EO 124: Further Implementation Guidance for Local Government Utilities

About the author

Kara Millonzi

View Other Posts

linkedin
Share on Google+
Share on Reddit
Share on Tumblr

UPDATE May 30, 2020: As detailed in this post, Governor Cooper issued EO 142 on May 30, 2020, which extends the effective period of EO 124 through July 29, 2020.

It has been over a month since the Governor issued Executive Order (EO) 124, which suspends certain local government utility collection practices and imposes some additional duties due to the COVID-19 pandemic, at least until June 1, 2020. There are some provisions of the EO that have been fairly simple (at least administratively) to implement, such as suspending disconnections for nonpayment on residential accounts. Other provisions of the EO have proven more difficult to navigate, particularly because the effective period of the EO does not match up with all of the various local government utility cycles. This blog post reviews the impact of the EO on a few different real-life billing cycle scenarios to give local governments some more guidance in how to implement the provisions.

Brief Overview of EO 124’s Main Provisions

Suspends Disconnections. As of March 31, 2020, a local government utility must suspend disconnecting residential accounts for nonpayment. The prohibition against disconnections applies if there was a delinquent account balance as of March 31, 2020, and if any delinquencies are incurred between March 31, 2020 and when the EO is terminated (currently scheduled for June 1, 2020). Once the EO is terminated, a local government utility may resume disconnections according to its normal policies, with one exception. According to the terms of the EO, a local government will not be able to terminate service to residential customers who incurred a delinquency between March 31, 2020 and June 1, 2020, and who are otherwise complying with the terms of a payment plan. (More on payment plans below.)

Suspends Late Penalties. A local government utility may not impose a late penalty for a “late or otherwise untimely payment” for the regularly occurring user fee charges on a residential account that come due between March 31, 2020 and June 1, 2020. A local government may continue to impose late penalties on amounts that became delinquent before March 31, 2020. And a local government also may continue to impose its normal administrative charges for all types of services, including residential services (such as account fees, convenience fees, third-party credit card fees, bounced check fees, etc.).

Mandates Payment Plans. A local government utility must offer a residential customer a reasonable payment plan option to pay any delinquencies that occur between March 31 and June 1, 2020. By the terms of the EO, the payment plan must allow a residential customer at least six months from the termination of the EO (currently set for June 1, 2020) to pay off any delinquent amounts accumulated during this 60-day period (or longer if the EO is extended). A payment plan allows the customer to pay off the delinquent balance over a period of time. The local government utility may set the terms of the payment plan and amount of periodic payments. See this post for potential options. If a residential customer refuses to participate in a payment plan or does not make the payment plan payments, the local utility may disconnect service and take other collection methods, according to its usual policies, even if it is within the 6-month window. (Note that for purposes of this blog post, I’m assuming that the Governor has authority to extend the provisions of the EO beyond its termination date.)

There are also customer notification and reporting requirements, which are discussed here and here.

Hypothetical Utility Billing Cycle

Let’s look at how these provisions apply to various scenarios. To get us started, we will look at a hypothetical city’s water billing cycle during normal times.

The City of Wastenowater bills for residential water services every odd month. Bills are mailed out on the first of the month for the previous two month’s service. Payment is due approximately 20 days later. If the bill is not paid in full by that date/time, a late penalty is added to the account. The amount is $5 or 5 percent of the total amount delinquent, whichever is greater. If the full amount owed is not paid 15 days after that, a second penalty is added to the account, in the amount of $25. Water services are cut off the next business day. In order to get services reconnected, a customer must pay the full account balance, including all penalty amounts, plus a $30 reconnect fee.

The following are examples of the first three billing periods of 2020.

Billing Period 1 (January/February 2020)
March 1:                              Bill Date
March 20, by 5:00pm:      Due Date
March 20, 5:01pm:            If bill is not paid in full, first penalty applied
April 6, 5:01pm:                 If bill still not paid in full, second penalty applied
April 7:                                Cut-off Date

Billing Period 2 (March/April 2020)
May 1:                                 Bill Date
May 20:                              Due Date
May 20, 5:01pm:               If bill not paid in full, first penalty applied
June 5, 5:01pm:                If bill still not paid in full, second penalty applied
June 6:                              Cut-off Date

Billing Period 3 (May/June 2020)
July 1:                                 Bill Date
July 20:                              Due Date
July 20, 5:01pm:               If bill not paid in full, first penalty applied
August 5, 5:01pm:            If bill still not paid in full, second penalty applied
August 6:                           Cut-off Date

Residential Customer Payment/Nonpayment Scenarios

Now we will look at a few hypothetical customer accounts to illustrate the impact of EO 124.

