DULUTH – Minnesota utilities are bracing for a stack of unpaid bills and increased costs as the pandemic continues to upend the economy.
As jobs are lost, late notices are expected to grow, which could cause rates to rise to recover those losses. The state’s smallest power providers, facing razor-thin margins, may be hurt the most.
Utilities said it’s too early to measure the effect so far, as only one bill cycle has passed since the state shutdown went into effect in late March.
“We have not yet experienced a material decline in on-time payment, but we believe such a change may occur, especially as the duration of the COVID-19 epidemic grows,” said Stephanie Hoff, spokeswoman for Fergus Falls-based Otter Tail Power, which has customers across western Minnesota and the Dakotas. “We are proactively working with customers on payment plans that fit their current situations.”
Nearly all the state’s utilities are temporarily extending the cold-weather rule to prevent disconnections for late payments for many, though not all, customers. That is keeping the lights on for those most affected by the pandemic, but at a great cost to power and gas providers.
“There are extra costs that have been incurred with more anticipated,” said Amy Rutledge, spokeswoman for Duluth-based Minnesota Power. “We have also waived fees like no late-payment charges for residential and small-business customers and no reconnection fees during normal business hours.
“These are costs or lost revenue outside the usual course of business.”
Parent company Allete on Wednesday suspended its 2020 earnings guidance “as we cannot predict at this time the extent and duration of the effects of COVID 19 on our results of operations for the rest of 2020,” CEO Bethany Owen said in a statement.
Xcel Energy, the state’s largest electricity provider, said the number of customers with late bills is so far similar to this time last year. A spokesman said the effect to business will “depend on how long the state’s orders remain in place and other economic impacts of the pandemic.”
On Thursday a group of large utilities will ask the Minnesota Public Utilities Commission to create a regulatory accounting to track losses and expenditures caused by COVID-19.
“The joint petition, the first in Minnesota’s regulatory history, was filed in recognition that all utilities are contending with unanticipated costs that may be large enough to have a significant financial impact,” said Ross Corson, spokesman for CenterPoint Energy, the state’s largest natural gas provider. “The joint petition is narrowly focused and only requests authorization for a utility to track pandemic-related costs while preserving the option to seek commission approval at a later date to recover these costs, if necessary.”
That may mean rate increases in the future, said Annie Levenson-Falk, executive director of the Citizens Utility Board advocacy group.
“There’s really no other place for that money to come from,” she said. “I think it’s appropriate to track those costs; if it’s done right there’s less to argue about later on.”
Co-ops hit hard
Nationwide, electric co-ops are expected to lose $10 billion over the next several years, according to the National Rural Electric Cooperative Association. That raises the possibility of “significant disruptions.”
“The economic health of electric co-ops is directly tied to the well-being of their local communities,” Jim Matheson, the association’s CEO, said in a statement. “As the economic impact of this pandemic spreads, electric co-ops will be increasingly challenged as they work to keep the lights on for hospitals, grocery stores and millions of new home offices.”
Lake Country Power, based in Grand Rapids, said the biggest change so far has been in how day-to-day operations are handled and that “it’s too early to tell what kind of impact the pandemic will have on the cooperative or even what it might look like in the upcoming months.”
“As an essential provider, we will continue to deliver safe and reliable electric service to our 43,000-plus members while adhering to our internal pandemic plan with public safety in mind,” said spokesman Greg Schulzetenberg.
The Minnesota Rural Electric Association has estimated a $10 million loss due to pandemic costs and lost revenue.
“There will be a cost to co-ops, and we’re trying to track that amount,” said Joyce Peppin, director of government affairs and general counsel for the association. “The impact of unpaid bills and how long they can go in covering any arrearages, it depends on the economy and when people can get back to work.”
Work with utilities
Even with increased protections during the coronavirus crisis, customers should not assume their power or heat will not be turned off due to nonpayment.
For those utilities extending the cold-weather rule, only certain residential customers are eligible for full protections and are required to set up a payment plan.
Other utilities have widened the no-disconnection policy, but Levenson-Falk said all customers should try to pay as much as they can and make plans with their utilities immediately to prevent or reverse disconnection.
The state’s Energy Assistance Hotline can be reached at 1-800-657-3710. A list of local assistance programs can be found at tinyurl.com/yym2uk55.