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Putting the Negotiation in Negotiated Payment Plans

Putting the Negotiation in Negotiated Payment Plans. National Community Action Foundation (NCAF) Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics November 2004. Issues to consider. 1-strike you’re out provisions. “New” vs. renegotiated vs. cured payment plans.

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Putting the Negotiation in Negotiated Payment Plans

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  1. Putting the Negotiation in Negotiated Payment Plans National Community Action Foundation (NCAF) Roger D. Colton Fisher, Sheehan & Colton Public Finance and General Economics November 2004

  2. Issues to consider • 1-strike you’re out provisions. • “New” vs. renegotiated vs. cured payment plans. • “Late fees” on payment plans. • Force majeur for consumers. • Forcing a utility to exercise its discretion. • Forcing a utility document its consideration of required factors. • Bargaining for time up-front. • The role of non-level payment plan payments. • Bargaining for “free” or “reduced” months. • Bargaining for an absolute payment plan cap. • The role of multiple payment plans.

  3. One-strike you’re out provisions. • Most regs require consideration of ability-to-pay. • 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.

  4. 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.

  5. Applying force majeur provisions • Force majeur allows a change in contract for external circumstances yielding substantially changed conditions. • Payment plans require payment toward arrears plus current bill. Level of current bill is assumed. • Changes in assumed current bill due to weather or price volatility should yield force majeur. • At the least, doctrine of mistake.

  6. Refuse late payments on DPAs • Late payments are to pay cost of collection. • Late payment fees serve as incentive to pay. • Neither function served by late payment fee on payment plan. • In addition, capital costs of payment plans embedded in base rates.

  7. 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.”

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

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

  15. For more information: roger@fsconline.com

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