Before the Public Utilities Commission of The State of Minnesota

Transcription

1 Ms. Andrea Newman EXHIBIT Before the Public Utilities Commission of The State of Minnesota In the Matter of the Application of CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Minnesota Gas For Authority to Increase Rates for Natural Gas Utility Service in Minnesota Exhibit (AN-R) Credit and Collections Practices March 2006

2 MS. ANDREA NEWMAN TABLE OF CONTENTS Page I. Introduction 1 II. Purpose of Testimony 1 III. Rebuttal to ECC Witness Marshall 2

3 1 I. INTRODUCTION 2 Q. Please state your name and business address. 3 A. My name is Andrea Newman. I am the Vice President of Retail Services for 4 CenterPoint Energy. My business address is 800 LaSalle Avenue, Minneapolis, MN Q. What are your present responsibilities? 8 A I am responsible for the Company's retail functions including marketing, sales, and customer care. In this role I direct the marketing and sales strategy of the Company to ensure programs and services meet customer needs. This encompasses the development of marketing and fulfillment materials that communicate clearly to customers. I am responsible for our call center operations ensuring prompt and effective resolution to customer inquiries and issues. I am also responsible for the Company's credit and collection operations and practices Q. 17 Describe your educational background, as well as your business and professional experience? 18 A Exhibit background. (AN-R), Schedule 1, is a resume of my educational and professional 21 II. PURPOSE OF TESTIMONY 22 Q. What is the purpose of your testimony? 23 A. The purpose of my testimony is to address comments by Ms. Marshall of Energy 24 Cents Coalition (ECC) in her intervenor testimony. Ms. Marshall asserts that 1

4 1 CenterPoint Energy's increased bad debt is the result of inadequate collection 2 practices including an alleged failure to maximize energy assistance dollars for 3 eligible customers. Specifically, I will explain the impact that high gas prices have on 4 CenterPoint Energy's bad debt expense and clarify that increased bad debt 5 expense is not the result of inadequate collection practices. I will explain how the 6 Company's collection practices focus on all delinquent customers, including low- 7 income customers, and how the Company balances the needs of delinquent 8 customers with the interests of all other ratepayers. In addition, I will explain 9 CenterPoint Energy's practices as they relate to maximizing energy assistance 10 funds for our eligible customers III. REBUTTAL TO ECC WITNESS MARSHALL 13 Q. What factors drive increased bad debt? 14 A. There are four primary factors that can adversely impact bad debt - high gas prices, 15 the level of energy assistance funds received, weak economic conditions, and the 16 effectiveness of the Company's collection practices Q. How does gas price affect bad debt expense? 19 A. As gas prices increase so does bad debt expense. This is clearly shown on the 20 following chart illustrating the correlation between gas prices and bad debt expense 21 over the past five years. When gas prices went down in 2002, the bad debt 22 expenses also decreased. Gas prices increased each year from and 23 bad debt expense also increased during this time. Higher gas prices have produced

5 higher customer bills, which have resulted in more customers unable to pay their bills and higher bills going unpaid. S1.2 Correlation Between Gas Prices and Bad Debt S16 $1.0 - S14 CD $ lavg. Residential Rate Bad Debt Exo. ; Q. Have the number of customers with bad debt and the amount of bad debt per customer increased during this time? A. Yes. The number of accounts with bad debt increased by 36% since 2002 and the amount of bad debt per customer has increased by 64%. Higher bad debt per customer explains 60% of the total increased bad debt, while more customers with bad debt accounts for 40%. High gas prices are the most significant driver in increased bad debts, affecting both the number of customers with bad debt and the amount of bad debt per customer. 13

