RALEIGH — Unless collections of utility payments are allowed to resume soon, a number of utility providers in the state could be facing bankruptcy due to one of Gov. Roy Cooper’s COVID-19 related executive orders.
Cooper initially addressed utility services in Executive Order 124 on March 31, which banned utility companies from charging late fees, interest, or terminating accounts due to non-payment. It also allowed residential customers at least six months to arrange to pay any of their outstanding bills. The first order was to last 60 days and also suspended evictions. The order also applied statewide regardless of income loss due to COVID-19.
Cooper later issued EO 142 which extended the prohibitions in EO 124 on disconnecting customers and continued to bar utilities from collecting and fees, penalties, or interest for late payments. The result of these orders has been an increasing number of customers not paying their bills at all, which is causing a financial meltdown for many utility operations.
EO 142 is set to expire on July 29, 2020, which may be too late for some citizen-owned utilities, as was the case with Elizabeth City, located in Pasquotank County. The city was one of the first reported to have reached a breaking point. Facing over 2,200 delinquent utility accounts and the electric fund was set to be depleted by August, the city was also reportedly looking at electric rate increases of up to 46% to compensate.
Elizabeth City officials voted on June 8 to request that Cooper and Attorney General Josh Stein grant the city a waiver from the order. Weeks later, with no response, the city manager issued a warning in a press release.
“The Attorney General has still not granted our justifiable waiver. The Elizabeth City Council can no longer wait on Governor Cooper or AG Stein to grant the waiver,” said City Manager Rich Olson on June 30. Olson warned that the city “will start sending out bills and expect our residential customers to begin paying them under the following terms and conditions.”
Quickly after that release, Stein granted Elizabeth City a conditional waiver.
Part of the orders pertaining to utilities required certain monthly reporting by the NC Utilities Commission (NCUC). That data is collected in order to assess the impact the governor’s executive orders on operations.
NCUC sent a letter to the governor on June 19 which reported figures spanning May 1 to May 31. In that letter, NCUC stated that 453,487 additional residential customers were eligible for disconnection due to non-payment but were not disconnected. That was an increase of 28,033 from the first report in May.
According to the NCUC report, between April and May there were 878,941 residential customer accounts were eligible to be disconnected but had not been with late fees and penalties totaling $10,039,546. During that same time period, 55,985 non-residential customers were eligible for disconnection but were not disconnected with late fees and penalties of $1,287,231.
“As of May 31, Utility Service Providers report an aggregate of $253,372,377 in residential and non-residential customer arrearages,” the NCUC letter reads. “Of this reported amount, approximately 60% is attributable to the three largest investor-owned electric utilities – Duke Energy Carolinas, Duke Energy Progress, and Dominion Energy.” The report notes that not all utilities had reported or reported consistently.
On June 23, Electricities sent its own letter to the governor outlining their plan to help customers while urging that order 142 be allowed to expire. The letter was signed by Joseph P. Brannan, EVP & CEO of NC Electric Cooperatives and Roy L. Jones, CEO of Electricities of North Carolina.
Electricities is a not-for-profit membership organization representing 92 public power communities across North Carolina, South Carolina, and Virginia.
The letter referenced the over $253 million in arrearages reported by NCUC and highlighted that the “average percentage of customers with past due accounts for the 256 Utility Service Providers that reported this information was 13.7%.”
“These aggregate arrearages, which accumulated during the relatively low-usage spring season, will quickly grow unmanageable during the upcoming summer months when consumers use significantly more electricity to power their air conditioners,” wrote Brannan and Jones in the Electricities in the letter.
Brannan and Jones wrote that “Ending the disconnection moratorium on July 29 and restoring the flexibility of our utilities to manage disconnections and payment plans on a case-by-case basis will provide better and more efficient responses to each circumstance.”
Cooper has not yet responded to the Electricities’ letter.
N.C. State Treasurer Dale Folwell has been watching the utility providers’ situation closely. In late June, Folwell asked the governor to issue waivers to all citizen-owned utilities in the state, noting that without waivers some of the citizen-owned utilities could possibly go bankrupt. In that press release, Folwell said he would bring the issue up again at the July 7 Council of State Meeting, and he did.
During the Council of State (COS) meeting, Folwell laid out the tenuous situation that dozens of utilities were in and noted that Cooper’s orders exempted cable and television providers while requiring power and water to comply.
“Executive orders 124 and 142 have had extreme financial unintended consequences,” said Folwell. “And it has the potential of creating an economic inequality, especially in rural North Carolina. This is not a political or emotional statement – it is a mathematical statement.”
Folwell said that local providers should be allowed resume their operations and that they know how to help their customers with compassion. Agriculture Commissioner Steve Troxler agreed with Folwell, then questioned what would happen if he revoked his concurrence on executive orders on utilities and Cooper responded by stating that “there is no provision” to revoke concurrence “under the law.”
