March 2020 | Point of View

What can utilities expect from the COVID-19 stimulus package?

Proactive utilities will help customers achieve benefits from the CARES Act

Congress passed and the president signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27. The stimulus is the largest economic relief package in U.S. history, allocating $2.2 trillion in financial support to individuals, households, non-profits, state and local governments, and businesses affected by the pandemic and resulting economic downturn. While the CARES Act is intended to primarily help consumers, businesses, and state and local governments, electric, water, and gas utilities, and heating fuel providers can play an important role in helping facilitate access to funding available to low-income customers through the Low Income Home Energy Assistance Program (LIHEAP).  

Support Available to Utilities

LIHEAP

To address the growing number of low-income households impacted by the furlough or layoffs, the CARES Act sets aside $900 million in additional LIHEAP federal funding through September 2021. This represents a 27% increase over current FY 2020 program funding and is expected to be dispersed over approximately 16-18 months.  

 FY 2020 LIHEAP Funding Release

 $3,3 Billion  

 Stimulus Bill Additional LIHEAP Funding

 $.9 Billion

 LIHEAP Stimulus Funding as a % of 2020 Budget

 27.26% 


Data current as of August 31, 2019.

Data from LIHEAP Performance Management reports show the variations among some of the states and the federal-income eligible population meeting the qualifications for assistance.  

Percent of federal-income eligible population receiving assistance from federally allocated LIHEAP 

Texas

 5.42%

Florida

5.76%

California

5.87%

Illinois

12.41%

Indiana

14.60%

Virginia

14.84%

Ohio

24.06%

New York

45.13%

 

The eligibility requirements, filing dates, and application procedures vary among states and might require some adjustments in selective states, due to COVID-19 precautions being taken. Many states require residents to call state or local agencies based on residency location to coordinate with caseworkers over the phone or in person, while others offer online applications for residents to apply. It is important that utilities understand the complexities surrounding individual government agency application processes for them to assist customers in applying for LIHEAP funding.  

While applications are processed by government agencies receiving LIHEAP funding, payments are made directly to energy providers. As such, customers not enrolled might first contact their local utility or energy provider for information and assistance in applying for LIHEAP funding.  

Small Business Paycheck Protection Program  

As an incentive for small businesses to retain employees and to help cover necessary short-term expenses, the CARES Act allocates $349 billion in lending capacity for small businesses under its Paycheck Protection Program. The program provides 100% federally guaranteed loans for qualifying small businesses and non-profits.  

Utilities can help these entities by either redirecting them to the Small Business Administration (SBA) or developing an alternative utility bill payment plan. For example, taking outstanding bills and converting them into a deferred equal payment plan option post-COVID-19 recovery. 

State and Local Government Relief & Loans  

The CARES Act provides two primary mechanisms for to state and local governments for support, which can help municipal utilities impacted by COVID-19. 

The first mechanism gives states and municipalities requiring liquidity due to losses resulting from the pandemic, access to $454 billion in loans and loan guarantees in accordance with the Federal Credit Reforms Act of 1990. As currently understood, electric, natural gas, and water utilities might well qualify for these loans and loan guarantees as they pertain to expenses and capital programs. 

The second mechanism applies to state and local governments with populations over 500,000 and includes $150 billion to be allocated to states in proportion to their population. Local governments will receive 45% of the state funding, and unused portions will go back to the state. The funds are intended to help states and local governments cope with the immediate costs incurred in containing and responding to the COVID-19. 

Navigate the Implementation of CARES Act


Coordination with State and Local Agencies on LIHEAP  

Many of the state and local customer care “walk-in” centers for households to register for LIHEAP assistance are no longer feasible due to temporary closure of local agency offices. Given the expected increase in LIHEAP applications, utilities can improve coordination and cooperation within and between state and local agencies regarding LIHEAP program operations. 

Utilities can advertise the increase in LIHEAP funding and highlight application support on their websites to ensure that the application process is as easy for customers as possible. In states without online application capabilities, or for customers without internet access, the entire LIHEAP application process will need to be reengineered. Utilities could collaborate with the states and local agencies to increase the efficiency and application options that customers use to apply for LIHEAP support by developing online application portals on their own websites or using interactive voice response (IVR) capabilities to supplement caseworkers. Utility cooperation is encouraged, as customer access to additional LIHEAP funding will stabilize utility revenue by reducing arrears and improving customer engagement and satisfaction by providing such assistance.    

Customer Education and Outreach   

The CARES Act outlines varying ways customers can access stimulus funds, including expanded unemployment benefits, increases to state LIHEAP funds, or via the bill’s Paycheck Protection Program for small businesses. Utilities could facilitate a customer outreach program to increase awareness of the program and funding available, together with the means by which customers can access programs and funding. Being active in identifying at-risk customers prior to increasing arrears, directing consumers to the right funding assistance funnel, and launching easily accessible online resource hubs can help ensure that the most at-risk customers receive the benefits to which they are eligible.  

It is in the utilities best interest to quickly understand the CARES Act and its benefits and requirements for customers and identify the means by which they can help customers keep current on their accounts and avoid significant negative cash flow impact. This can be achieved through focused customer engagement and process improvements using tools such as value stream mapping, and the digitization of certain key customer engagement processes.   

Contact Center Improvements  

Contact center call congestion is an expected outcome of more customers seeking information and applying for assistance. Customers eligible for assistance will be quick to inquire about their options, and utilities should be able to answer such questions. Active versus reactive customer engagement will shorten the time between when federal funds are available and when utility customers receive the assistance. In preparation, utilities should be creating hubs and online resource centers, and turning their contact centers into higher performing service centers.   

Utilities should work towards creating new customer journeys (in collaboration with state agencies) for customers at risk of not being able to afford their utility bills and taking steps to streamline journeys associated with uncollectible accounts. This will enable the utility to understand every point of potential engagement and anticipate roadblocks in advance.   

Financial and Customer Dashboards  

Utilities are - or will be - experiencing lowered commercial and industrial demand that will have adverse impact on revenue and collectibles. In addition, utilities will be confronted with many uncertainties and risks about their business and financial health requiring transparency and proactive action to address.  

Indications from Congress suggest the possibility of another COVID-related stimulus bill. Being able to stress-test and model utility financial health through dashboards on a week-to-week or even day-to-day basis will allow utilities to react quickly during this period.   

Proactive Utilities will Help Customers Achieve Benefits from the CARES Act  

Utilities should be focused in the near term on implementing these new tools, processes, and procedures not only efficiently and effectively, but also in a remote, contactless environment to create a win-win for customers and shareholders.   

Helping more of the utility’s low-income customers apply to receive the LIHEAP benefits being made available through CARES will benefit all customers through the reduction in uncollectible account receivables. At the end of the day, the utility and the customer have end goals that are mutually aligned: getting customers access to the stimulus funding and assistance as quickly as possible and utilities having greater certainty of revenue.   

Listen to a 1-hour virtual roundtable to hear from utility representatives on challenges they’re facing and how they’re responding during these uncertain times. Watch this complimentary on-demand event. 

 

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