1. Delinquency Occurred Before March 31, 2020. Del Linquent has a residential water account with the city. She frequently pays her bills late, and her services have been shut off at least twice in the past year. According to the city’s water ordinance, Del was required to pay an additional deposit after her second disconnection within a 12-month period. Her total amount on deposit is $200. Del received a bill for $90 on March 1, 2020, which reflected services provided in January and February 2020. She did not pay it by the due date of March 20, 2020. She incurred a late penalty of $5.00. Thus, the total amount owed as of March 21, 2020 was $95. That amount was still outstanding as of April 7. Pursuant to the city’s water ordinance, the city applied a second late penalty of $25 to the account. The total amount currently owed on the account is $120.

What effect does EO 124 have on this account?

  • The city MAY NOT disconnect Del’s residential water service until June 1, 2020, or when EO 124 is terminated, whichever occurs later.
  • The city MAY apply both the $5 and the $25 late penalties to the account because the delinquency occurred before March 31, 2020. Late penalties for delinquencies incurred before March 31, 2020, are not suspended, waived, or extinguished. (Of course, the city council may have voted to amend the water ordinance to suspend late fees. In that case, the city should follow the board’s new directive.)
  • The city is NOT obligated to afford Del a payment plan option and/or allow her to repay her delinquency over at least 6 months after the termination of the EO. The city may terminate Del’s service immediately upon the termination of the EO if any of $120 (original bill plus penalties) remains unpaid because the delinquency occurred before the EO’s effective date of March 31, 2020.
  • The city MAY offer Del a payment plan, according to terms set by the city council. Those terms should be adopted in the city’s water ordinance. It may be advisable to set up a payment plan option to help Del avoid a significant bill at the end of the EO.
  • The city MAY sue Del for the amounts owed or submit them to the state’s set-off debt collection program. The city also may apply the deposit to pay off the delinquent amounts owed on the account, according to its normal policies.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

2. Delinquency Incurred Between March 31 and June 1, 2020. Needa Notpay is a residential water customer. She paid her March 2020 bill on time and in full. She is aware that the Governor suspended disconnections and late penalties so she chooses not to make her May payment of $108. The bill remains unpaid as of June 6, 2020. (Assume for purposes of this example that EO 124 terminates, according to its current terms, on June 1, 2020.)

What effect does EO 124 have on this account?

  • The city MAY NOT disconnect Needa’s residential water service until December 1, 2020, unless Needa does not comply with the terms of the city’s payment plan.
  • The city MAY NOT impose either of its late penalties on Needa’s account, because both would have been assessed for a delinquency that occurred between March 31 and June 1, 2020.
  • According to the terms of the EO, the city MUST offer Needa a reasonable payment plan option, that allows her until December 1, 2020 (6 months after the termination of the EO) to pay off her $108 delinquency in full.
  • If Needa refuses to participate in the payment plan offered by the city, or misses a payment plan payment, the city may disconnect her residential water service before December 1, 2020, according to the terms of the payment plan.
  • The city MAY sue Needa for the amounts owed or submit them to the state’s set-off debt collection program.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

3. Delinquency Occurred Both Before March 31 and Between March 31 and June 1, 2020. Recall that customer Del Linquent has an outstanding delinquency (including late penalties) as of April 7 of $120. Del also does not pay her May bill of $90. Her total outstanding delinquency as of June 7, 2020, is $210, of which $120 is due to a delinquency before March 31, 2020, and $90 is due to a delinquency between March 31, 2020 and June 1, 2020. There is a $200 deposit on her account. (Assume for purposes of this example that EO 124 terminates, according to its current terms, on June 1, 2020.)

What effect does EO 124 have on this account?

  • The city MAY NOT disconnect Del’s residential water service until at least June 1, 2020.
  • As detailed above, the city MAY continue to assess the late penalties imposed on Del’s account for amounts that went delinquent before March 31, 2020. The city MAY NOT impose either of the penalties on the May bill delinquency, though.
  • According to the terms of the EO, the city MUST offer Del a reasonable payment plan option, that allows her until December 1, 2020 (6 months after the termination of the EO) to pay off the $90 delinquency she incurred between March 31 and June 1, 2020. As per above, however, the city may immediately terminate service if the $120 from the March delinquency remains unpaid after June 1, 2020.
  • If Del refuses to participate in the payment plan offered by the city for the $90 delinquency incurred in May or misses a payment plan payment, the city may disconnect her service before December 1, 2020, according to the terms of the payment plan. The city may follow its normal policies for reconnection, including assessing the $30 reconnection fee.
  • The city MAY apply the deposit to pay off the $120 delinquency incurred before March 31, 2020. However, it MAY NOT apply the deposit to the $90 delinquency incurred between March 31 and June 1 if Del is honoring the terms of the payment plan.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

4. Delinquency Occurs After Termination of EO 124. Harden Times has a residential water account. Harden paid his March and May bills on time. He fails to make his July bill payment of $90 by July 20. The city applies a late fee penalty of $5 to his account. The bill remains unpaid as of August 6, at which point the city applies a second late penalty of $25 and disconnects his residential water service. In order for service to be reconnected, Harden must pay the $120 owed on his account plus a $30 reconnect fee. (Assume for purposes of this example that EO 124 terminates, according to its current terms, on June 1, 2020.)