Cooper asserted throughout the meeting that the only thing waived in his order were late fees and interest and that the public should be paying their bills.
“This is now under the emergency management act, and there is no provision to revoke a concurrence on an executive order that has already gone into effect,” said Cooper.
Attorney General Josh Stein and Folwell sparred a bit over the potential lawsuits that might be filed by other municipalities and utilities. Folwell also said that every member of the COS was covered under executive order 142 and that there is “absolutely no means testing” in the executive orders.
“There’s nobody on the Council of State who has to pay these bills either. They can also be deferred,” said Folwell. He went on to ask if Order 142 was meant to apply to “me, the governor, and the other members of this Council of State,” as well as others who have the means to pay.
The discussion soon moved from the financial ramifications of the order to returning local control.
“We need to push the power from Raleigh back into these local communities who know these cities and citizens better than anyone else,” said Folwell.
State Auditor Beth Wood then weighed in, stating she agreed with Troxler on the length of the order and with Folwell that Cooper’s order on utilities, “was not sustainable.”
“I am in agreement with Commissioner Troxler. I too, when I signed off on this, thought this was a temporary thing,” said Wood. “I thought July 1 things would return to normal, but we are not, and I agree with the treasurer in that what we have here is not sustainable.”
Wood also said she wanted to remind Folwell and everyone on the COS call that not all local governments “have what it takes” to get out of the situations they are in, and “many elected officials cannot run their local governments.” The auditor said that she is investigating several cities right now that have “no financial controls in place,” citing the City of Rocky Mount, which has “written off a million dollars a year in electric bills,” of which Wood claimed the city council said they were “never aware.”
Wood reiterated that “Executive Order 142 is not sustainable” and said that while “the cities and counties will go out of business,” dissolving 142 isn’t going to “get it either.” She cited 150 cities in the state that are on a “financial watchlist” because they are allegedly not being run well.
“Thank you, madam auditor. I do not plan to rescind this order,” replied Cooper when Wood concluded her remarks. “It does end July 31 and there is no provision under the law to revoke concurrence.”
According to Order 142, it does not end on July 31. The cited duration is for “one hundred twenty (120) days, until 11:59 pm on July 29, 2020.”
Troxler spoke up, saying a notice needed to go out to consumers very soon, making sure that they are made aware they need to start planning to pay their bills and back payments.
He encouraged the governor and attorney general to work with municipalities because “agriculture runs on power.” Troxler also said he worried the situation utilities were now in could get much worse and that these bills will hit already cash-strapped farmers.
Cooper repeated that “none of the payments were waived” in his executive order.
“What is going on now is that many of these municipalities are telling their customers that as of August 1, they will have the authority to disconnect utilities, so ‘you better enter into a payment plan with us’,” said Cooper.
It was made clear the majority of the COS of state would not be concurring to renew Order 142, at which point, Troxler asked the governor for his office to put something out to make sure people know they are supposed to be paying their bills, and Wood agreed.
Labor Commissioner Cherie Berry asked if there was a possibility of any federal funds that might be used to help citizens struggling to pay utility bills. Berry noted that summer months were going to make some of these bills worse.
In response to Berry, Cooper said that there were negotiations in the U.S Senate related to the latest stimulus bill, the HEROES Act (Health and Economic Recovery Omnibus Emergency Solutions Act), to get more financial help for city and counties.
“We are working hard to find more money,” said Cooper, adding that he hopes the General Assembly will “step up.” Conversations followed about waiting for federal action until Folwell intervened.
“Mr. Governor, I ask that as your policy people are considering these matters, they dutifully consider the unintended consequences of the orders,” said Folwell. When something goes through Congress, it has a scoring on it. When something goes through the General Assembly, it has a fiscal note on it. I think executive orders should have to have a fiscal note on them.”
Folwell went on to say, “I am opposed to the federal government providing subsidies for people like the people on this call, whose income has not gone down, for them to get a deferral that may put their municipal utility in a bind.”
“This needs to be means tested and Executive Order 142 is not means tested nor did it apply to cable companies,” Folwell said. He said he knows some are paying their cable bills but not for the electricity that turns their TV on.
The governor replied, restating that everyone owes the amount of their utility bills, and his orders were only to keep services from being shut off.
“Mr. Treasurer, this executive order did not remove debt that anybody owes,” said Cooper. “Everybody owes the full amount of their utility bills. All this did was prevent utilities from being cut off for a period of time. That’s all it did.”
Cooper asked for any more comments. Supt. Mark Johnson had one but said he would follow up with the governor later. An unidentified speaker asked if they would be “going around the horn,” but Cooper said there was “no time for that today” and terminated the call.
