Staff Report Item 6
TO: Ava Community Energy Financial, Administrative, & Procurement Subcommittee
FROM: Kelly Brezovec, Sr. Director of Account Services
SUBJECT: Accounts Receivable Recovery Process, Proposed Updates DATE: March 13, 2024
__________________________________________________________________ Recommendation
Receive an informational item and provide feedback to proposed updates to Ava Community Energy’s Accounts Receivable Recovery Process.
Background and Discussion
The initial policy regarding Delinquent Accounts and Collections (Accounts Receivable Recovery Process) was adopted as part of the February 7, 2018, staff report covering Administrative and Operational Policies. The Board of Directors received an informational review of this policy at the November 20, 2019 meeting. At that time, staff intended to put the policy into operations by the end of the 2019-2020 fiscal year; instead, the policy was put on hold in response to the State’s emergency customer protections adopted to support customers impacted by the COVID-19 pandemic. The State’s COVID-19 State of Emergency terminated on February 28, 2023. Ava staff is revisiting our Accounts Receivable Recovery Process in preparation of putting it into operations in 2024.
Current Policy
The current policy, which is available, but not enforced, provides paths for three activities related to delinquent payments and the accounts receivable (AR) recovery process:
1. Ava can return delinquent customers to PG&E for continued non-pay.
2. Customers with debt exceeding set limits for both amount of debt and days past due, will be provided with a late payment notification and placed on a payment plan if no payment is received.
3. Customers with closed accounts and a past due balance will be available for recovery.
Customer Debt Journey
Ava customers follow PG&E’s Electric Rules 8 and 11, which outlines actions applied to past due accounts, has not changed substantially since the initial delinquency and collections policy was written in 2018. Previously, the 15-day notice window opened on Day 27-33, the 48 hour notice on Day 41-47 and the account was eligible for disconnection as of Day 50-56. For non-residential, the account was eligible for disconnection on day 32. The current policy is listed below in Table 1.
Table 1: PG&E Delinquency Process as of December 2023
Residential Accounts Non-Residential Accounts
Day 0 Bill is completed
and issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27-34
A new bill is issued
for current charges
and a 15-day notice
is included for past
due charges.
Day 21-34
A new bill is
completed for new
charges and any
unpaid charges and
a 7-day notice is
issued for past due
charges.
Day 42 96-hour notification
sent NA NA
Day 44-47 48-hour notice via
mail NA NA
Day 48 Outbound phone
call NA NA
Day 51 Account is eligible
for disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to
CCA
As shown in Table 1, PG&E follows a schedule regarding delinquency, with several customer touch points, each an opportunity for a customer to pay their bill in full or agree to a payment plan to become current on their balance. Payment plans may be three (3) to 24 months long.
Should a customer fail to pay their balance or enter a payment plan, the customer will be disconnected. Forty-four days after the disconnection, Ava’s debt that remains unpaid will be “reversed” to Ava. At this time, Ava may begin efforts to recover debt, as PG&E is no longer issuing bills that include our outstanding balance.
Proposed Policy Updates
1. Ava can return delinquent customers to PG&E for continued non-pay.
Ava proposes to maintain this policy. While Ava has not yet returned customers to PG&E, there may be egregious situations that call for the return of customers to PG&E. Returning a customer to PG&E would both allow Ava to cap the arrears and, eventually, PG&E would reverse the debt back to Ava, allowing for collection activities to commence.
The policy does state that the outstanding balance must be over 90 days old. As shown in Table 1, Ava may want to return a customer to PG&E prior to 90 days, since the debt would automatically be returned to us at that time regardless. Staff recommends removing the time restriction to customize this step per situation and limit the number of returns.
2. Customers with debt exceeding set limits for both amount of debt and days past due, will be provided with a late payment notification and placed on a payment plan if no payment is received.
The current policy states, for residential customers:
EBCE (Ava) Residential customer accounts exceeding $250 in charges overdue for more than 90 days will be sent a late payment notification by EBCE (Ava). The customer will be provided 60 days to pay or make payment arrangements. If payment in full is not received within 60 days from the date of notification, or the terms of an activated payment arrangement are not fulfilled, the EBCE (Ava) customer account may be closed and returned to PG&E bundled generation service on the next account meter read date.
As shown in Table 1, PG&E is already managing the delinquency process for the customer via several notices and customer contact points. Additionally, Ava does not have the ability to make payment arrangements; payment arrangements, also known as payment plans, are managed by PG&E, who handles billing and payment.
Staff considered maintaining a delinquent payment notification in this policy.
