By Rich Heidorn Jr.

Public power and electric cooperatives are asking Congress to include them in future COVID-19 relief legislation, saying their utilities are facing a cash crunch because of unpaid utility bills.

“One in eight Americans depend on a not-for-profit electric cooperative to keep the lights on and empower their local economy,” Jim Matheson, CEO of the National Rural Electric Cooperative Association (NRECA), wrote in a letter to congressional leaders March 6. “As Congress crafts the next legislative response to this crisis, I write today to request the inclusion [of] remedies to challenges currently facing electric cooperatives.”

NRECA said “the vast majority” of cooperatives have temporarily suspended disconnections and waived late payment fees. The American Public Power Association (APPA) said a “large number” of public power utilities have suspended customer disconnects during the pandemic.

“The longer the pandemic goes on and customers can’t pay their electricity bills, along with declining load, there could be negative effects on cash flows for utilities,” APPA said in a blog post Wednesday.

Desmarie Waterhouse, APPA’s vice president of government relations, said the organization is asking its members whether they are seeing load declines and “at what point in their billing cycle they are noticing an uptick in the number of customers who can’t pay their bills.”

“We are trying to gather information right now that would be helpful for us to make the case for some sort of additional funding that would be available to public power utilities,” she said.

Matheson asked for federal funding to help co-ops maintain service during the current economic stress. “Some electric co-ops have limited reserve margins to sustain high rates of nonpayment. As a result of nonpayments and load falloff resulting from economic hardship, some not-for-profit electric cooperatives are facing significant operational shortfalls,” he said. “Without federal assistance, co-ops may face severe financial distress.”

LIHEAP Funding

Congressional leaders are discussing hundreds of billions of dollars in aid for hospitals, state and local governments, food stamp recipients and small businesses.

The $2 trillion CARES Act enacted last month included an additional $900 million for the Low-Income Home Energy Assistance Program (LIHEAP), but many ratepayers now out of work do not qualify, NRECA noted.

State LIHEAP directors are calling for an additional $4.3 billion in LIHEAP funding, according to the National Energy Assistance Directors Association (NEADA).

“Due to the depth of the crisis, this funding only scratches the surface of what families will need to stay afloat,” NEADA said. Its estimate of need assumes an average grant of $325 to cover home energy costs for four months, plus $300 to provide window or room air conditioners for elderly and medically vulnerable households to keep their homes at a safe temperature.

Matheson said NRECA also would like Congress to provide vouchers to help needy families and small businesses to pay internet service providers. “Service is especially crucial during the pandemic for online school assignments, teleworking and telemedicine,” it said. It also seeks more funding for the Department of Agriculture’s Rural Utilities Service (RUS) ReConnect Broadband Loan and Grant Program to bring high-speed internet to rural areas.

NRECA also urged the Federal Emergency Management Agency to reimburse co-ops for past disasters. Some Florida co-ops are still awaiting reimbursements for rebuilding their systems after Hurricane Michael in 2018, NRECA said.

Financing

Financing is also a concern of NRECA, APPA and the investor-owned utilities represented by the Edison Electric Institute.

NRECA wants lawmakers to order the RUS program to allow co-ops to reprice or refinance RUS debt at current low interest rates without penalties. Co-ops hold more than $40 billion in RUS electric program loans.

The organization also is seeking an increase in the amount of lending available under the RUS Guaranteed Underwriter Program, which guarantees loans made to co-ops by private cooperative banks including the National Rural Utilities Cooperative Finance Corp. and CoBank.

APPA is seeking reinstatement of tax-exempt advance refunding bonds to allow public power utilities more flexibility in refinancing their debt. It is also seeking an expansion of the small issuer exception from $10 million to $30 million to allow smaller utilities to borrow directly from banks with tax-exempt debt.

IOUs Seek Help on Commercial Paper

Meanwhile, EEI — which announced on March 19 that its members had suspended disconnects for nonpayment — is seeking help to restore liquidity in utilities’ commercial paper market.

“Liquidity is rapidly declining,” they said, causing Standard & Poor’s to downgrade the outlook for regulated utilities sector to negative.

“Utilities are highly creditworthy, are significant issuers in the A2/P2/F2 commercial paper market and rely on liquid, smoothly functioning markets for working capital and other short-term needs. However, our operating and holding companies are facing severe degradation of revenue and extraordinary increases in short-term funding costs due to the current Tier 2 challenges, creating a serious economic strain on the most essential of services,” the trade groups said.

The trade groups asked the Fed to extend its CPFF purchasing to Tier 2 holding and operating companies in sectors designated as critical infrastructure under the Presidential Policy Directive on Critical Infrastructure Security and Resilience (PPD-21).

On Tuesday, FERC Chairman Neil Chatterjee and National Association of Regulatory Utility Commissioners President Brandon Presley wrote in support of the groups’ request.

“We believe that extending CPFF purchasing would be a constructive step toward ensuring a properly functioning, critically important short-term debt market during this challenging period,” they said. “Both their continued financial stability and their ability to continue to support the country’s essential infrastructure are supported by ready access to short-term debt.”