As we head into the cold, dark months of winter, some utility customers’ already-overdue gas, water and electric bills could hemorrhage. But that doesn’t mean there’s nothing utilities can do to mitigate the situation. In fact, there are a lot of quick, easy steps they can take right now to protect their customers and themselves.
While some experts argue that energy costs more in the summer than it does in the winter, that can usually be attributed to behavioral shifts, like kids being home from school every day, more people in the household using electronics for longer hours, filling swimming pools or running the air conditioner when it’s hot outside.
But 2020 has been unique, and we expect the winter to present unique hardships. For a lot of families, everyone is home all the time now, for remote work and school, and we are attached to energy-zapping electronic devices more than before. In many parts of the country, we’re bracing for colder temperatures to arrive soon, which means we must also prepare to pay for the added energy we’ll be using to heat our homes.
The US Energy Information Administration (EIA) projects that, while commercial sales of electricity will remain low for the remainder of 2020, residential sales will maintain their 3.2 percent increase this year over 2019. The EIA also expects residential natural gas sales to increase from 37 to 39 percent this year, and for that level to continue into the first quarter of 2021.
To power everyday American life, then, as temperatures drop and sunlit hours dwindle, utility customers can expect to see mounting bills. For customers who were already falling behind on payments, adding more debt will present major concerns.
Delinquent balances make customers susceptible to service shut-offs, and customer debt puts utilities in the difficult position of possibly having to raise rates or cut staff.
We don’t want any of that to happen, so we’re offering tips on how utilities can get ahead of the coming COVID winter.
But first, to understand how extreme a challenge the cold season could present, let’s look at how the economy is currently affecting many Americans.
800K Americans filed new jobless claims in September 2020, according to The New York Times. Additionally, people are voluntarily leaving the workforce as a result of the coronavirus–to take care of kids while schools are closed. Detroit News coverage of a September federal jobs report reveals women between the ages of 25 and 54, especially women of color, have been leaving their jobs at higher rates than other groups. Fortune Magazine reports that in September alone, 865K women gave up their positions.
This means households where two or more adults had previously been employed and contributing to the finances now have a much-reduced income and could be falling behind on their bills. For families headed by single women, this could indicate a shift to no income at all, or an increased reliance on government assistance.
In September, the World Economic Forum reported 40 million Americans were at risk of eviction. In addition, the CARES Act six-month mortgage forbearance program is about to end. 3.5 million homeowners currently use the program, says MarketWatch.com. But the deadline is fast approaching, meaning borrowers will have to reapply for another six months of forbearance or resume making mortgage payments, which could expose them to deeper economic difficulty.
The inability to pay for housing often indicates other, concurrent risks, including energy insecurity.
According to the Kaiser Family Foundation’s May 2020 report, 26 percent of Americans have skipped meals or relied on food banks and government assistance programs as a result of coronavirus-related income reductions.
35 million Americans are now estimated to have difficulty getting enough food to feed themselves or their families, according to NPR’s reporting on recent studies. (For comparison, per the USDA, 13.7M households experienced food insecurity at some point during 2019.)
The heat-or-eat dilemma could prove to be extremely severe for these households this year, forcing them to choose between putting food on the table and paying their energy bills.
Physical and Mental Health Risks
43 percent of Americans are inadequately insured, according to a recent Commonwealth Fund survey. And, according to the US Centers for Disease Control and Prevention (CDC), mental health concerns have spiked this year, too. Nearly 41% of survey respondents reported an “adverse mental or behavioral health condition,” including anxiety and depression, suicidal thoughts, substance abuse, and TSRD symptoms related to COVID-19.
Late Utility Payments
BlastPoint’s own analysis shows that, in some regions, the number of late-paying utility customers leveled off between July and September 2020. That may sound like good news, but their late balances are considerably higher than what’s typical for this time of year: $400 versus $150.
Government-instituted shut-off moratoria remain in place for some parts of the country, but they only protect customers until state governments decide to lift them. Which means utility customers who have not made payments or have only paid some are at immediate risk of termination.
