Didn't pay heat bill? It'll go on your record

Socked with a record $106 million in customer delinquencies, the state's largest provider of natural gas is taking an unusual get-tough step: telling the nation's big credit-rating agencies who pays the bill on time and who does not.

The change, which will begin in January for CenterPoint Energy's residential customers, could potentially push down the credit scores of those who owe. Other utilities across the nation grappling with unpaid bills are mulling similar measures.

CenterPoint is announcing the changes in radio ads, customer newsletters and an insert in November gas bills. The utility said that the practice can help customers who pay on time -- young people and renters, for example -- who have little or no credit record to establish a reliable history. But some privacy advocates see it as part of a worrisome trend.

"It's true, this could start to build you a credit score," said Evan Hendricks, author of "Credit Scores & Credit Reports."But they are ignoring the other side: late payments with a thin history will have a devastating impact."

The utility said that it's trying to get its statements moved up from the bottom of everyone's stack of bills. Credit scores are used for everything from employment background checks to mortgage applications to car insurance rates.

The CenterPoint move comes as concerns mount nationally over high consumer debt, rising payments on adjustable-rate mortgages and higher levels of unemployment.

Nationally, an estimated 1.2 million households have been disconnected from utility service, according to the National Energy Assistance Directors' Association in Washington, D.C.

Last summer, CenterPoint reported that about a third of its customers -- about 208,000 businesses and households -- owed money after the heating season.

It's difficult to know how many utilities are reporting to credit rating agencies -- including Equifax, Experian, Innovis and TransUnion. There's no official registry, and in Minnesota there's no requirement for utilities to ask for permission or to even report the practice to the Public Utilities Commission, said Burl Haar, the commission's executive director.

Who else is doing it?

Xcel Energy doesn't do it, although collection agencies that take over some company debt might, spokeswoman Mary Sandok said.

Some of the earliest and most enthusiastic adapters are Texas utilities, Hendricks said. CenterPoint, Minnesota's largest natural gas distributor, is based in Houston.

Greg Schirmers, CenterPoint's credit manager in Minnesota, said that many utilities are looking at credit reporting. "They're basically looking for a way to influence a customer to make payments, to treat their utility bill very seriously," he said.

But that assumes that customers can afford to pay and just choose not to, said Ron Elwood, an attorney at the Legal Services Advocacy Project in St. Paul.

"Does it spur some payment? Probably. How much? Who knows?" Elwood said. "Are you willing to harm a lot of people for the potential of some payback?"

CenterPoint says it will build in several protections for low-income customers. Those who have set up individual payment plans will avoid negative credit reports. Also, under the state's Cold Weather Rule, intended to help Minnesotans keep their heat on through winters, the utility offers more flexible catch-up terms to customers in arrears.

Since Oct. 15, however, those in arrears are charged a two-month deposit -- usually about $200 -- to continue or reconnect service, Schirmers said.

Important to loans

Credit scores of 740 and above are top-of-the-line; 620 or below is subprime, Hendricks said. That score determines not just if someone gets a loan, but also what it will cost.

"Lenders change their interest rate for every change of 20 points in the scores," Hendricks said. Most people don't expect their utility bills to be connected to their credit report, he said. That's why he believes advertising and stuffing bills aren't enough.

"I think utilities should have customers sign something that says, 'Yes, I understand what's happening.' That's how important this is," Hendricks said.

CenterPoint spokesman Rolf Lund says the utility understands the significance. "What we do in November ensures they will all have detailed information on the credit reporting."

H.J. Cummins • 612-673-4671

H.J. Cummins • hcummins@startribune.com