SYRACUSE — New Yorkers racked up billions of dollars in unpaid utility bills during the COVID-19 pandemic, but now the bill is coming due.
State officials are working with National Grid and other utilities on a plan that could include an unprecedented bailout for hundreds of thousands of households and small businesses that failed to pay their bills during the pandemic moratorium on utility closures.
That could mean higher utility rates for everyone in New York City, depending on what the state’s Civil Service Commission decides to do.
Unpaid gas and electric bills are piling up relentlessly in New York City. Nearly one in six households have fallen behind, as have thousands of small businesses. The state blocked service terminations, but no one forgave the bills.
Now state officials are trying to avoid a cuts crisis and get public services the money they are owed.
Last month, the PSC approved a plan to fully reimburse $587 million in overdue bills owed by low-income customers enrolled in utility bill rebate programs. To help cover the costs, utility customers will begin August 1 to pay a small surcharge on their bills.
But the debts of clients whose incomes are known are not the biggest problem. Other residential and small business customers account for three-quarters of the record $2.3 billion in unpaid bills that have piled up during the pandemic.
The PSC is also looking to help these customers in a second phase of the rescue plan. If the commission chooses to pay off all or most of their debts, taxpayers are likely to bear at least part of the cost.
The PSC brought together representatives from utilities, state agencies and consumer groups to find a way to pay off some or all of the debt.
“Are they going to completely annihilate it?” I don’t know,” said Bill Ferris, a legislative representative at AARP, one of the groups in the discussion. “But they’re definitely looking at people…who don’t qualify for any of the aid programs.”
The scale of the debt crisis is something never seen before.
In the two years since COVID-19 arrived in March 2020, unpaid utility bills nearly tripled from $794 million to $2.3 billion statewide. Without some resolution, utility companies warn, all those unpaid bills could trigger a torrent of service terminations, hamper economic recovery and prompt utilities to seek rate increases to cover uncollectible bills.
There is pressure to find a solution quickly.
In May, utilities began shutting down residential customers for nonpayment for the first time in more than two years.
Working with the governor and legislature, the Public Service Commission last month developed a plan to pay off $587 million in unpaid utility bills accrued by low-income households eligible for utility programs.
These households will be told that their overdue bills accumulated up to May 1 this year will be paid off, even debts incurred before the pandemic. The utilities have agreed not to end service for low-income customers until at least September 1.
The state will tap into a variety of sources to pay for it. State lawmakers earmarked $250 million for the budget; Another $100 million or so is expected to come from the Office of Temporary Assistance and Disabilities, which uses money from its rental assistance program to pay some bills. Utility companies are contributing $36 million.
Most of the rest — about $180 million — will be covered by a new surtax paid by utility ratepayers. State officials say the surcharge starting Aug. 1 will add less than 0.5% to residential bills — say, about $1 on a $200 monthly bill.
Separately, utilities began charging new fees on July 1 to offset any late penalties they were not allowed to charge during the pandemic. The money from this surtax will also be used to pay down the debt of low-income households. The special charge will add approximately $1.50 per month for a typical National Grid household with gas and electric service.
This is the first phase of the rescue plan.
But that leaves a huge outstanding bill — around $1.7 billion. Of this amount, $1.1 billion is owed by residential utility customers who do not qualify for low-income programs. More than $600 million is owed by small business customers.
Statewide, nearly one in six households are at least two months behind on their utility bills. The same is true in National Grid’s upstate territory. In April, the average amount owed by 76,000 low-income National Grid customers was $1,139. The average overdue bill for 151,000 non-low-income customers was $1,872.
In addition, more than 14,000 of the utility’s small business customers owed an average of $3,049 in May, National Grid reported.
State regulators are just beginning to work on phase two bailouts to help small businesses and low-income customers get out of debt. How much of their arrears will be repaid? Will all businesses and residents be eligible for aid or will there be a hardship test? None of the details have yet been discussed.
In addition to seeking state and federal funds for phase two, the PSC will likely consider a surcharge on utility bills to cover some of the costs, as it did for phase one. Part of the discussion will also be how much utility shareholders should contribute to the effort.
For the first phase, National Grid will contribute $4.85 million. For comparison, the PSC has calculated that upstate customers will pay about $33 million for the first phase through the surcharge that will begin appearing on bills on August 1.
Unpaid bills were already a problem before the pandemic. In recent years, regulators have beefed up programs for low-income customers, who get monthly discounts on their bills. National Grid has approximately 175,000 upstate poor customers enrolled in its energy accessibility program.
But the pandemic has multiplied the difficulties and many high-income households who could normally meet utility bills have stopped paying.
Under the state of emergency declared by Governor Andrew M. Cuomo in March 2020, utilities were forced to stop charging late fees and shut down customers for nonpayment.
Technically, this moratorium on closures ended a year ago. But the state gave customers a grace period until December if they were affected by the pandemic. And utilities don’t usually shut people down during the winter months.
When spring arrived, utilities began to shut down service again for non-payment. This reinforces the urgency for the PSC to finalize its plans for the debt problem. Some of the customers targeted for closure may now qualify for debt relief later this year.
According to what the PSC orders for a phase two “debt relief, non-low-income customers at risk of being closed are likely to receive assistance with pandemic-related bills at some point this year. But how it will work won’t be known for at least a few months.
All New York City utilities have promised not to shut down customers who participate in their energy affordability programs until at least September 1. end December.
In May, National Grid ended service for 2,751 residential customers in the upstate, the first cuts in more than two years. The utility is focused on customers who owe $500 or more, spokesman Jared Paventi said.
More than 240,000 National Grid upstate customers are potentially eligible for shutdown because they owe at least two months of unpaid bills.
For low-income customers: If you already participate in your utility’s low-income energy assistance program, you don’t have to do anything to get help for past-due bills from before May, the 1st. You are responsible for keeping up to date with invoices after this date.
If you are not participating in an energy assistance program but are receiving income-based benefits such as SNAP (the Supplemental Nutrition Assistance Program), contact your utility to enroll. National Grid customers can visit ngrid.com/eap to learn more and apply.
For other customers: National Grid advises that termination of service is a last resort. If you have overdue bills, the utility should offer you the option of a deferred payment agreement to fix the problem. Payments can be as low as $10 per month.
National Grid has a team of consumer advocates who work with customers on affordability issues. To reach a consumer advocate, call 1-800-642-4272.
The PSC said it hoped to have a plan in place to deal with the backlog of unpaid bills before the start of the heating season in mid-October.