Customer Intelligence Solutions
At BlastPoint, we advise our utility partners to look closely and carefully at their customer data to get ahead of the looming billpay crisis. Assessing payment histories and determining billing baselines can illuminate the best course of action to take. Here are some basic tips on what to do right now:
Develop a system to estimate the overall value of outstanding collections. If you were able to collect missing payments on X number of customers, how much could you recoup, and how far would that go? This analysis helps you determine costs and gives you an idea how much outreach to plan for. It can also illuminate how urgent it is to pursue shut-offs, as they become necessary.
Who’s Likely to Pay?
Determine which customers in your database are most likely to pay their bills in full. With strong payment histories and little evidence of economic distress, these are typically customers with secure jobs, economic stability, and may have shown interest in energy efficiency programs. We refer to these customers as being in the Green Zone of Customer Risk. They are easily reachable via numerous channels and are responsive to your programs. These are the customers to engage first about catching up on any overdue or outstanding balances.
In fact, our system identified Green Zone customers who had started falling behind on their payments with one of our utility partners. The utility then sent an email to remind them they now carried a balance. Within a couple of weeks, 47 percent of those customers followed through by paying off their total bills in full. Get the details in our case study here.
Who Will Partially Pay?
Determine which customers are willing and able to make at least a partial payment. Many customers in your database will fall into this category. We refer to partial payers as being in the Yellow Zone of Customer Risk, as they may owe a month or two right now but otherwise have a clean payment history, or who regularly make partial payments toward their balance. They may utilize billpay programs or engage with you regularly.
These are excellent candidates to reach out to in the coming months. Make a plan to determine whether they should jump onto a payment plan or apply for assistance, and walk them through that process. This will ensure you keep receiving some payment while protecting them from a future shut-off.
Assistance or No Assistance
Assess which customers have a history with energy assistance programs, which don’t, and which would make good fits now. Knowing who receives LIHEAP, for instance, or has done so in the past, helps utilities decide who may need protection in the next few months.
Some customers may show intermittent reliance on crisis grants, for instance, while others may enroll annually for low-income support. Still others might show a sudden lapse in coverage, which rarely suggests they’ve magically resolved their financial struggles. Rather, it usually indicates that the paperwork was too difficult to submit – something that may be happening more frequently during the pandemic, as local agencies who help customers navigate assistance programs have reduced in-person capacity. These customers could potentially re-enroll, and thus make more consistent payments, with a streamlined system or step-by-step help from a company representative.
Which Outreach Mode is Best?
Predict the best communication channels for different customers. Some customers never open snail mail. Others will always respond to text messages. Using A.I. and external data sources, BlastPoint’s system helps utilities determine the best communication preferences for specific customer personas. Knowing whether to deploy an email campaign or fill the radio airwaves with messaging about certain programs helps utilities save money by avoiding the spray-and-pray marketing approach. It also helps utility employees to save time and focus their effort on customers who need it.
It’s also important to personalize content whenever you can, as personalized communications have higher engagement. If you know the main characteristics of the customers you are targeting, personalization becomes much more effective.
Look Outside of Collections for Quick Wins
To make up for gaps in expected revenue, identify ways to save money that may not seem related to collections. For example, one of our energy partners saved $1.3 million in less than 3 months by getting more customers enrolled in their paperless billing program. Read more about it in our case study here. Boosting enrollment in paperless programs has the added benefit of making payments easier, which is always a good idea.
Driving engagement with utility customers who aren’t at risk right now can also help mitigate lost revenue. One easy win with these customers is enrollment in direct debit or other automatic payment options. It’s convenient for financially stable customers and establishes a baseline of revenue that you can reasonably depend on, even during a crisis.
BlastPoint is proud to offer utilities actionable solutions for preventing crises and mitigating customer risk. If you are interested in learning more or would like our team of experts to support your billing and collections strategy, we’d love to hear from you. Explore our solutions for more information or contact us here!