1. Putting the Negotiation back into Negotiated Payment Plans National Community Action Foundation (NCAF) Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics (voice) 617-484-0597 November 2007

2. One-strike you’re out provisions. n Ability-to-pay is more than level of income; includes “fragility” of income. n Low-income disproportionately hourly wage workers. –No paid leave –No flex time –“Involuntary part-time employment” n Put in income assumptions. n Put in renegotiation clause. n Even if refused, of legal significance. –No “agreement”--duress –Adhesion contract.

3. The need for “cure” provisions n Many regs provide that a utility is not required to offer a new payment plan. n Be sure to distinguish between: –New payment plan –Renegotiated payment plan –Cure of payment plan default.

4. Considering “ability to pay” (1 of 2) n Universal regulatory requirement is to consider “ability to pay.” n Circumstances of concern: –Standardized payment plans –Maximum payment plan lengths –Deadlines for completion of payment plan

5. Considering “ability to pay” (2 of 2) n Aspects of “ability to pay”: –Absolute income –Relative income (poverty level) –Discretionary income –Fragility of income –Seasonality of income (income, expenses) –Ability to meet exigencies n Procedural aspects –Requirement to “offer” payment plan. –Void ab initio –Signature as waiver

6. Force a utility to exercise discretion. n Most regs do not establish a set time for payment plans. –“Up to 12 months” –“At least” 12 months. n It is necessary to distinguish between: –Utility practices –Utility tariffs –PUC regulations. n A refusal to exercise discretion is legally “arbitrary and capricious.”

7. Force a utility to consider all relevant factors. n Most regs require a consideration of set of specific factors in setting payment plan. –Time arrears outstanding. –Reason for arrears. –Ability to pay. n Basic rule of law: a failure to consider all relevant factors makes a decision “arbitrary and capricious.” n Document factors and payment plan demands based on that/those factors.

8. Negotiate time up-front n Often a time-sensitive reason for nonpayment. n The need is not simply to spread payments out, but to get beyond the period of need. n Mortgage workouts are precedent. n Exchange higher downpayment for delayed payment. –E.g., use EITC to make initial payment for delay in additional payments for 3 months. –Pay EITC in Month 1--next payment Month 4.

9. Negotiate for non-level billing plan n Most regs do not require levelized payment plan payments. n Most regs require a consideration of ability-to- pay in setting payment plan payment. n Consider household income. n Consider household expenses, including other energy expenses. n Lower summer/winter payment plan payments.

10. Negotiate for “free” or “reduced” months n Most regs do not require equal payment plan payments. n Most regs require a consideration of ability to pay in setting payment plan amounts. n Consider fixed non-recurring expenses in setting payment plan payments. n School and Christmas obvious. Document other non-recurring expenses: winter clothes, car/home insurance/school activities/property taxes.

11. Negotiate absolute cap on payments n Most regs require a consideration of ability to pay in setting payment plan amounts. n Setting an absolute cap on the payment plan payment is reasonable. n For example, the payment plan payment is not to exceed average monthly bill.

12. Break arrears into multiple parts n Genesis of notion of multiple payment plans in some of the arrearage forgiveness provisions of USF programs. n Take arrears $500 or $1,000 at a time per payment plan. –Once completed, negotiate payment plan on next increment. n Collecting anything is better than collecting nothing.

13. For more information: http://www.fsconline.com (Library *** News)

14. For more information: roger@fsconline.com