City\GEUS Consumer Service Policies. City Council Workshop July 27th, 2010

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1 City\GEUS Consumer Service Policies City Council Workshop July 27th, 2010

2 Discussion Items Security Deposits for Utility Services Bad Debt Transfers Universal Rates Throughout City empower Pre Paid Electric Policies Electric Deregulation in Texas

3 City\GEUS Security Deposits for Utility Services Prior to 2005 All deposits were kept unless a refund was requested No systematic process of increasing deposits for poor pay FY04-05 City & GEUS Bad Debt Reported to Experian $308,086 on 1,023 Accounts Bad Debt impacts all ratepayers City Council & GEUS Board approved similar deposit policies to automatically refund deposits to good paying customers and begin basing future initial customer sign up deposits on customer s credit scores & have escalating deposit levels should they fail to pay on time. Initial Refund for Good Pay History - $222,000

4 Residential GOOD FAIR POOR Water $0 $80 $120 based on meter size Garbage $0 $10 $15 Electric $0 $150 $225 to 1/6 of annual cost empower Pre Pay $0 $100 $100 Commercial GOOD FAIR POOR Water $0 $150 $150 based on meter size Garbage $0 60 days 60 days Electric $0 60 days 150% of FAIR

5 June 2010 Experian Credit Checks for New Service GOOD: Including Letters of Credit ->58% require no deposit FAIR: 14% POOR: High Risk or No Score 29%

6 City Ordinance Sec Cash deposits Any residential or commercial customer whose account has been active or twenty-four (24) months, has reached the nonpayment cutoff list during that period, and has not been advised of late payment more than twice during that period, will automatically have the deposit for water service be applied to the account balance. The utility administration manager reserves the right to reapply at least the minimum deposit should a customer receive more than two (2) late payment fees in a twelve-month period.

7 PUC of Texas Credit Requirements and Deposits Additional deposits An additional deposit may be required if: 1) the average of the customer's actual billings for the last 12 months are at least twice the amount of the original estimated annual billings; and 2) a disconnection notice has been issued for the account within the previous 12 months.

8 Hired Full Time Collection Person - January 2008 Main focus has been to review non-pay list weekly and increase deposit levels if needed and to find customers with bad debt living in Greenville.

9 GEUS does not reapply or increase deposits after late payments, but we do if the account hits non-pay. First non-pay in 24 months and the deposit is increased to FAIR. The second time in 24 months and the deposit is increased to POOR. Letters are mailed and the additional deposit is billed over the next 3 billings.

10 Bad debt reported to Experian FY04-05 $308,086 on 1023 accounts Past 12 months $187,821 on 718 accounts

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12 Debt Transfers City Ordinance Sec Withholding information of unpaid bill Any consumer who shall discontinue the place of business or move from his or her residence and leave a bill for water service or any other services due the utility office and shall make application for service at some other address, either under his or her own name or under a different name, without stating to the office the old address and name under which water was used at the address where there is a bill due, shall be guilty of a misdemeanor. (Ordinance , sec. 1, adopted 7/26/05)

13 City Ordinance Sec Denial of service for delinquency No service shall be furnished to any person who is delinquent in the payment of any bill for city-provided services furnished on the premises to which city-provided services are desired or to any other premises in the city. (Ordinance , sec. 1, adopted 7/26/05) City Ordinance Sec Joint users; moving to different locations (a) Where there are different consumers liable for any city utility charges, and where one (1) or more consumers so liable leaves such premises, such consumers so leaving shall not be supplied with city utilities at the new premises occupied by them until all accounts due by such persons shall have been paid. Where any consumer is liable to the city for such charges at one (1) place, and is thereafter located using city utilities at some other place, the city utilities shall be turned off at the new location until all valid accounts past due are paid.

14 Upon GEUS finding solid evidence that someone is consuming services at a residence that has an outstanding utility debt, a letter is mailed informing the person that the debt will be included on the next billing to the home. This can take up to 56 days to collect or terminate services to the home. Past 12 Months: Bad debt discovered\collected at sign up for new service: $67,055 Bad debt transferred to active accounts after GEUS discovers debtor is consuming services: $30,407 transferred, but not all collected. Many just skip again on the old & current debt!

