A Water Affordability Program for the City of Detroit Prepared by: Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics Belmont, MA February 10, 2005

Components of the Affordability Program n Rate affordability component: –Burden-based –Fixed credit n Arrearage management component n Water conservation component

Cost Recover for Rate Affordability n Meters charge (not volumetric): –Bad debt offsets –Start-up expenses n Annual level of a meters charge: –Residential: $12 –Commercial: $240 –Industrial: $3,300 –Municipal/school/housing: $900

Rate Affordability Expense Savings n “Going forward” bad debt savings n Reduction in working capital n Reduction in credit and collection n Rationalize credit and collection

Impacts of affordability program: Columbia Gas n 61% fewer disputes n 53% fewer new payment plans n 69% fewer broken payment plans n 48% fewer shutoff notices n 74% fewer orders for disconnections for nonpayment

Impacts of affordability program: National Fuel Gas n 30% increase in number of payments n 10% increase in percentage of bill paid n 80% decrease in number of disconnections

Basic Consumer Protections Service disconnects for nonpayment n Waived late fees for low-income customers n Disconnect limitations: –Ban notice with no present intent to disconnect –Impose time limit on efficacy of notice –Limit number of notices not acted upon

Basic Consumer Protections Payment Plans for Arrears n Renegotiate payment plans with changed circumstances. n Reinstate payment plan after default if no disconnect. n Regular but not necessarily equal monthly payments. n Cap payment plan payment at one month’s average bill.

Innovations in collections n Increased use of Electronic Funds Transfer (EFT) for ability-to-pay payment plans. n Landlord receiverships whether or not gas and/or electric vendors involved. n Cross-servicing residential accounts: city permits. n Cross-servicing non-residential accounts: license and permits.

Summary of program proposal n Rate affordability program: –Rate affordability –Arrearage management –Water conservation n Fundamental consumer protections n Designated ability-to-pay collection initiatives

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