Will The Water Stay On? Virginia’s Municipal Utilities Need Help

By Ashley Spinks Dugan

November 13, 2020

Gov. Northam promised funding assistance earlier this month, but that hasn’t materialized.

BLACKSBURG- The Western Virginia Water Authority provides clean water to more than 150,000 people throughout Roanoke City and the counties of Roanoke, Botetourt and Franklin. Since March, the authority has suspended disconnections for residential service, even as an economic downturn has made it harder for many to pay their bill. 

“This was a unique situation with the pandemic, and the economy was grinding to a halt,” said Mike McEvoy, executive director of the authority. “Having access to good sanitation in the middle of a pandemic is important.” 

The authority is staying afloat for now. 

“The number’s been kind of manageable for us, so we’re happy to help the community out,” McEvoy said. But folks are missing payments—about 1,000 of the authority’s 62,000 accounts fail to pay each month. Over the past few months, the number has grown. The authority gets more than 90% of its revenue directly from customer payments. 

It’s a problem municipal utilities across the state face. In order to stay operational, you need revenue. But due to the pandemic, residents can’t pay their bills. Do you cut off their power and water, creating more health issues? Or do you keep the lights on and let the bill continue to grow?

In September, Roanoke County allocated $100,000 of its CARES Act money to the utility, to assist customers with delinquent bills. According to McEvoy, $80,000 of that money has already been spent. 

An influx of cash from the state government could help expand the authority’s bill assistance program, McEvoy said. “If the state were to allocate money,” he said, “we’d definitely continue the same program.” 

A dream deferred


The ability to help even more struggling customers seemed within reach on Nov. 9. Gov. Ralph Northam announced he would allocate $60 million of the state’s CARES Act funding to assist municipal utility customers. The only problem? Northam can’t allocate funds on his own; the General Assembly has to approve his requests. 

When the re-enrolled budget was released Nov. 12, the $60 million allocation was not included.

Instead, the General Assembly allocated $100 million in CARES Act funding for “direct utility assistance to customers” of State Corporation Commission-regulated entities, such as Dominion Virginia Power. Asked for a clarification on the discrepancy, Northam spokesperson Alena Yarmosky said, “The Governor has not yet acted on the final budget. We are working diligently on finalizing the best mechanism for funding that will ensure municipal utilities can provide relief to their customers.”

McEvoy’s optimism about the alternative amendment was lukewarm. He said the language in the new amendment suggests that the SCC-regulated entities share some of the money with the Department of Housing and Community Development. That’s the department that would have administered Northam’s proposed program for municipals. The new amendment “is a lot less clear than what the Governor said (before), which is, ‘There will be $60 million for municipals,’” McEvoy said. 

He added that regardless of any financial boons, the authority isn’t planning disconnections for a while. “First of all, we don’t have the manpower to do 1,000 disconnects,” he said. “And it’s just not good business.” He said eventually, the authority will begin reaching out to delinquent customers to set up payment plans, which will be phased in over several months.

RELATED: Virginia’s Utility Bill Freeze Just Ended. This Could Make The Eviction Problem Worse.

Why include bigger companies?

It’s not like this came as a surprise. The SCC warned that unpaid utility bills were a growing problem in September and October.

“This moratorium is not sustainable indefinitely,” SCC members wrote in their Sept. 15 letter to the governor. “The mounting costs of unpaid bills must eventually be paid, either by the customers in arrears or by other customers who themselves may be struggling to pay their bills. Unless the General Assembly explicitly directs that a utility’s own shareholders must bear the cost of unpaid bills, those costs will almost certainly be shifted to other paying customers.”  

And that’s exactly what happened. Still, people question why the final budget included companies like Dominion. After all, one could argue Dominion doesn’t need the help like municipal utilities do. Earlier this year, the SCC found since 2017, Dominion overcharged customers by $502.7 million.

In this fall’s special session, Northam recommended that the utility be required to pay that money back, in the form of assistance to its customers.

The General Assembly rejected that idea, along with watered-down alternatives from some members of the House and Senate. Those options would have forced Dominion to return at least one-third of the $502.7 million. Instead, the company kept the extra revenue and received some financial support in the form of this state budget.

It’s also worth mentioning that this week, Dominion paid out $2.8 billion to its shareholders, the largest payout in its history.

A different approach

Meanwhile, municipal utilities have to make tough choices. In Salem, the city is disconnecting electric customers. City of Salem Finance Director Rosie Jordan said carrots, like temporary moratoriums or federal assistance, often don’t motivate as well as sticks. The Salem Electric Department serves approximately 13,300 customers. Jordan said “a substantial percentage” of those customers are currently in arrears.

While she could not provide an exact figure, Jordan said, “We have had a big increase in the number who have reached the threshold for being cut off.”

The Salem City Council implemented a moratorium on penalties for nonpayment earlier this year, but it expired July 31. A similar moratorium on disconnections expired a month later. On Sept. 1, Jordan said, disconnections resumed.

Jordan’s impression is that the governor’s various interventions—directing public utilities on how to do their job—exacerbated problems. “A lot of customers will take advantage and not make a payment,” she said, even if they’re financially capable of doing so. Over time, those customers build up a balance that is “quite difficult to pay.”

Jordan called the governor’s actions, such as instituting moratoriums on disconnections, “very bothersome”. She added, “it’s as if he didn’t trust localities to do the right thing by our customers.”

Will The Water Stay On? Virginia's Municipal Utilities Need Help
A look at the growing unemployment numbers in parts of the state. Without a job, people can’t pay power or water bills. Unpaid bills means municipal utilities have less revenue to operate with, creating more problems.

Cities offer what help they can

For its part, the city of Salem, together with Roanoke County, also made funding available for bill assistance, Jordan said. The two localities jointly provided $150,000 to the Department of Social Services. It tasked the agency with screening residents for eligibility and distributing those funds for rental assistance, or bills like phones or utilities. 

The Salem Electric Department has historically always offered payment plans or other mitigation when customers are really struggling, too. 

Jordan said in many cases, even those customers who were made aware of financial assistance did not take it.

“I can’t force the customers to use it,” she said.

The approach initially suggested by Northam’s office was to provide funding directly to municipal utilities, which Jordan acknowledged may work more smoothly.

“But until final guidance comes from the Department of Housing and Community Development,” she said, “it’s a very complicated topic.”

There are 15 other municipal electric power companies throughout Virginia, including several in the southwestern part of the state. The cities of Radford, Danville, Bristol, Martinsville and Richlands are all served by such utilities, as is the campus of Virginia Tech in Blacksburg. This means any funding the General Assembly does approve could potentially have a big impact in the region— both for the businesses and for folks facing financial hardship.

Ashley Spinks Dugan is a freelance reporter for Dogwood. You can reach her at [email protected].

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