What effect does EO 124 have on this account?

  • The city MAY disconnect Harden’s residential water service for nonpayment according to its normal policies (as detailed in the city’s water ordinance). The EO does not prohibit disconnections for delinquencies that occur after it expires.
  • The city MAY assess both late fee penalties on Harden’s accounts because the delinquency happened after the termination of the EO.
  • The city is NOT obligated to afford Harden a payment plan option and/or allow him to repay his delinquency over at least 6 months after the termination of the EO.
  • The city MAY offer Harden a payment plan, according to terms set by the city council. Those terms should be adopted in the city’s water ordinance.
  • The city MAY sue Harden for the amounts owed or submit them to the state’s set-off debt collection program.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

5. Payment Denied because of Nonsufficient Funds Between March 31 and June 1, 2020. Penny Bounce has a residential water account. She pays her March bill on time. She writes a check to cover her $120 May bill. The bank refuses to process the check because of nonsufficient funds (NSF). In other words, Penny’s check bounces. The city’s policy is to assess a $35 administrative fee for processing the bounced check, which is the maximum allowed by law (G.S. 25-3-506). The city contacts Penny and she immediately pays her bill with a credit card, after finding out that the city is not charging its normal convenience fee charges. However, the payment is made on May 22, past the due date.

What effect does EO 124 have on this account?

  • The city MAY assess the $35 administrative charge for the bounced check on Penny’s account. This is not prohibited by EO 124.
  • The city MAY NOT assess the $5 late penalty on Penny’s account because the delinquency occurred between March 31 and June 1, 2020.
  • The city MAY amend its water ordinance to stop charging its normal convenience fees for electronic payments in order to encourage customers to use this payment option.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

6. Nonpayment on Residential Account Merged with Commercial Account Between March 31 and June 1, 2020. Mary Multitasker has two water accounts with the city, one is a residential account and one is a business account. According to the town’s water ordinance, the accounts are treated as merged for purposes of delinquencies. That means that if Mary incurs a delinquency on one account, the town may disconnect service at both her residence and her business. Mary pays the May bill for her business account, but not her residential account. Her residential account has a $90 delinquency. Under the city’s normal policy, if this amount remains outstanding past June 7, her residential and commercial service will be terminated.

What effect does EO 124 have on this account?

  • The city MAY NOT terminate Mary’s residential service for nonpayment between March 31 and June 1, 2020.
  • The city MAY NOT impose a late penalty on Mary’s residential account because the delinquency occurred between March 31 and June 1, 2020.
  • According to the terms of the EO, the city MUST offer Mary a reasonable payment plan option, that allows her until December 1, 2020 (6 months after the termination of the EO) to pay off the $90 delinquency she incurred between March 31 and June 1, 2020.
  • If Mary refuses to participate in the payment plan offered by the city for the $90 delinquency incurred in May or misses a payment plan payment, the city may disconnect her service before December 1, 2020, according to the terms of the payment plan. The city may follow its normal policies for reconnection, including assessing the $30 reconnection fee.
  • It’s unclear whether or not the city may terminate the service at Mary’s business, according to its normal policies. The EO states that “[n]o Utility Service Provider shall terminate the service of a residential customer for nonpayment.” This could be referring to terminating residential service only, or it could be interpreted more broadly to include terminating any service because of nonpayment on a residential account. A local utility that has a similar policy should consult its attorney before terminating the commercial service under these circumstances during the effective period of the EO.
  • The city MAY NOT waive or extinguish the fees or penalties that have been applied to the account.

7. Commercial Customer Delinquency Between March 31 and June 1, 2020. Busy Ness owns a commercial building in the city’s downtown. Busy had to shut down in April and did not make her May water bill payment.

What effect does EO 124 have on this account?

  • EO 124 does not apply to commercial accounts.
  • The city is free to follow its own policies, unless the governing board amended the water ordinance to suspend normal policies related to commercial accounts.

8. Partial Payments. For purposes of this hypo, assume that the city bills for water, wastewater, and solid waste services on the same bill. The city council has adopted an ordinance specifying that any partial payments of a bill will first be applied to the solid waste amount, then to the wastewater amount, and finally to the water amount. The effect is that if a customer makes a partial payment it leaves the water bill unpaid, which allows the city to shut off water services according to its normal policies.

What effect does EO 124 have on partial payments?

  • Between March 31 and June 1, 2020, a local government utility MAY NOT disconnect residential water, wastewater, electric, or natural gas utilities, even if only a partial payment is received for a combined bill.

Leave a Comment

NOTE - You can use these HTML tags and attributes:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Time limit is exhausted. Please reload the CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.