Monday Study – The Cost To Keep The Lights On

Powerless In The Pandemic; After Bailouts, Electric Utilities Chose Profits Over People

Jean Su and Christopher Kuveke, September 2021 (Center for Biological Diversity and Bailout Watch)

Executive Summary

Already a national embarrassment, the practice of disconnecting household electric service for unpaid bills (“utility shutoffs”) became a lethal threat to poor families last year after Covid-19 hit. By rendering homes uninhabitable, electric companies made social distancing impossible and increased transience, leading to higher infection and death rates, according to recent research.

While brushing off calls to pause their punitive collections practices, electric utilities used their political power to secure bailouts that cost taxpayers $1.25 billion, cushioning them from the pandemic economy.

The harm caused by electric shutoffs is indisputable. Less discussed is the nexus of utilities’ political influence, predatory collection tactics and climate impacts.

Utilities are a massive, sometimes overlooked contributor to the climate emergency. While oil and gas giants garner more attention for their role in causing climate change, the electric industry is also culpable. Utilities were responsible for 32% of U.S. greenhouse gas emissions in 2020, mostly from gas- and coal-burning plants.2 The biggest utilities operate their own fossil fuel infrastructure to supply these dirty power plants. At the same time, their profits-over-people collections practices heap further harm onto the poor communities and communities of color already suffering disproportionate climate harm and energy burdens.3

To interrogate the disconnect between utilities’ reliance on public benefits and their callous treatment of customers, the Center for Biological Diversity and BailoutWatch analyzed government data and company filings. We identified 16 electric utilities that benefited from last year’s Covid-19 bailouts while also cutting customers’ service for their inability to pay, and found:

Families had their power cut nearly a million times (990,234) between july 2020 and june 2021 by 16 companies that enjoyed a collective $1.25 billion in government bailout benefits. 4

Electric companies’ spending on executive pay and shareholder dividends dwarfed the cost of merely canceling households’ late bills5 — most could have bailed out their customers 500+ times with just what they paid out to executives and shareholders.

Nine companies received tax bailouts totaling $1.25 billion. It would have cost just 8.5% of that bailout total to prevent every shutoff reported.

For what taxpayers spent bailing them out, 15 companies (all but nextera) could have forgiven all unpaid accounts — hundreds of times over in some cases.

A six-member hall of shame — NextEra Energy (parent of Florida Power & Light and others), Duke Energy, Southern Company, Dominion Energy, Exelon and DTE Energy — perpetrated 94% of all documented shutoffs. NextEra alone accounted for nearly half.

The problem is much bigger than we were able to document because many utility regulators don’t require utilities to report data about disconnections.

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Overview

As Covid-19 spread last year, unprecedented economic disruption left Americans struggling to afford necessities. Heat waves and extreme weather drove up power bills. Many people fell behind.

Continuing a practice as old as debt collection, utilities pursued the harshest allowable tactic to collect unpaid bills: suspending or canceling service, leaving people without hot water, refrigeration, air conditioning and medical devices. Their houses uninhabitable, these families faced transience or being homeless.

For owing a few hundred dollars, some Americans were deprived of a basic right in a pandemic: to maintain the social distance necessary to protect themselves.

Defying calls to pause shutoffs, powerful electric utilities insisted that the practice was a necessary component of their collections cycle — and without this cudgel, customers who could afford to pay would choose not to.

In the end, a patchwork of statewide moratoriums protected some people, for some time, in some states. For the rest of the country, shutoffs remained a deadly scourge. Recent research proved the correlation between utility shutoffs and increased Covid infection and death rates.

A nationwide ban on evictions and utility shutoffs for March 2020 - November 2020 would have reduced U.S. Covid infections by 8.7% and deaths by 14.7%, according to research published this year by the National Bureau for Economic Research (NBER).6

The NBER findings expose a fault in how many utilities are structured: Utilities are entrusted by governments to deliver essential human services; yet as private companies, their ultimate responsibility is to further enrich wealthy stakeholders.7

Our analysis provides fresh evidence of how utilities’ corporate decision-making is impaired by their misaligned incentives…

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Toward A Real Solution

The Covid-19 crisis gave utilities an opportunity to save lives by keeping people in their homes. Many chose to collect small debts instead, leading to increased deaths and infections. Climate-related destruction challenges electric companies to drastically cut emissions and deploy climate-resilient systems like rooftop and community solar and storage. Instead, many corporate utilities sow confusion and remain among the worst emitters, actively undermining lower-emissions and distributed energy systems because they threaten to compete for profits.

While opposing efforts to transition to a renewable, resilient energy system, utilities remain steadfastly unprepared for climate disaster — as demonstrated recently by climate-caused hurricanes like Ida, the Texas energy freeze, and grid negligence in California’s wildfire areas.

These urgent facts compel us to weigh systemic changes that might discourage or prevent such antisocial, anti-public corporate acts. Yet the utility shutoff problem has plagued American communities since long before Covid-19.26 Any fix must solve for injustices that exist separately from, and regardless of, the state of the pandemic.

Utility justice advocates believe the for-profit utility system must be overhauled, centering power as a human right and permanently banning shutoffs. Earlier in 2021, House Reps. Cori Bush of Missouri and Jamaal Bowman of New York jointly introduced a resolution to make electricity a publicly owned utility sector, impose a universal ban on utility shutoffs for nonpayment, and build out community and rooftop solar and storage as climate-resilient and affordable energy solutions.

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Conclusion

Focusing on bailed-out utilities’ choice to disconnect families and the resulting increased spread of Covid-19, this report aims to illuminate a structural flaw in the U.S. utility framework: For-profit companies lack accountability to the public good.

The climate emergency will continue to magnify the harms from this conflict, as extreme weather ravages ever more communities whose residents are disproportionately low-wealth and Black and other communities of color.

Given utilities’ contributions to the escalating climate crisis, and their reliance on public assistance during the Covid-19 pandemic, it is imperative that we act to limit the damage inflicted by profit-seeking companies that control basic resources.

In a nation of abundance, there is no space for a system whose powerful stakeholders get richer by choosing to harm untold millions of Americans, disproportionately communities of color and poor families, amid a global health crisis.

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