The American Public Power Association (APPA) recently weighed in on an interim final rule (IFR) for coronavirus state and local fiscal relief recovery funds in comments submitted to the U.S. Department of Treasury.
In its July 16 comments, APPA said it strongly supports Treasury’s decision in the IFR to allow coronavirus state and local fiscal relief recovery funds to be used for purposes similar to those of coronavirus relief funds previously authorized.
At the same time, APPA said it disagrees with Treasury’s decision to exclude electric power utilities from the definition of general revenue.
“Historically, public power utilities nationwide on average contribute 5.4 percent of their operating revenues back to the communities they serve. However, the inability of some customers to pay their utility bills due to the COVID-19 pandemic has significantly affected many public power utilities,” APPA said. Treating lost utility revenue as lost general revenue, would allow these communities to use coronavirus state and local fiscal relief recovery funds to offset these losses, the public power group said.
The IFR states that assistance, including utility assistance, to households or populations facing negative economic impacts due to COVID-19 is an eligible use of coronavirus state and local fiscal relief recovery funds. The IRF also allows such assistance to be predicated on the assumption that households or populations experiencing economic harm during the pandemic experienced that harm due to the pandemic, and thus qualify for assistance.
“APPA believes this flexibility is appropriate and will help reduce barriers to relief to those who need it most,” it said.
APPA also strongly supported Treasury’s guidance in the form of Frequently Asked Questions relating to the use of Coronavirus Relief Funds (CRF) and the prohibition of CRF to replace lost revenues.
Specifically, that guidance clarified the parameters under which CRF lost revenue prohibitions would not be violated by a utility payment assistance program benefiting customers of public power utilities. APPA believes that guidance continues to help communities draft programs of benefit to public power utility customers.
“However, as we understand the rules, households must still attest to their need before relief can be provided,” APPA said. “Because many households are being shielded from the effects of the pandemic by utility shutoff moratoria, there is growing evidence that these households are not seeking relief. In fact, while electric utility customer arrearages are soaring in many communities, we have heard anecdotally that the number of applications for Low Income Home Energy Assistance Program benefits are down.”
Allowing programs supported by coronavirus state and local fiscal relief recovery funds to provide relief directly to customers in arrears without such an attestation would get around this hurdle, APPA said.
Meanwhile, APPA noted in its comments that the statute allows the use of coronavirus state and local fiscal relief recovery funds for the provision of government services to the extent of reduction in revenues.
“As we read the IRF, that includes the provision of electric utility services. However, the IRF specifically excludes utility revenues from the definition of lost general revenue,” APPA said.
As a result, the “pool” of coronavirus state and local fiscal relief recovery funds that could be spent as “lost revenue” funds will be smaller than the actual amount of lost revenue. “While we understand the need for a simple clear methodology for defining this term, it simply does not reflect reality for communities that own or operate their own electric utility. More importantly, it puts at a disadvantage those communities that have suffered significant electric utility arrearages due to the pandemic.”
APPA conducts annually a survey of its members, including an in-depth study of their finances. Consistently these surveys show public power utilities contributing to their communities. For example, the 2020 survey on 2018 financials, showed that, on average nationwide, public power utilities contributed roughly 5.4 percent of operating revenues back to their communities.
However, in February 2021, APPA surveyed its members about the dollar amount of residential arrearages for their electric power utility for January 2020 and then January 2021. Overall, surveyed utilities reported arrearages totaling $375 million as of January 2020 and arrearages totaling $778 million as of January 2021. That is a net increase of $402 million. Measured against residential revenue, arrearages as of January 2021 totaled 5.1 percent of residential income.
Responses to the survey were also quite varied. “Some communities have done relatively well during the pandemic, and so customer payment of bills has not fallen – in fact, in a handful of communities, arrearages have declined. In most communities, however, there has been an increase in arrearages as a result, and in roughly one third of communities, these increases have been quite substantial (with the definition of ‘substantial’ being admittedly subjective),” APPA said.
Many of those communities seeing the highest arrearages are in areas hit particularly hard by the pandemic and where the community has chosen to suspend utility shutoffs or are required to suspend shutoffs by the state.
While coronavirus state and local fiscal relief recovery funds can be used for utility assistance payment relief, that is only helpful if customers are seeking relief and willing to attest to their need for relief, the public power trade group pointed out.
Allowing utility lost revenue to be treated as lost general revenue would ensure that the pool of coronavirus state and local fiscal relief recovery funds that could be spent as “lost revenue” funds is closer to the actual amount of lost revenue. In turn, that would allow public power utilities to seek the use of coronavirus state and local fiscal relief recovery funds for use “for the provision of government services,” APPA said.
“If allowed, our members have indicated that they would most likely seek to use these funds to establish customer assistance programs in which they credit customer accounts for arrearages. Again, as a replacement of lost revenues, this relief could be provided without the heavy hand of the threat of a utility shut off.“