Putting the Negotiation back into Negotiated Payment Plans

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

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

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

5. Considering “ability to pay” (2 of 2) • 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 • Procedural aspects • Requirement to “offer” payment plan. • Void ab initio • Signature as waiver

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

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

8. Negotiate time up-front • Often a time-sensitive reason for nonpayment. • The need is not simply to spread payments out, but to get beyond the period of need. • Mortgage workouts are precedent. • 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 • Most regs do not require levelized payment plan payments. • Most regs require a consideration of ability-to-pay in setting payment plan payment. • Consider household income. • Consider household expenses, including other energy expenses. • Lower summer/winter payment plan payments.

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

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

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

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

14. For more information: roger@fsconline.com