Utility Late Fee/Shutoff Moratorium Expires September 30: Now What?
Editor's note: This blog has been updated to remove references to state guidance related to the creation of COVID-19 customer support programs. That guidance was incorporated into Proclamation 20-23.6 to help utilities create their own programs. Since it has not been referenced in any subsequent proclamations, the guidance may not have any legal effect. The update also adds a link to the Washington State Department of Health’s Customer Assistance Program.
Governor Inslee issued Proclamation 20-23.16 on July 2, 2021, which extended the utility shutoff moratorium through September 30, 2021. He has indicated that this will be the final extension. The Washington State Department of Commerce has assembled resources for utility customers behind on their payments, and the Washington Department of Health’s Office of Drinking Water has a customer assistance program. However, the question remains as to what actions local utilities can take to collect past-due amounts. In this post, we’ll focus on what effect (if any) the proclamations have on your existing collections process.
As a quick refresher, take a look at MRSC’s Collection Practices for Delinquent Utility Accounts webpage, our Utility Liens and Shutoffs Tool, and our February 22, 2021 blog: A Quick Guide to Utility Account Overcharges, Undercharges, and the Statute of Limitations. These pages cover more specific details that depend on the type of utility, and it’s critical that you use the right tools for your specific type of jurisdiction and type of utility.
The Proclamation 20-23 series (the proclamations) only applied to energy, telecommunications, or water services. The proclamations required these utilities to develop COVID-19 customer support programs that would address payment plan options for residential customers who are in arrears due to COVID-19-related circumstances. And while they applied to water and sewer districts as well as other municipally-owned utilities, the proclamations did not specifically include sewer or stormwater services. Further, the prohibitions on disconnecting or refusing to reconnect these services was limited by the language of the proclamations to “residential service,” but the prohibition on charging late fees did not include that limitation. So, late fees for commercial customers were also prohibited during the emergency.
Based on the plain language of the proclamations this is how we think they affect the utilities once the prohibitions expire.
The proclamations said that customers “shall not be charged” late fees for energy, telecommunications, or water services between March 23, 2020, and September 30, 2021. (Since interest is generally considered to be a penalty for non-payment it is probably included in “late fees.”)
There is no similar prohibition for sewer or storm water services. It appears that sewer and storm utilities are not prohibited from charging late fees and interest (depending on the utility’s rate schedule) for any past-due amounts. But since many utilities issue a combined utility bill it may be difficult to separate out services for which it can charge late fees from those it cannot.
Note that the proclamations do not prohibit imposing some kind of monetary penalty for failing to comply with the provisions of a payment plan. In other words, they do not prohibit your payment plans from including interest or late fees for missing a payment after the effective date of the payment plan.
The proclamations did not prohibit disconnecting sewer and storm services (if practical) for non-payment. The proclamations also did not prohibit any utility from disconnecting water, power, or telecommunications service if the customer does not comply with the terms of a payment plan.
Utility Liens and Collections
Remember that for city-owned utilities, RCW 35.67.210 and RCW 35.67.215 apply to sewage liens. Water and electrical services have a statutory lien under RCW 35.21.290, but enforcement of the lien is limited to shutting off the utility by RCW 35.21.300. Additionally, the period in which the lien may be imposed was amended this year by the legislature (see HB 1069, section 15). The four-month lien limit on water services (enforceable only by water shut-off) is extended by:
The period in which the lien may be imposed is the later of: (a) Three months from the expiration of the emergency declaration preventing collection or a lien; or (b) Three months of the ratepayer's failure to abide by the terms of an agreed payment plan, if the payment plan for past due charges would have allowed the ratepayer to repay the past due charges over a period of six months or more.
The bill also extends the time for cities and counties to impose a sewage lien:
A sewage lien may exceed six months' delinquent charges without the necessity of any writing or recording if collection of charges was impacted by the declaration of an emergency by the governor. In such circumstances, a lien may be filed for all charges due during the period covered by the declaration and may be effective for six months after the expiration of the declaration of the emergency.
For collection of delinquent amounts by water-sewer districts, the procedures in RCW 57.08.081 control. For water-sewer districts considering rate forgiveness, RCW 57.08.014 requires the district to notify all ratepayers of the special rates and any associated cost shifts.
For county-owned utilities, RCW 36.94.150 authorizes a lien for sewerage and water. As an alternative to the collection provisions in that section, RCW 36.94.150(3) allows the county to adopt the procedures in RCW 35.67.290 for collection.
Also, utilities may assign delinquent customer debts to licensed collection agencies under the authority provided in RCW 19.16.500 and pursuant to a written contract with a licensed agency. At least 30 days before assigning debt, the utility must first attempt to notify the debtor of the existence of the debt and that the debt may be assigned to a collection agency if not paid. According to RCW 19.16.500(1)(b), utilities may also add a reasonable collections fee to the outstanding debt.
Writing off Uncollectible Debts
In the past MRSC has written that a utility is required to collect a past-due amount and that failing to do so may violate Article VIII section 7 of the state constitution, which prohibits a government agency from gifting public funds. It may also violate the prohibition against discriminating among similarly situated ratepayers [Hous. Auth. of Cty. of King v. Ne. Lake Washington Sewer & Water Dist., 784 P.2d 1284 (Wash. Ct. App. 1990)].
But utilities will have to balance their need to maintain their revenue stream with the reality that some of their customers may not have the ability to pay the past-due debt and keep up with current expenses. You may want to consider adopting a policy that will authorize you to write-off uncollectible debt. The policy should provide clear criteria for allowing the debt to be written off and should apply to all types of accounts receivable (water, sewer, garbage, court fines, and other fees and charges that the utility may impose).
The policy should consider the variables for each type of receivable with specific criteria and internal controls in place to assure that the utility’s assets (receivables) are being safeguarded. With clear criteria, the governing body can delegate the authority to write-off the debt to staff without further involvement from the governing body. For policy examples, see our Ask MRSC Archives question: Is there a process for cities to write-off bad debt?.
MRSC has consolidated additional information in the Utility Collection Deferrals, Shutoffs, and Payment Plans section of our COVID-19 Small Business and Tenant Assistance Programs webpage.
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