15 Request To Consider Ordinance Modification Current wording is too strict: Roll a truck and terminate services until paid Current practice of adding to next bill is too lenient GEUS would recommend 10 day period to pay before terminating services

16 Utility Bills Average Utility Bill in Greenville: Past 12 months Electric 1,017 kwh $ Sewer 6,200 gal $ Water 6,200 gal $ Garbage $ Sewer Mandate 6,200 gal $ 8.37 Total Cost $ Only Set of Rates in Greenville Electric Water Inside City Limits Water Outside City Limits

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20 empower Pre-Pay Electric Disadvantages of Traditionally Metered\Billed Electric Accounts Requires discipline and budgeting to set aside $ for a service being used today Texas weather can have a dramatic impact on electric usage during a short period of time surprising many customers. Vendor predicted 800 customers in Greenville would be interested Current Subscribers: 895 spread throughout Greenville Cycle 1(NW): 287 Cycle 2(SW): 249 Cycle 3(SE): 157 Cycle 4(NE): 202 Very Popular ~ Out of Inventory 35 on the Waiting List ~ More units shipping this week

21 Advantages of empower Can buy as little as $5 or up to $300 at any time Average customer buys $19 every 7 days Unit tells you exactly how many $ are left & estimates about how long it will last Can pay out old electric debt at 30-50% of card revalues Friendly, Non Shut Off Feature: Units running out of $ after 4:30PM won t terminate power until 7:30AM the next weekday. Won t shut off on weekends or holidays Five Convenience Store Revaluing Locations Plus GEUS

22 Card Disabled to Avoid Future Revalue When Water Bill Goes Unpaid (International & Local Health Code) SECTION 505 WATER SYSTEM General. Every sink, lavatory, bathtub or shower, drinking fountain, water closet or other plumbing fixture shall be properly connected to either a public water system or to an approved private water system. All kitchen sinks, lavatories, laundry facilities, bathtubs and showers shall be supplied with hot or tempered and cold running water in accordance with the International Plumbing Code. Requires all homes to have hot and cold running water and sewer Would be irresponsible of GEUS to knowingly provide power to a home in direct violation of a health code

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25 Electricity Deregulation Deregulation is a system in which customers choose among electric retailers while the local utility maintains electric wires as a common carrier

26 Electricity Deregulation Deregulated investor owned utilities (IOUs) within ERCOT about 70% of market Not deregulated local option: coops and municipally owned utilities (MOUs) Not deregulated IOUs outside ERCOT

27 Status Private utilities are deregulated Oncor, Centerpoint, AEP, Texas New-Mexico MOUs and Coops have a local option to deregulate

28 Status To date, none of the 72 municipal utilities in Texas have chosen to opt in MOU rates are comparatively low Retail markets have experienced issues including significant price volatility Costs of participation higher than benefits

29 Utility Functions Generation: competitive at the wholesale level for all segments Transmission and Distribution (wires): not competitive, remain regulated Retail: customers can choose among suppliers of retail electricity in areas that are deregulated; the competitive portion of the electric bill accounts for perhaps half of the cost of electricity

30 Requirements to Opt In MOU must meet state-mandated operational requirements Conversion can be lengthy and expensive, involving: New billing systems New information technology to interface with statewide deregulation systems Changes in electric rates to unbundled services Splitting the MOU (facilities, personnel, books) to segregate the new retail function Charging customers for state-mandated programs Loss of transition benefits to MOUs with generation

31 Policy Considerations Policy considerations for a MOU that might opt in include: Potential negative impacts on city finances, including bond ratings and reduced transfers of electric utility revenues to general fund Impacts on shared billing with other city services separate electric billing might be required Impacts on customers now paying comparatively low MOU rates who may experience varied pricing levels Opt-in decision should not be made without significant research the decision is irrevocable

32 Observations Electric deregulation has been and is still an experiment, pushed on Texas and other regions by companies like Enron Results have been mixed Other states who were considering retail competition have abandoned the idea It is healthy to have regulated and deregulated models working side-by-side for comparison and checks & balances

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34 Letters to the Editor Dallas Morning News What benefits? Deregulation in Texas has been a disaster for the homeowner residential rates have skyrocketed I work with many intelligent people, but less than a quarter of them have any understanding of their options for choosing a different electric provider Dallas resident Drawbacks to rate-shopping To get the lowest price I must shop the Power to Choose website, then agree and sign a contract for a set price and time. If the market price falls, I can t capitalize on that until my contract expires. And maybe then, the price has risen.i have a life, and I don t want to spend it shopping for electricity. Tyler resident

35 Benefits of Local Control GEUS is focused on: Rates Reliability Customer Service GEUS personnel are highly motivated to provide service to the community GEUS personnel are stationed in local offices GEUS Board and City Council are accessible and govern rates and service policies for the benefit of our 13,000+ customers