Disconnects Bog

October 25, 2022

Last week, we disconnected 6 customers for non-payment.  Fortunately, they have all since got their accounts caught up and have been reconnected.  This is one of the less enjoyable parts of this business but a necessary one. 

There are basically three reasons for disconnecting a customer.  The first is when it is at the request of the customer.  This is usually for safety reasons as electrical work is being done at the customer premise.  It is often arranged by the electrician so the customer may not even know that NOTL Hydro is involved.  Customers are entitled to one free disconnect/reconnect a year so there is usually no charge.  The second reason for a disconnect is safety.  This is much rarer but can happen if there is a fire or an accident.  It will often be coordinated with the fire department or police and may even be necessary so that they can perform their duties safely.

The third reason is for non-payment.  Electricity is used before it is paid for.  This is similar to other utilities (gas, water) but very different from other essential products (groceries, vehicle fuel).  We do not recommend you try to use these latter products before you have paid for them.  Disconnection is the final means an electric utility has of getting payment.

This does not mean that disconnection is the immediate result of not paying your bill.  There are a number of steps that NOTL Hydro takes before we will disconnect.  Some of these are required by regulations and others are because we believe they are good business practices.  The regulations around disconnecting a customer are very precise which we make sure we follow.  The specific details are in the regulations and our Conditions of Service but the following is a general description:

  1. The first step is a reminder notice.  They are prepared and sent out four days after the due date of the customer’s regular monthly billing.  In terms of numbers, we have just under 10,000 customers and send out 700-800 reminder notices a month. 
  2. Seven days after this we send out a disconnection notice.  This advises customers that they have 20 days to pay their bill or they could be disconnected.  Usually only around 60-70 disconnection notices are required.
  3. If a customer has provided a security deposit to NOTL Hydro, this deposit is applied to the arrears on the account before the disconnection notice is sent.  The customer is still responsible for replenishing the security deposit so this is not a permanent fix but it does give the customer more time to get their account caught-up.
  4. Customers are called at least 48 hours prior to any actual disconnection.  This is more than just leaving a voice mail.  We want to ensure a customer actually knows they may be disconnected so will use all sort of avenues to try to reach them (e-mail, close contacts, etc.) to ensure they receive the message.  We have a number of customers who live outside of the country or are snowbirds so a voice-mail will not suffice.  We will still have 20-30 customers on the list at this point.
  5. Prior to disconnections being approved, the list is reviewed by the President.  If we think there are valid reasons for the bills not to have been paid and that they can be rectified without disconnections, we will not disconnect.  Unfortunately, there are also other customers who are repeat offenders and the only way to get them to pay their bills is to disconnect. 
  6. By the day of disconnection, we are usually down to 0-8 customers.  Two months ago, we had zero disconnects which was nice.  Our staff try very hard to get payment or some sort of payment arrangement as it is better for all concerned if we do not have to disconnect.  We have had customers who, only on seeing our truck, realize they need to pay and take quick action.  The day of disconnections is also busy as the disconnected customers try to get their accounts caught up and reconnections are scheduled.

One of the advantages of being a small utility is that we really know our customers and many of our staff live among them.  Some customer information can be captured in a CIS (Customer Information System) but some things cannot.  We know some customers that always pay at a certain point in the process because that’s the way they are, we know that some customers rely on their relatives to pay their bill so we will contact them and we know who may have had a personal tragedy so may need additional leniency.  This level of service cannot be replicated when you have a million customers.

For customers who are not in a position to pay there are some ways we can provide support.  These include:

  1. Payment arrangements can be made with the customer.  These allow the customer to pay the amount in arrears over a period rather than all at once.  While this can be helpful if a large bill has accrued, the customer is still responsible for meeting both the payment arrangement and all future invoices.  Failure to do so can lead to disconnection in the future.
  2. All electric utilities in Ontario make a payment to a LEAP (Low-income Energy Assistance Program) provider.  In Niagara-on-the-Lake the provider is Reach Out Niagara.  This is run by volunteers and they can provide financial assistance based on the criteria of the regulations.  Over the years, Reach Out Niagara built up some excess funds.  In 2021, $10,000 was donated to the LEAP providers in each of Niagara Falls and St. Catharines.  One of the key steps in getting assistance is customers need to provide proof of their financial condition.  As a utility, we never want to have this information.  That is just not right.  As new programs are being set up by the provincial government at various times, we have to remind them not to structure it so that the utility is the arbitrator of who gets financial assistance and sees this personal information.
  3. During the pandemic there were additional funds made available to assist customers in paying their electricity bills.  NOTL Hydro made sure our customers could benefit from these funds.
  4. There are other not-for-profit organizations who can help customers in financial distress.  If we think a customer will qualify for this assistance and benefit from it, we will direct them to these organizations.  We will not disconnect a customer while they are going through this process but it is still the customer’s responsibility to get the bill paid eventually.
  5. What has to be remembered is that unpaid accounts are a cost to everyone; not just the utility.  The bad debts expense of NOTL Hydro and most utilities is very low as electricity is essential so most residents and businesses will ensure that their bills get paid.  These low bad debts expenses are built into rates.  If the bad debts expense rises then so will rates.

A few years ago, disconnections unfortunately became politicized.  As is usually the case when this happens, the blame could be pointed in several directions.  Some Ontario electric utilities were using disconnections as a collection tool much too early in the process to our way of thinking.  Disconnections should be a last resort tool.  Also, there were a few high-profile cases of disconnects having serious impacts on the livelihoods of some small businesses.  Together, this made disconnecting electricity customers a tempting political target.

Blame also rests with the politicians who preferred looking good with a “sound-bite” about utilities mistreating their customers over enacting sound policy.  Winter moratoriums on disconnects were put in place as were the overly precise processes with fines if these processes are not following exactly.  While these regulations sound reasonable on the surface, and made the news for a short period of time, the reality is they only add costs to the system and remove flexibility.  Most Ontario electric utilities had “unofficial” winter moratoriums but there were times when winter disconnects were needed.  Now that is not an option and either higher bad debts or higher collection costs are the result.  If the disconnection process was being abused, the real question should be on the governance of those utilities.

By law, an Ontario electric utility must provide electricity to any customer that wants it and meets the requirements.  For good reasons, the utility cannot pick and choose their customers.  The utility also cannot bill for the electricity until well after it has been consumed.  This creates a risk of bad debt.  If a customer does not pay, the distribution utility takes the full loss.  The generators, transmitters and regulators all still get their portions of the bill which is over 80% in the case of NOTL Hydro.  This increases the cost of that risk.  This risk is borne by all electricity users.  Customers pay their bills because they need electricity and know that if they do not pay, they can be disconnected.  Very few residents and businesses can survive without grid electricity.  The ability to disconnect customers who do not pay is therefore a very important tool for electric utilities.  It is a tool that should only be used after all avenues have been exhausted, but it is an important tool.

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