Evidence is mounting in state after state that programs which help low-income consumers pay their utility bills actually save utilities and other ratepayers money. The savings come in the form of lower "write-offs," (uncollectible bills), lower administrative costs, and increased payments from the customers themselves.

Many have categorized assistance programs as "welfare," arguing that they should be funded by taxes rather than being part of utility programs. However public utility commissions in Pennsylvania, New York and Wisconsin,after carefully reviewing the facts, have recognized that such programs benefit both shareholders and other ratepayers by reducing utilities' costs. Thus these Commissions have mandated such programs based on their cost savings alone.

A closer-to-home example illustrates typical savings realized by such programs. In 1988, Clark County, WA, in collaboration with Clark PUD and NW Natural Gas, initiated a "Guarantee of Service Plan" (GOSP) which capped low-income families' utility bills at nine percent of their income. If these customers paid that amount regularly each month the utilities would pay off any past-due amount and any utility charge above that amount. Clark PUD, for example, spends over $450, 000 per year on the program.

Analysis of the affect of the program was done after 2-3 years, and termed "impressive" by the evaluation group. First, write-offs declined 36% for a utility savings of about $300,000 per year. Delinquent balances fell from 67% of the eligible population behind on their bills to only 13%. Power disconnections plummeted 65%. The utilities thus were able to cut administrative costs substantially. Clark estimates the cost to "carry" a past-due account (send out notices, do disconnections, pay collection agencies, etc.) at about $9.00 per month. Reducing its past-due accounts by about 1000 customers saved around $100,000 each year.

Most impressive was the fact that low-income customers themselves paid more once they felt their utility bills were under control. Previous to the program, these customers contributed only around $29 per month to the utility. But once they felt they could handle the level of payments and had an incentive to pay on time, the amount increased to $52. (Extensive interviews revealed that the customers were willing to pay more because they knew it wasn't hopeless. Previously, past-due accounts of hundreds of dollars discouraged them from paying anything on their bills. The program is extremely popular, with customers stressing that they liked being able to pay their bills on time.) Given the over 2000 customers participating, this works out to around a half million dollars in benefits to the utility each year; more than the total cost of the program!

Therefore low-income assistance programs are win-win. Low-income customers benefit through reduced shut- offs, uncertainty and administrative hassles; while utilities--their ratepayers and shareholders--save significant costs through lower write-offs, administrative costs and increased customer payments. Far from being "welfare," a well-designed assistance program is more like a cost-effective, often lucrative INVESTMENT on the part of the utility.

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NEWS RELEASE (October 2002)