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Food or power? Energy bill late fees force difficult choices

Chris Kinney is a Rapides Parish resident in central Louisiana. He has had his electricity cut eight times over the past two year because he was late on his Cleco Power energy bills.

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Food or power? Energy bill late fees force difficult choices

His family did everything to catch up, including pawning his possessions, accruing huge bank overdraft fees and borrowing money.

Kinney's remarkable balance grew somehow.

Cleco Power billed him $1,250 for late payments.

"These charges keep mounting up and there is no way for us to catch up. Kinney stated that the financial strain was insane.

In 2019, $561 million was spent on late payments for electric utilities.

However, the amount you pay will depend on where you live.

AP's analysis of federal regulatory data revealed that many major utilities companies in states such as Louisiana, Mississippi and Kentucky are charging customers late fees much higher than the national norm.

Cleco Power and Kentucky Power Co. were the five power companies that generated more than $17.50 in annual late fees revenues between 2011-2020. This is three times more than the $5.83 average per customer nationally for the same period.

Although fees make up a tiny portion of the overall revenue of major energy companies, less than one-quarter percent on average, they can be devastating for those who have to pay them.

Customers who can't afford their utility bills are often hit with late fees. Poor insulation and natural disaster damage can lead to residents who are less able to pay their utility bills. Hispanic and Black households are more likely than others to be affected by energy insecurity and utility disconnections.

It is often difficult for those who are behind to choose between power and other necessities.

Mary Boyd, 83, lives in New Orleans and said that her high-priced energy utility bills from Entergy, a major provider of utility services in Louisiana and three other Southern States, were forcing her to make a choice between medication and other expenses, such as the repair of Hurricane Ida's damage to her fence.

"I am sick. Boyd stated that he has high blood pressure, asthma, and arthritis. Imagine this: This three hundred and one dollar energy bill will take food and other items away.

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Entergy Power and Cleco Power say that late fees are a good tool to get customers to pay their bills.

Entergy spokesperson Jerry Nappi stated in an email that "finally, late payment policies were put in place to help ensure all customers against potential rate increases due to uncollected payments." He stated that the company does not profit from late fees.

Late payment fees are a significant part of revenues for major utilities providers like Entergy.

Nine companies, including Baltimore Gas and Electric and Central Hudson Gas and Electric and Cleveland Electric Illuminating Co., get more than 0.5% from late payment fees collection between 2011 and 2020 -- twice or even triple the national average at about 0.24%.

Late fees cover the cost to collect a bill or to disconnect or reconnect power to a residence.

They are not intended to be punitive, according Odogwu Obi-Linton, who is on the board of directors of National Association of Regulatory Utility Commissioners.

Linton stated that if a customer pays their bill promptly, the utility does not have to pursue or carry out collection. This saves money for the utility company, which can avoid turning off customers or making phone calls to collect late payment.

Advocates argue that the amount charged does not reflect power company expenses.

Kent Chandler, Chairman of the Kentucky Public Service Commission, stated that "Historically, few, if not all, of the late charges our utilities charge are cost-based."

Former policy advisor to the Washington Utilities and Transportation Commission Dan Kermode stated that late fee penalties in many states are a result of rules made long before the advent and use of computer technology. Late payments are virtually impossible to collect thanks to automated meters and billing software.

Louisiana regulations allow for a maximum 5% penalty for late payments of electric utilities. Colby Cook, Public Service Commission press secretary, said that he couldn't comment on why the penalty for late payments was set at 5% because the 1976 rules regarding late fees didn't explain the reason behind it.

Kermode stated that late fees are a unique way to discourage late payments.

Late fees are questioned by some regulators and advocates for consumers.

The pandemic in Kentucky led to a moratorium regarding late fees for residential customers, which was implemented until 2020. The commission examined the effects of the moratorium and concluded that "late fees have very little effect on the timeliness for residential customer payments for utility services."

According to Indiana University researchers, , energy insecurity has disproportionately affected Black and Hispanic households, and the ongoing pandemic, according to a paper published in Nature Energy.

Total Community Action in New Orleans distributes federal energy assistance based on financial need. Nearly all the 7,000 recipients of energy assistance from Total Community Action are Black, despite the fact that only about 60% of New Orleans residents identify as Black.

According to the American Council for an Energy Efficient Economy, Black households spent 43% more on energy in 2017 than white households. In 2020, the American Council for an Energy-Efficient Economy published a similar analysis. It found that Native American and Hispanic households had much higher energy costs than white households.

Low-income homes and older homes are generally less energy efficient. Floods and other disasters can cause damage to these buildings, making them ineligible for government weatherization assistance.

"Homes in Louisiana were affected by flooding and hurricanes." It means that we cannot weatherize them as it requires a new roof. Lauren Holmes, who manages energy assistance programs for Louisiana Housing Corp. said "That's beyond the scope of weatherization." If there is a four-foot gaping hole in your attic, we can't go in to insulate it.

Most homes in neighboring Kentucky aren't eligible for this assistance.

Kent Chandler, a member the Kentucky Housing Corp., stated that for every home that the Kentucky Housing Corp. can weatherize with federal funds, approximately two homes cannot be retrofitted because of underlying safety and health problems that prevent them from being eligible for that aid.

Weatherization isn’t the only factor that affects energy efficiency. How people heat their homes plays an important role as well. Chandler stated that many Kentucky homes are heated by inefficient electric heating. This can lead to high bills during winter months.

For those who are self-employed or unemployed, however, it can be difficult to get financial assistance to pay these bills.

"Residents receive a disconnection notice and have only a few days to seek help and provide all documentation before being disconnected," Selton Jones, Total Community Action's community services specialist for energy services, said. "If I play in a jazz bar, and I'm only on the saxophone," I don't have any tax stubs.

People who receive pensions, Social Security, or any other retirement income have this documentation. However, that doesn't mean that they will always be able to pay their bills.

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