The agency that regulates Arizona’s electric utilities is moving toward a bipartisan compromise proposal to help consumers struggling with a backlog of unpaid electricity bills running well into the tens of millions of dollars statewide.

The proposal to be discussed by the Arizona Corporation Commission next month would allow those with a backlog of unpaid bills to set up a schedule to pay the bills over a year.

With apparent, tentative support from Tucson Republican Commissioner Lea Marquez Peterson and Democrat Sandra Kennedy, this proposal would also provide partial forgiveness of those bills for low-income customers who manage to make scheduled payments each month.

Commissioners agreed at a meeting Friday to discuss such a proposal at their Dec. 8 meeting. That came after extensive debate of other proposals that would have been either more or less generous to utility customers.

The proposal comes as the state’s two largest ACC-regulated utilities, Tucson Electric Power and Arizona Public Service Co., face a huge load of unpaid bills, at least partially due to the coronavirus pandemic that has shut down many businesses and put thousands of persons out of work in both Tucson and Phoenix.

It also comes as consumers approach the end of a nine-month moratorium on utility shut-offs due to unpaid bills. It expires in December.

Unpaid bill load dates back months

A total of $13 million in unpaid bills faces TEP customers, and about 19,000 customers could ultimately be disconnected if they don’t eventually pay up, TEP official Denise Richerson told the commission.

The debt backlog is much larger — $58 million — for 117,000 customers of the much larger Arizona Public Service, whose service area covers the much bigger Phoenix metropolitan area and stretches west to Yuma, APS officials said.

The APS debt backlog dates back to before the coronavirus pandemic started in March 2020, utility spokesman Jim McDonald said. TEP couldn’t say Friday how far back its debt backlog dates. Kennedy had written utilities to request this data on unpaid utility bills in early November. 

For individual customers, this unpaid bill load has amounted to as much as $3,000 apiece, dating back at least several months, Diane Brown, executive director of the Arizona Public Interest Research Group, told the commission.

Going into Friday’s meeting, the commission faced a proposal from Kennedy to allow electricity customers to defer payments for up to 20 months before having to pay their total tab.

For each month a residential ratepayer on such a plan pays on time, a utility would be required to deduct one-twelfth of the customer’s total debt obligation.

Competing proposals

If the customer keeps paying at this rate for a year, the debt would be fully forgiven.

In addition, her proposal would raise the income level for which customers would be eligible for low-income discount plans from 150% of federal poverty level incomes today to 200% of the poverty level incomes. Today, 200% of the federal poverty level income of $26,200 for a family of four amounts to $52,400.

A competing proposal from commission staff would allow no debt forgiveness, and limit the length of a payment plan to eight months, with that period starting this year and extending until the start of the commission’s annual summertime moratorium on utility shut-offs in May 2021.

If only low-income families were eligible for utility debt forgiveness, that would dramatically reduce the number of customers who could benefit from the program.

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TEP, for instance, has 3,500 lower-income customers who participate in Lifeline, a program that offers $15 monthly discounts on their bills. Their total obligation is $1.7 million.

APS has fewer than 17,000 customers on low-income discount programs — and they owe a total of $7.5 million, utility officials told the commission Friday. Persons with household incomes of about 150% of federal poverty levels are eligible for these discount programs.

Supporters of Kennedy’s proposal, led by the Arizona Public Interest Research Group, said it would give a desperately needed break to utility ratepayers whose jobs and incomes were wrecked or limited by the pandemic.

The extended payment plans and debt forgiveness would ensure that utilities continued to collect some bill payments that they might not otherwise get if people had to pay them all upfront, the supporters said.

But at Friday’s meeting, spokespeople for TEP, its sister company Unisource, and APS raised major concerns about Kennedy’s proposal. They said it could saddle them with large amounts of unpaid debt they would ultimately have to recover from all customers in the form of higher electric rates.

If it’s not limited to low income customers, the debt forgiveness could apply to any customers and its effects will spread to all customers, including low-income customers, TEP’s Richerson testified.

Equity a concern in payment plans

“Then all the customers will be picking up debt. There are some equity issues there,” said Richerson, the utility’s customer service director. “We’re also concerned about extending the payment periods. With some accounts up to $3,000, if we extend this, the accounts could get to the level that they may not be able to address the bills.”

Commissioner Boyd Dunn, a Republican, said he’s concerned a 20-month payment deferral period could aggravate peoples’ problems of not trying to take care of their debts more efficiently, “unless their ability to pay is substantially increased.”

Peterson said she’s not comfortable with Kennedy’s proposed incentive program, saying, “I don’t think it’s fair to customers who have been making their payments on time.”

But, “I don’t believe that these are the only two options we have,” said Peterson, referring to Kennedy’s and the staff’s proposals.

But if you reduce peoples’ electric bill debts, the customers will still be able to pay part of them, thereby ensuring that utilities get at least some revenues from those customers, countered PIRG’s Brown and Commission Chairman Bob Burns.

“Twenty-four months is the best way to make sure folks are actually able to pay. With a six or eight month plan, right now it will be near impossible for a number of households to pay their bills,” Brown said.

“We think spreading them out onto a manageable payment period is in the best interest of customers challenged by bills right now. It also brings in funds that might not otherwise be coming in.”

She quoted the non-profit National Consumer Law Center as saying, “This not only keeps the lights on, it also helps utilities collect more money from otherwise uncollected accounts.”

“This is an unusual circumstance”

Without a discount program to encourage customers to join the deferred payment plans, there will be no incentive for them to get and stay on them, Burns added. Without at least partial payment from customers, all the unpaid debt will fall on the general ratepayer, he said.

After some additional discussion, Kennedy and Marquez Peterson agreed a 12-month deferred payment period and a low-income-only forgiveness plan could or would be acceptable.

Peterson said, “We will work together to come up with an alternative to what they have on the table. We will talk about it in December.”

Sandy Bahr, director of the Sierra Club’s Grand Canyon chapter, said this proposal isn’t what everyone wanted but it’s closer to being acceptable than what previously existed.

“It recognizes this is an unusual circumstance — not just a hot summer but a record hot summer and a pandemic,” Bahr said.

TEP can’t comment on the compromise idea because no specific proposals on it were presented at Friday’s meeting, TEP spokesman Joe Barrios said.

The utility supported the staff’s proposal and expressed concerns about extending the deferred plan beyond the beginning of the next shut-off moratorium, he said.

APS spokesman Jim McDonald was also noncommittal, saying, “When the commission makes its recommendations, we will assess impacts to all customers and support accordingly.”

Both utilities said they encourage their customers who face unpaid bills to contact them as soon as possible and not to wait until the bills pile up too high.

They said they’re committed to supporting their customers as much as possible. APS has set up an $6.8 million fund — backed by shareholders — to help low-income customers defray bills, while TEP has set up a similar, $1 million fund.

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Contact reporter Tony Davis at tdavis@tucson.com or 806-7746.

On Twitter@tonydavis987