However, we are unable to discern, in a timely manner, if a customer has started a payment plan with PG&E. Payment plans result in ongoing payments to Ava, and the customer may become current in as little as three months. A reminder notification may cause confusion and a customer paying Ava directly, therefore delaying the payment to PG&E – which could result in an avoidable shut-off.
Therefore, Ava proposes removing the policy section delinquent payments for residential, as well as the sibling discussion around non-residential delinquent accounts.
3. Customers with closed accounts and a past due balance over $100 will be sent to collections for overdue charges.
Ava expects to reduce our accounts receivable balance through a recovery process.
Today’s policy limits that recoverable balance to $100. The standard practice at other Community Choice Aggregators varies, with the recovery process threshold ranging from zero to $100. Staff recommends editing the policy today to allow Ava to choose a starting point and modify as needed to optimize both the customer experience and our operations.
Residential Focus: Setting a threshold for AR recovery
Of outstanding debt from closed accounts, closed residential accounts contribute 55% of the total outstanding debt and 93% of total (closed) accounts, making this population a natural focus for Ava’s initial AR recovery actions.
Over 93,000 residential customers have closed accounts with debt aged 61 days or more. As shown in Table 2, a lower limit of $10 would include most of our uncollected debt while having no limit would result in over 5,500 customers receiving an invoice of less than one dollar. At a lower dollar amount of $10, Ava would be able to attempt to recover approximately $1.6M more from about 40,000 customers, compared to a higher threshold of $100.
Lowering the amount to $0 would require Ava to send out an additional 20,000 notices to customers and only bring in approximately $39,000. This would not be cost-effective as it would cost about $1 per letter sent. There are approximately 10,000 customers that owe between $5-10 totaling about $70,000. This amount is not substantial enough for us to attempt to collect currently.
Table 2: Arrears for terminated residential customers, at 61+ days past due.
Threshold Total
Count
Total Arrears CARE/
FERA
Count
CARE/ FERA
Total
Arrears
Standard
Count
Standard
Total
Arrears
Total 93,153 $14,656,000 21,065 $4,429,780 70,288 $10,226,800 ≥$100 26,916 $13,043,000 9,494 $4,034,425 15,624 $9,009,740 <$100 66,237 $1,612,000 11,571 $395,360 54,664 $1,217,060 ≤$50 54,848 $795,000 8,293 $156,830 46,555 $637,690
≤$20 38,744 $265,650 4,815 $39,055 33,928 $226,595
≤$10 27,757 $105,260 3,041 $12,685 24,716 $92,575
<$1.00 5,592 $2,635 548 $250 5,404 $2,380
Next, staff reviewed the differences between Residential CARE/FERA, standard residential customers, and non-residential customers, as shown in Tables 3 and 4.
While customers in a special program do show slightly higher levels of average and median arrears, the range is similar. Non-residential customers, as expected, have higher average arrearage. Staff will examine these differences more while moving forward with the recovery process.
Table 3: Residential & non-residential arrears, average and median, at 61+ days past due.
Customer Type Average Arrears Median Arrears
Standard Residential $160 $30
Residential CARE/FERA $210 $82
Residential Non-CARE/FERA $146 $25
Non-Residential $1,764 $154
Table 4: Arrears for terminated non-residential customers, at 61+ days past due.
Lower Limit Non-residential
Customer Count
Total Arrears
Total 6,723 $11,859,300
>$1,000 1,375 $10,847,360
≥$100 3,874 $11,770,040
<$100 2,849 $89,260
≤$50 2,127 $35,900
≤$20 1,351 $9,095
≤$10 970 $3,420
<$1.00 273 $96
Ava expects to begin our AR recovery process around a lower limit of $10 and will modify based on results and feedback. It’s important to note that while this activity may result in recovery and collections activity for CARE/FERA customers, these customers have already closed their accounts. Ava’s recovery activities will not be the cause of customers being shut off for non-pay. Ava is making a request to collect on owed funds, on closed accounts. This recovery process will not negatively impact a customer’s credit report.
Fiscal Impact
In the past five years of operations, Ava has amassed over $26 million in outstanding debts. While some of this is old debt and will be part of a write off process, at a $5 million annual accrual rate, a recovery process that nets 20% of past due AR would see an additional $1 million back to Ava’s budget.
