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

Components of the Affordability Program

Rate affordability component: – Burden-based– Fixed credit

Arrearage management component Water conservation component

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

Rate Affordability Expense Savings

“Going forward” bad debt savings Reduction in working capital Reduction in credit and collection Rationalize credit and collection

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

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

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

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.

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.

Summary of program proposal

Rate affordability program:– Rate affordability– Arrearage management– Water conservation

Fundamental consumer protections Designated ability-to-pay collection

initiatives

For More Information

http://www.fsconline.com

(Library or News)

For More Information

roger@fsconline.com