6 1 Q. Has the level of Energy Assistance funds available in Minnesota changed as gas 2 prices have increased? 3 A. No. The level of Energy Assistance funds available in Minnesota has remained 4 relatively stable. As the chart below illustrates, the level of energy assistance 5 payments for direct heating (total funds less cost of administration and 6 weatherization) has remained essentially flat for the past four years, with the 7 amount in being significantly higher. 8 9 Q. Has the level of Energy Assistance payments received by CenterPoint Energy 10 changed during this period? 11 A. No, not significantly. As shown in the following chart, CenterPoint Energy has 12 received Energy Assistance payments of between $11.2 million and $13.5 million 13 since CenterPoint Energy receives, on average 26.6%, of the total state 14 Energy Assistance funds distributed for heating payments. While the state's total 15 energy assistance funding levels may not be keeping pace with the need as 16 suggested by Ms. Marshall in her testimony, the Company's increased bad debt is 17 not the result of receiving less Energy Assistance funding. LIHEAP - Funding Distribution Total Federal LIHEAP for MN $90,000,000 $69, $78,300,000 $72,100,000 $84,700,000 $78,880,000 Direct Heating Payment(1) 558,900,000 $47,000,000 $50,000,000 $49,500,000 $47,500, ,580,000 Total CNP LIHEAP $18,499,674 $11.169,811 $12,475,287 $11,758,996 $13.476, ,475,968 % CNP UHEAP of Direct Htg 28.4% -7,7 LIHEAP - Household Served Total households served 110, , , , , ,756 Total CNP households served 26,810 26,060 29,576 _ 26, % CNP HH of total 24.3% 23.3% 26.3% 23.7% 24.5% 24.4% 18 (1! Based on 2005/2006 LIHEAP program, 11.7% of funds go to administration and weatherization with the remaining for direct heating assistance. According to DOC, this distribution is consistent from year to year

7 1 Q. Ms. Marshall claims the Company's efforts to maximize Energy Assistance dollars 2 for its customers are inadequate. Do you agree? 3 A. No T I do not agree. Ms. Marshall claims that the number of CenterPoint Energy 4 households receiving energy assistance is 20.7% and below the statewide average 5 of 23.78% and suggests this serves as evidence the Company does not maximize 6 the opportunity to obtain Energy Assistance dollars. This is incorrect. In the /2005 heating season, 24.5% of CenterPoint Energy households received 8 energy assistance, more than half a point higher than the statewide average. When 9 viewing the total households that heat with natural gas and receive energy 10 assistance, over 40% are CenterPoint Energy households. CenterPoint Energy 11 does a good job of maximizing available energy assistance dollars from the pool of 12 available funds for its eligible customers Q. Ms. Marshall's testimony states the percentage of Energy Assistance allocation 15 received by CenterPoint Energy through January 31, 2006 is 5% compared to 13% 16 the previous year. Does this indicate a decline in the Company's ability to maximize 17 energy assistance? 18 A. No. There are several reasons why this statement is inaccurate. First, Ms. 19 Marshall's conclusion is based on a single data point in January, well before the end 20 of the energy assistance season. CenterPoint Energy has no control over the 21 amount of the recipient grant and the speed at which grants are processed. 22 Comparing performance to the previous year based on a single data point is 23 inappropriate. Second, the Department of Commerce changed its process for I _ 24 distributing funds beginning with the season. Previously, one large

8 1 payment was paid to the utility at the time the customer grant was processed. Now, 2 the grant is paid in four smaller installments made throughout the Energy 3 Assistance season. The difference in the amount of allocation CenterPoint Energy 4 received through the end of January is not a reflection of the Company's ability to 5 maximize energy assistance for its customers. 6 7 Q. Ms. Marshall references Xcel Energy's Energy Assistance customer participation 8 rate compared to that of CenterPoint Energy as an example of the Company's 9 inadequate practices. How do you respond? 10 A. This is an inaccurate comparison for several reasons. This comparison is again 11 based on a single data point, Xcel and CenterPoint Energy Energy Assistance 12 recipients as of February 17, The administration of energy assistance funding 13 typically extends through spring. Utilities have no control over the amount of the 14 recipient grant and speed of administration. Second, It is also inappropriate to 15 compare Xcel and CenterPoint Energy because material differences exist that result 16 in a meaningless comparison. Energy Assistance customers can choose to allocate 17 30% of the grant to their electric Company. Thus, a portion of Energy Assistance 18 grants for CenterPoint Energy households goes to Xcel Energy to help with the 19 customer's electric bill. Comparing a gas utility (CenterPoint Energy) to a combined 20 gas and electric utility (Xcel Energy) is not a meaningful comparison Q. How does CenterPoint Energy reach out to low-income customers to help them 23 receive energy assistance?