Attachments
1. Current Policy
2. Amended Policy
3. PowerPoint
4. Resolution
Accounts Receivable
Recovery Process:
Proposed Policy
Update
Financial, Administrative, & Procurement Subcommittee
March 13, 2024
History •
•
•
•
Current
Delinquency and
Collection Policy
Current Customer
Debt Journey
•
•
Return Customers to PG&E
Current Proposed
•
•
•
•
•
Delinquent Payment Notice Process
Current Proposed
•
•
•
•
Accounts Receivable Recovery Process
Current Proposed
•
•
o
o
Residential Focus:
Setting a Threshold
• Of outstanding debt from closed accounts
oClosed residential customer accounts
contribute 55% of the total outstanding debt,
about 93% of total accounts
• A threshold of $50 would exclude over half of
customers from recovery efforts
• A threshold of $0 would include over 5,500
customers that owe less than $1
Residential Focus: Setting a
Threshold
≥
≤
≤
≤
Residential Focus:
Distribution
•
•
Non-Residential Focus:
Setting a Threshold
≥
≤
≤
≤
•
o
•
Fiscal Impact • Total arrears for terminated accounts
currently about $28.4 million
• $26.5 million available for recovery
• 20% recovery rate would reduce this to $21.1
million
• Ongoing estimates at 60% recovery rates
would recognize an additional ~$3 million in
revenues
Thank you!
ACCOUNTS RECEIVABLE RECOVERY PROCESS
Policy Number:
Approval Date:
Agenda Item: Item 6
Approved by Resolution: {To be added by Clerk}
Delinquent Accounts:
Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action:
Residential Accounts Non-Residential Accounts
Day 0 Bill is completed and issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27- 34
A new bill is issued for current
charges and a 15-day notice is
included for past due charges.
Day 21-34
A new bill is
completed for new
charges and any
unpaid charges and a 7-day
notice is issued for past due
charges.
Day 42 96-hour notification sent
Day 44-47 48-hour notice via mail
Day 48 Outbound phone call
Day 51 Account is eligible for
disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to CCA
Aging Accounts:
All Ava Community Energy accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, are eligible to be returned to PG&E for continued non-payment. Customers returned to PG&E may be charged the applicable Ava opt-out fee.
Accounts Receivable Recovery Process:
Closed Ava accounts with overdue amounts may be recovered by Ava or referred to a collection agency and are subject to the recovery process established by this policy.
This policy replaces the existing policy for Delinquent Accounts and Collections (P-2018-4).
Item 7 C
Subject: Delinquent Accounts and Collections Policy
Policies:
Delinquent Accounts:
Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action:
Residential Accounts Non-Residential Accounts
Day 1 - Issuance of Bill Customer Receives Bill Day 1 - Issuance of Bill Customer Receives Bill Day 22 Past Due Day 18 Past Due
Day 27 - 33 15 Day Notice on Next
Bill Day 21 7 Day Notice Delivered
Day 41-47 48 Hour Notice via
Mail Day 29 24 Hour Phone Call or In Person Notice
Day 45 - 51 24 Hour Phone Call or
In Person Notice Day 32 Account is Eligible for Disconnection Day 50-56 Account is Eligible for
Disconnection
Aging Accounts:
All EBCE accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, with outstanding balances over 90 days or more are eligible to be returned to PG&E.
EBCE Residential customer accounts exceeding $250 in charges overdue for more than 90 days will be sent a late payment notification by EBCE. The customer will be provided 60 days to pay or make payment arrangements. If payment in full is not received within 60 days from the date of notification, or the terms of an activated payment arrangement are not fulfilled, the EBCE customer account may be closed and returned to PG&E bundled generation service on the next account meter read date.
Residential customers returned to PG&E will be charged the applicable EBCE opt-out fee.
POLICY NO. 2018 - 4
Delinquent Accounts and
Collections
Agenda: February 7, 2018
Item No.: 7
Resolution: No Resolution
associated with policy
Item 7 C
EBCE Non-Residential customer accounts exceeding $500 in aggregate in unpaid charges for 60 days or more will be sent a late payment notification by EBCE. The customer will be provided 30 days to pay or make payment arrangements. If payment in full is not received within 30 days of the date of notification, or the terms of an activated payment arrangement are not fulfilled, the EBCE customer account may be closed and returned to PG&E bundled generation service on the next account meter read date. Non-residential customers returned to PG&E will be charged the applicable EBCE opt-out fee.
Collections:
Closed East Bay Community Energy accounts with overdue amounts greater than $100 may be referred to a collection agency. Amounts $100 or less may be written off. PG&E may close customer accounts before payment delinquencies bring them to the attention of EBCE operations. When PG&E closes customer accounts, these accounts are also closed in the EBCE program. In these cases, the thresholds outlined in the preceding paragraphs apply in either referring closed accounts to collections or writing off balances.