Paying For Heat, Electric In Trying Times

With winter fast-approaching, and families across the country struggling to make ends meet, a growing number can't pay their utility bills. Many are even having their electricity cut off as a result. But The Early Show's financial adviser, Ray Martin, has plenty of tips to assist them, and shares them in this column.

The election is over, and America is hoping a new President can improve the nation's economy. But in the meantime, average families across the country are left to fight their daily financial battles.

I was shocked to read in the Wall Street Journal this week that the number of homes having their electricity shut off because they can't pay the bills is growing in leaps and bounds.

The newspaper says, "Utilities are becoming more aggressive about collecting money from delinquent customers, leading to a surge in service shutdowns just as economic woes are pushing up the number of households falling behind on bills. The utilities say they are under pressure to clean out accounts that are weighing down their books at a time when their stocks are being hammered and earnings growth has slowed. Meanwhile, the increasing number of homes left without power -- which could rise as economic pain deepens -- is beginning to worry some consumer advocates and regulators."
For instance:

  • One Pennsylvania utility company increased shutoffs by 78 percent
  • In Memphis, shutoffs increased by 38 percent
  • Michigan saw increased shutoffs of 39 percent

    Why the big increases? Just like banks and credit card companies, utility companies are feeling the pressure to rid their books of bad debt (and delinquencies are growing; one Memphis utility company said the number of accounts owing more than $900 that were 90 days or more past due was up 148 percent as of Oct. 28). At the same time, consumers are losing jobs, losing money in the stock market, and paying higher costs for everything from their utilities to food.

    Surprisingly, technology is also playing a role: The Wall Street Journal also reported that, "Digital meters allow power companies to do things remotely that previously required sending out work crews. For example, utilities can take meter readings wirelessly and switch a customer's power off or on without having to send a crew to a house. They also can use a "service limiter" feature to cut power flows to a trickle until customers pay up. Utilities are installing millions of these meters across the U.S.

    "Southern California Edison, a unit of Edison International of Rosemead, Calif., currently disconnects late-paying customers owing as little as $30, but that could drop lower in the future. That usually would be a money-losing proposition, because it requires a crew to be sent out to disconnect service manually. But the company is in the process of installing 5.3 million digital meters, at a cost of $1.63 billion, which will allow remote, wireless shutoffs, making it economical to take action even for tiny amounts owed. In a recent filing with regulators, it said it could adopt "rigid enforcement" of payment rules in the future for those owing less than $30."

    This is not to say that utility companies typically shut off a homeowner's electricity without a second thought. Most companies say that step is a last resort. And some states set a moratorium on shutoffs of low-income customers during the winter months.

    If you are having trouble paying your utility bill, what should you do? Here is some advice that may be helpful to a lot of folks this winter:

    Consider A Budget-Billing Plan: If the seasonal rise of your utility bills makes it difficult to manage your payments during the winter, then consider Budget Billing. Budget Billing is a payment plan that lets you pay a level payment all year long, regardless of the actual cost of utility services used in a particular month. The way it works is that the utility company calculates the total cost of usage for the year and simply divides that amount by 12 to arrive at a level monthly payment. In some months your level payment will be more then your actual cost for usage, and in some months, your actual usage costs will be more than your level payment, but your payment will not change for the year, which should make it easier to budget and manage. It's important to note that Budget Billing does not reduce your overall utility costs -- it simply enables you to spread out your annual utility costs over a 12-month period. At the end of the year, if your actual costs are more, the balance of the unpaid cost is rolled into a new level payment for the next year, which would be a little higher. If your actual costs are lower, the extra amount paid is credited to your utility bill. Most states laws require utilities to offer this option to their customers.

    Ask for Utility Bill Payment Arrangements: If you are having difficulty paying your utility bill, contact your utility company immediately. Most states require utility companies to make payment arrangements available to all customers having difficulty paying, regardless of income. Under a payment arrangement plan, the utility company may agree to let you make level installment payments to pay off past due amounts, which would be in addition to your payment for current cost of usage. You may also qualify for utility bill payment assistance programs provided by your utility, your state's programs, or social service agencies. These state programs are typically available for lower income individuals and families facing financial crisis.

    Apply for HEAP Benefits: Under a decades-old federal program called the Low Income Home Energy Assistance Program, a block grant of federal funds is made available to all 50 states. Each state administers its HEAP program and distributes these funds to low income households to help pay for their immediate home energy needs. Earlier this year, the Congress approved a significant expansion of the program by increasing the funds available by 78 percent, to $5.1 billion, and increasing the income eligibility requirements, enabling more people with higher incomes to qualify for benefits.

    Eligibility is generally limited to individuals or families with incomes that do not exceed 60 percent of their state's median income. But for the 2008-2009 fiscal year, that limit has been raised to include individuals and families with incomes up to 75 percent of their state's median income. The qualifying income limit amounts will vary by state and by the number of people living in the household. For example, in New York, the 2008-2009 Gross Annual Income Guidelines for qualification for benefits under HEAP are $23,556 for an individual and $45,312 for a household that includes 4 people.

    Regular Benefits under HEAP include an annual supplement toward the cost of heating and related utilities of up to $800. The specific amount will depend on the living situation (whether you pay directly for heating costs or not) and the type of energy source used (electric, oil, gas, kerosene, propane, etc).

    Emergency Benefits of up to an additional $800 are also available under HEAP, which provides money to qualifying individuals who are about to have their electricity or gas service shut off or are in danger of running out of heating fuel.

    Since funds available under the LIHEAP program are not guaranteed and most of the funds are spent in the winter, qualifying individuals should apply now. Although the amount of funds available for the 2008-2009 fiscal year have been increased significantly, things are really bad out there, and current trends suggest they will continue to get worse, which raises the possibility, however small, that these funds could be spent before the end of winter.

    Apply for Weatherization Assistance: Under the Department of Energy's Weatherization Assistance Program, lower income individuals and families may have access to funds that can be used to make their home or apartment more energy-efficient. According to the DOE Web site, on average, weatherization reduces heating bills by 32 percent and lowers overall energy bills by $358 per year at current prices. The program includes funds that can be paid directly to local service providers for weather-stripping and caulking around windows and doors; cleaning, testing, repairs or replacement of heating systems; replacement or repair of windows, doors or storm windows; and addition of insulation to walls or ceilings.

    In some northern states, the cost of weatherization improvements made and fully paid for under this program average about $2,500 per home.

    The benefits of this program are available to both homeowners and renters, and the costs of eligible weatherization improvements are fully covered for eligible individuals. The eligibility requirements are generally the same as for HEAP, and the application usually takes about 20 minutes to complete.

    This program is administered by the state in which you live, and you can contact your states Weatherization Program by connecting to the by the DOE site and going to the state program contacts.