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A Water Affordability Programfor the City of Detroit
Prepared by:
Roger D. Colton
Fisher, Sheehan & Colton
Public Finance and General Economics
Belmont, MA
February 10, 2005
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Components of the Affordability Program
Rate affordability component: – Burden-based– Fixed credit
Arrearage management component Water conservation component
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Cost Recover for Rate Affordability
Meters charge (not volumetric):– Bad debt offsets– Start-up expenses
Annual level of a meters charge:– Residential: $12– Commercial: $240– Industrial: $3,300– Municipal/school/housing: $900
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Rate Affordability Expense Savings
“Going forward” bad debt savings Reduction in working capital Reduction in credit and collection Rationalize credit and collection
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Impacts of affordability program:Columbia Gas 61% fewer disputes 53% fewer new payment plans 69% fewer broken payment plans 48% fewer shutoff notices 74% fewer orders for disconnections for
nonpayment
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Impacts of affordability program:National Fuel Gas 30% increase in number of payments 10% increase in percentage of bill paid 80% decrease in number of
disconnections
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Basic Consumer ProtectionsService disconnects for nonpayment
Waived late fees for low-income customers
Disconnect limitations:– Ban notice with no present intent to
disconnect– Impose time limit on efficacy of notice– Limit number of notices not acted upon
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Basic Consumer ProtectionsPayment Plans for Arrears
Renegotiate payment plans with changed circumstances.
Reinstate payment plan after default if no disconnect.
Regular but not necessarily equal monthly payments.
Cap payment plan payment at one month’s average bill.
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Innovations in collections
Increased use of Electronic Funds Transfer (EFT) for ability-to-pay payment plans.
Landlord receiverships whether or not gas and/or electric vendors involved.
Cross-servicing residential accounts: city permits.
Cross-servicing non-residential accounts: license and permits.
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Summary of program proposal
Rate affordability program:– Rate affordability– Arrearage management– Water conservation
Fundamental consumer protections Designated ability-to-pay collection
initiatives
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