Food or power: Energy bills’ late fees force tough choices
NEW ORLEANS — Chris Kinney, a resident of Rapides Parish in central Louisiana, has seen his electricity disconnected eight times in the past two years for falling behind on his energy bills to Cleco Power.
His family did everything they could think of to catch up: pawning possessions, accumulating vast bank overdraft fees, borrowing money and applying for energy assistance.
Somehow, Kinney’s outstanding balance kept growing.
While his electrical charges added up to about $6,400 for the past two years, Cleco Power also billed him over $1,250 for being late on paying his bills, including late fees, reconnection charges and deposits.
“These charges keep piling up, and there is no way to catch up. The financial strain was just insane,” Kinney said.
Americans paid a combined $561 million in late payment fees to electrical utilities in 2019.
But how much you pay depends on where you live.
An Associated Press analysis of federal regulatory data found that several major utility companies in states such as Louisiana, Mississippi, Kentucky, Florida and Maryland are charging customers late fees that are much higher than the national average.
Five power companies — Cleco Power, Kentucky Power Co. and three subsidiaries of Entergy Corp. — averaged more than $17.50 per customer in annual late fee revenues between 2011 and 2020. That’s three times the national average of $5.83 in the same period.
The fees account for a small part of major energy companies’ overall revenue — less than one-quarter of a percent on average. But for the people who must pay them, they can be crushing.
Late fees typically punish customers who are least able to afford their utility bill to begin with. Poorly insulated homes and damage from natural disasters contribute to poor residents spending larger portions of their paychecks on energy bills. And Black and Hispanic households are more likely to experience energy insecurity and face utility disconnections.
For those who fall behind, it often means choosing between paying for power and affording other necessities.
Mary Boyd, 83, of New Orleans, said her expensive energy bills from Entergy — a major utility provider in Louisiana and three other Southern states — were causing her to choose between medication and other expenses such as repairing the damage to her fence caused by Hurricane Ida.
“I am sick. I have high blood pressure, asthma and arthritis,” Boyd said. “Now just imagine this, this 300 and some dollars energy bill takes away from food and other things.”
Power companies, including Entergy and Cleco Power, say late fees are an important tool to encourage customers to pay their bills.
“Ultimately, late payment policies are put in place to help protect all customers from potential rate increases caused by uncollected payments,” Entergy spokesperson Jerry Nappi said in an email. The company doesn’t profit from late fees, he said.
But for some major utility providers, including Entergy, late payment fees make up far more of the companies’ revenues than average.
Nine companies derive more than 0.5 percent of their total revenue from late payment fee collection from 2011 to 2020. That’s double and even triple the national average of about 0.24 percent.
Late fees are meant to cover the cost of collecting a bill or the cost of disconnecting or reconnecting power to a residence.
They’re not meant to be punitive, said Odogwu Obi Linton, who sits on the board of directors of the National Association of Regulatory Utility Commissioners.
If a customer pays the bill quickly, the utility doesn’t have to carry or pursue collection of the debt, Linton said. This saves the utility company money.
But advocates say the amount being charged doesn’t reflect expenses to power companies.
“Historically few, if any, of the late fees our utilities charge are cost-based,” said Kent Chandler, chairman of the Kentucky Public Service Commission.
Dan Kermode, a former policy adviser at the Washington Utilities and Transportation Commission, said rules on late fee penalties in many states were decided long before the advent of new technologies and computer systems. Billing software and automated meters have made the cost of collecting late payments virtually zero for utilities.