Business & Economy

Water, electric utilities watch unpaid bills pile up during the pandemic

The city of Moorhead's municipal utility is moving forward with a plan to start collecting on mounting customer debt.

an electricity meter
A meter measures electricity use at a Moorhead city park.
Dan Gunderson | MPR News

As subzero temperatures persist across Minnesota, utilities are watching unpaid heating bills pile up.

Because of the COVID-19 pandemic’s impact on many people’s personal finances, most utilities have not disconnected customers for about a year, despite unpaid bills.

But the city of Moorhead, which runs a utility that distributes electricity and water to city residents, is about to launch into a plan to start collecting the mounting customer debt — starting Friday.

The utility’s general manager, Travis Schmidt, told the Moorhead City Council this week that unpaid bills have grown exponentially since the pandemic arrived a year ago.

"Moorhead public service was at about $40,000,“ last year, Schmidt said. “At the end of January, we are at about $650,000. That's up roughly 15-fold. That's a lot of money.”

Schmidt said the number of delinquent accounts for the city’s utilities is about the same as past years — roughly 1,500 people, or about 15 percent of customers, who are more than three months behind on their payments. But some haven't paid a utility bill in 12 or 13 months, which is out of the ordinary. About two-thirds of customers whose bills are delinquent in Moorhead owe $1,200 or less — but a handful owe more than $4,000 each.

In addition, unpaid fees payable to the city of Moorhead for services like garbage or tree trimming are sitting at about $1.7 million, up 74 percent in the past 12 months.

Large state-regulated utilities are also seeing larger uncollected bills than usual.

A spokesperson for Fergus Falls-based Otter Tail Power said it currently has 6,830 Minnesota customers with outstanding bills that total about $2.5 million, a dollar amount that’s increased by about $650,000 since May 2020.

Duluth-based Minnesota Power said unpaid bills have nearly doubled since the end of 2019, with a total now approaching $6 million. Like Otter Tail Power, the number of delinquent Minnesota Power customers has declined, but the size of overdue bills is growing.

power poles and lines in a snowy field
Part of the electric power distribution system in Moorhead in February 2020.
Dan Gunderson | MPR News 2020

Xcel Energy said it does not release information about customer accounts.

A company spokesperson said in addition to internal assistance programs, Xcel has proposed a payment plan credit program to provide up to 75 percent forgiveness for past due bills, to encourage customers to set up payment plans. The program will require the approval of the Minnesota Public Utilities Commission, which regulates the state’s largest utilities.

Those large, state-regulated utilities are bound by a moratorium on disconnections issued by Gov. Tim Walz in March 2020, but the 124 smaller city-owned electric utilities across Minnesota are regulated locally, and have been voluntarily abiding by the moratorium.

Nearly a year in, Schmidt wonders if the utility is helping or hurting customers by letting overdue bills pile up.

"The concern that we all have is: Are we are we causing our customers more financial difficulties by letting them continue to get more in debt?” said Schmidt. "If we let the bills continue to stack up and stack up, how does that impact them, long term? Is it worse than going back to normal?”

Going back to normal for Moorhead Public Service means restarting the disconnection process for people who are behind on utility bills.

Warning letters will start going out to Moorhead customers this week, followed by phone calls and more letters.

Minnesota’s cold weather rule, already in effect, requires utilities to work with customers on a payment plan before turning off any electricity or gas service that provides heat between October and April.

No customer’s electricity will be shut off until April 15 at the earliest, and the city has no plans to shut off water because of unpaid bills. The utility and the city have waived late fees, and will give customers up to two years to pay overdue bills, if they sign a repayment agreement.

The Minnesota Municipal Utilities Association doesn't track its member utilities’ overdue bills, but CEO Jack Kegel said, based on conversations he’s had, most municipal utilities have seen a significant increase in unpaid bills in the past year.

"I don't know of any municipals that feel like they're in immediate financial peril,” he said. “But long term, if these debts remain uncollected, that is going to be a big hit."

The municipal utilities serve about 14 percent of electric customers in the state, said Kegel. Customers can get financial assistance through regular energy assistance programs and through additional COVID-19-related assistance.

The Minnesota Housing Finance Agency reported that 24,291 applicants requested a total of $16.8 million for utility assistance during 2020.

The state Commerce Department says about 118,000 households received energy assistance last year, but applications are down 10 percent this year.

a sign on a brick building
Moorhead's city-owned utility is initiating an effort to collect past due bills, which have grown significantly during the pandemic.
Dan Gunderson | MPR News

"The people who are in danger of being disconnected are people who continually ignore the notices and won't respond, so it's not a happy situation for anyone,” said Kegel. “Nobody wants to harm anybody in the cold weather or during this pandemic, but it puts the utility in a really tough position if the customer won't engage with them."

Moorhead utility manager Travis Schmidt said he hopes no one will have their electricity shut off, and he thinks that won't be necessary, if customers seek help. Utilities will connect customers with assistance available through established programs and new money provided through COVID-19 relief funds.

"The hard work's ahead, staff is going to have to have those conversations and they're not going to be fun, they'll be difficult, in trying to get people the assistance they need and get on a payment plan."

There’s a bit more leeway for customers of large state-regulated utilities. The moratorium on utility disconnections is in effect until Walz’s peacetime emergency, prompted by the pandemic, expires.

COVID-19 in Minnesota

Data in these graphs are based on the Minnesota Department of Health's cumulative totals released at 11 a.m. daily. You can find more detailed statistics on COVID-19 at the Health Department website.

The coronavirus is transmitted through respiratory droplets, coughs and sneezes, similar to the way the flu can spread.