9 1 A. The Company works diligently to help low-income customers pay their heating bills. 2 An integral component of our collection practice is to inform customers of the 3 assistance resources available and refer customers who may be eligible for 4 assistance to appropriate agencies. When customer service representatives discuss 5 delinquent bills with customers, they inform them of programs that are available to 6 help. This is a regular practice because we have no way of knowing which 7 customers meet the income eligibility guidelines for assistance, with the exception 8 of noting that a customer is a previous energy assistance recipient. However, many 9 customers' situations change and while they may have been eligible in the prior 10 year, they may not be eligible for assistance programs in current year. We do 11 proactively contact customers (via letter and phone) who received energy 12 assistance the previous year to make them aware of the resources that are 13 available to help them pay their heating bills. In 2005, the Company also worked 14 collaboratively with the Office of Attorney General to increase awareness of funding 15 resources available to help eligible customers pay their heating bills. The Company 16 also works closely with the energy assistance agencies to enable a helpful and 17 administratively efficient process for eligible customers. The Company has 18 historically hosted a workshop at the start of the heating season with Energy 19 Assistance agencies to facilitate open communication and planning Q. Have recent and current economic conditions influenced higher bad debt expense? 22 A. Yes. It appears rising energy costs and higher interest rates are having adverse 23 economic impact on some residential consumers. According to the Wells Fargo 24 January 2006 Credit Quality Report, consumer debt burdens have risen steadily 7

10 1 since 1993 and increased sharply in While a higher consumer debt burden 2 does not automatically lead to increased delinquency rates, there are recent 3 indicators that suggest this is impacting some consumers. Personal bankruptcies 4 and mortgage delinquency rates, particularly for FHA loans, have increased since CenterPoint Energy's bankruptcy write-off increased by 200% since The Company is not alone in experiencing the adverse impact of higher consumer 7 delinquencies. 8 9 Q. Please describe CenterPoint Energy's collection practices. 10 A. The collection process involves four basic progressive steps. The process 11 progresses only if the customer has not paid or made arrangement to pay. First, a 12 delinquent customer receives past due notices on their bills. Second, if no payment 13 is received, the customer receives a notice of proposed disconnection. Third, 14 delinquent customers receive automated phone messages asking them to contact 15 us to make a payment arrangement. Fourth, a field collector visits the customer. At 16 each step of this process, customers are encouraged to contact the Company to 17 make arrangements to pay their bill. As part of the interaction with customers, 18 CenterPoint Energy informs them of resources that may be available to help pay 19 their bills and discusses other solutions that may be helpful. This is a continual 20 process and should be viewed as constant outreach to ail delinquent customers. 21 Ultimately, if payment is not received, service is disconnected. The Company 22 consistently follows this process on all accounts. Thus, the level of collection activity 23 expands as the number of delinquent customers increase. 24

11 1 Q. Ms. Marshall suggests the investment made by the Company on collection activities 2 decreased in 2005 concluding the Company's collection practices are inadequate. 3 How do you respond? 4 A. It is not reasonable to conclude the Company's collection activity decreased 5 because collection expense decreased. Again, Ms. Marshall makes this assertion 6 based on a single data point. CenterPoint Energy's collection expense has actually 7 increased by 20% since Additionally, CenterPoint Energy recognizes that bad 8 debt expense and the cost to collect bad debt is a ratepayer cost. The Company 9 works hard to minimize the cost to ratepayers while maintaining effective collection 10 practices. It does this by using the four step process described above which is an 11 efficient way to reach delinquent customers. It relies on interaction with the 12 customer's to understand the customer need and seek appropriate solutions Q. What solutions does CenterPoint Energy provide to customers to help them 15 manage their heating bills? 16 A. CenterPoint Energy actively promotes levelized billing programs, such as the 17 budget billing plan to its customers to help them avoid large winter heating bills. The 18 Company promotes these programs through bill inserts, customer newsletters, and 19 the website. Our Customer Service representatives proactively explain these 20 programs to customers having trouble paying their gas bill. The Company also 21 proactively communicates with customers about gas prices and educates them on 22 what to expect through its Get Ready for Winter Campaign. As part of this 23 communication, the Company shares information about billing programs, 24 conservation tips, and encourages customers to contact the Company if they are

