discretion regarding water districts and water associations and mandates the Commission to accept the late fee if it is in the water district tariff.  It also prevents the Commission from requiring the water district or water association to justify that the late fee is required to cover specific customer costs that would otherwise result in a monetary loss to the utility or increased rates for other customers.
The Kentucky Resources Council opposes the bill, for these reasons:
  1. Late fees don't make residential payments more timely.  
    On March 16, 2020, in Case No. 2020-085, the PSC suspended late fees and disconnections for nonpayment.  The PSC reviewed residential customer payments during the first six months of that year and concluded that “the evidence indicates that late fees have little discernible effect on the timeliness of residential customer payments for utility service.” On-time payment rates changed little, and in some cases increased compared to pre-COVID, even though the utilities were barred from assessing late fees or disconnection for nonpayment.
  2. The proposed 10% late fee is punitive and arbitrary, and is completely unrelated to the amount of the past due bill or the loss value of the funds that are paid late. 
    By contrast, the IRS charges only .5% per month on late taxes.  
  3. The imposition of late fees on low-income customers is illogical and will harm low-income bill assistance efforts. 
    Under Section 533 of the “Consolidated Appropriations Act, 2021,’’ There is a new program authorized by Congress which will for the first time provide federal water and wastewater bill assistance to low-income customers, similar to the LIHEAP energy assistance program. $638,000,000 has been appropriated for a “Low-Income Household Drinking Water and Wastewater Emergency Assistance Program” providing grants to states to assist low-income households “particularly those with the lowest incomes, that pay a high proportion of household income for drinking water and wastewater services, by providing funds to owners or operators of public water systems or treatment works to reduce arrearages of and rates charged to such households for such services[.]”

    The Consolidated Appropriations Act further provides that the States shall “to the extent practicable, use existing processes, procedures, policies, and systems in place to provide assistance to low-income households, including by using existing programs and program announcements, application and approval processes[.]” These funds will be managed by the Cabinet for Health and Family Services in a manner similar to the LIHEAP program. It is likely that water and wastewater utility crisis bill help likely won’t be available until the customer is late in paying bills or has received a disconnect notice for nonpayment, so that the bill will do nothing but punish customers who by definition can’t pay the underlying bills. 

    There are some 51,588 distinct households in the Commonwealth (2.9%) receiving LIHEAP assistance on their electric bills from the crisis fund. Imposing a late fee on a customer who, by definition, can’t pay the underlying bill without assistance, and can’t access the utility assistance until they are late, won’t change the customer’s payment habits and will do nothing other than drain additional assistance monies, resulting in fewer people served by the program. 

    The fiscal impact of this bill on such a program has not been considered by the Kentucky House of Representatives.
  4. The bill is special legislation that treats water districts differently from other PSC-regulated utilities by requiring the PSC to accept without question proposed late fees for water district tariffs.  No other regulated utilities are guaranteed late fees without justification.
For these reasons, KRC opposes HB 272 and asks that you do as well. 

Taking Action

  • Please call 1-800-372-7181 on Monday, March 1, and leave a message for "All Representatives" to vote no on House Bill 272.  The toll-free phone line opens at 7 a.m. Monday morning and the bill could be voted on after 4 p.m. this Monday.
  • Please write also to your state Representative, and to House Speaker David Osborne and Representative Steven Rudy to recommit HB 272 to the Appropriations and Revenue Committee so that adverse impact it will have on low-income assistance programs can be studied.  They are at David.Osborne@lrc.ky.gov and Steven.Rudy@lrc.ky.gov
Remind the Representatives that no one sent them to Frankfort to punish low-income households who are already struggling, by imposing mandatory late fees of up to 10% on all their water bills.
By Kentucky Resources Council on 03/01/2021 7:00 AM
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