Virus Could Push Unpaid U.S. Utility Bills to Highest in Decades
(Bloomberg) -- WEC Energy Group Inc. and OGE Energy Corp. may face the utility industry’s steepest hits to earnings as unpaid customer bills pile up, according to a research report.
The Milwaukee-based utility’s pre-tax income may slide as much as 3.7%, Hugh Wynne and Eric Selmon, analysts with the investment research company SSR LLC, wrote Monday. They warn that the economic fallout from the coronavirus pandemic may drive uncollected electric and natural gas bills to the highest in two decades.
Other utilities that may face a significant drag on earnings include Oklahoma-based OGE, with an estimated 3% decline, Avangrid Inc.with a 2.9% drop and Dominion Energy with a 2.8% fall.
With millions of people out of work, many utilities have stopped disconnecting customers for failing to pay bills. While certain states allow utilities to recover the cost of unpaid bills through additional charges, utility cash flows will suffer until the rate increases go into effect, the analysts said. In addition, eleven states including Wisconsin are allowing utilities to track Covid-19 expenses, they said.
Annual changes in unemployment rates account for about 39% of the increase in uncollected electric bills and 45% of gas bills, according to the report. U.S. unemployment skyrocketed to 14.7% in April, the highest since the Great Depression, as shelter-in-place orders forced businesses to shed millions of workers.
WEC Energy said that under current regulations, the company can recover bad debt expenses and is working with regulators and stakeholders to track bills for future recovery. The company is also working with federal and state governments to help customers manage their bills. OGE, Avangrid and Dominion didn’t immediately respond to requests for comment.
Regulators are letting utilities defer virus-related expenses including those from non-payments for future potential recovery, WEC Chairman Gale E. Klappa said during an earnings call last week.
Dominion can recover the costs of lapsed collections over time for nearly all of its gas utilities. Chief Financial Officer James Chapman said on the Virginia-based company’s first-quarter earnings call that he does not expect “bad debt expense in excess of budgeted amounts to be a material driver for the year.”
©2020 Bloomberg L.P.