12 1 having difficulty paying their heating bills. As explained above, the Company informs 2 customers of programs that are available to assist with paying their heating bills. 3 4 Q. Does the four step collection process allow for special consideration of low-income 5 customers and other hardship situations? 6 A. Yes, CenterPoint Energy recognizes that some delinquent customers are low 7 income or in hardship situations that make it difficult to pay their bills. However, not 8 all delinquent customers are low-income customers, approximately 80,000 9 customers are delinquent and roughly 27,000 customers receive energy assistance. 10 Because the Company has no way of knowing which customers are eligible for 11 energy assistance, it regularly informs customers, at the point of contact, about 12 assistance programs that may be available. A key principle of the collection 13 approach is that both the Company and the customer have responsibility to take 14 action. The Company is responsible to notify the customer of their delinquent status, 15 work with the customer to reach acceptable payment arrangements and inform the 16 customer of available resources that can help them pay their bills. The customer is 17 responsible for responding to notifications, working with the Company to seek 18 options to bring their account current, keep their payment arrangements, and avail 19 themselves of useful resources Q. Discuss the role service disconnections play in the Company's collection practices? 22 A. The Company proceeds to service disconnection as a last resort. Different 23 collection practices can stimulate different customer behavior. Many times the 24 notice of proposed disconnection stimulates action by the customer when previous 10

13 1 collection actions were unsuccessful. In other cases, repeated collection attempts 2 by the Company, including premise visits, result in no action by the customer. In 3 these situations, service is ultimately disconnected. 4 5 Q. Ms. Marshall asserts that bad debt expense is a result of inadequate collection 6 practices by CenterPoint Energy? Do you agree? 7 A. No. There are four primary factors that can adversely impact bad debt expense - 8 high gas prices, the level of energy assistance funds received, weak economic 9 conditions, and the effectiveness of the Company's collection practices. I have 10 explained that the primary drivers of increased bad debt are high gas prices and 11 worsening economic conditions for some customers. The level of energy assistance 12 funding the state and the Company received has remained stable. The Company's 13 collection practices have been consistent, while reaching greater numbers of 14 delinquent customers as delinquencies have increased. My conclusion is that the 15 increase in the Company's bad debt expense is a result of high gas prices and, to a 16 lesser extent, weaker economic conditions. Increased bad debt expense is not the 17 result of inadequate collection practices by the Company Q. Does this conclude your rebuttal testimony? 20 A. Yes, it does. 11

14 Andrea L. Newman Vice President, Retail Services 800 LaSalle Avenue, Minneapolis, Minnesota Docket No. G-OQ8/GR Exhibit (AN-R) S Schedule 1 Experience Current Responsibilities ( Present) Overall duties include responsibility for and direction of the company's retail functions including marketing, sales, and customer care. Direct the marketing and sales strategy of the company to ensure programs and services meet customer's needs and marketing materials are communicated clearly to audiences. Accountable for call center operations, ensuring prompt and effective resolution to customer inquiries and issues and credit and collection operations and practices. Previous Professional Employment CenterPoint Energy Vice President, Home Service Plus Director, New Business Development Director, Customer Relations Group Health, Inc Manager, Membership Services West Publishing Company National Training and Sales Support Coordinator Education B.S. Business Administration, 1981, Lake Superior State University, Sault Ste. Marie, Ml Graduate University of Idaho Executive Utility Program, 2003 University of Minnesota, Carlson School of Management, Executive Finance Program, 2001 Professional Associations American Gas Association Dunwoody Institute Board of Trustees, Vice Chairman, Marketing Subcommittee Chair Menttium Program Mentor, coaching and development program for emerging woman leaders