Dealing with utility companies

This post is in response to a comment that was left on one of my videos about dealing with collection agencies. I believe the original comment was made by someone in Manitoba, Canada. I've edited the original a little but did my best to keep the sentiment.

Original comment:

What about plain harassment all the time when big companies estimate the billing and say you used the power or gas or water, when you did not use what they estimate, and know it does not cost that all that the company says just by there estimating. You have anything on or about where the hell does it give the big businesses the right to charge us those ridiculous charges and if you do not pay it they threaten to cut you off

Your comments and question are fantastic. At the same time I wish you didn't even have to worry about these things. You raise serious issues that I'm sure a lot of others can relate to, myself included.

First and foremost though, if you can’t pay utilities because you’re paying credit card debt, PAY YOUR UTILITIES FIRST! Sign up for my next webinar (register here for free). You’ll get some good tips and an important perspective there if you have any debts.

There’s a lot to cover in responding to your comment, and I want to be as thorough as possible, so I actually wrote a blog post about it which you can read here.

Without knowing your particular situation, here are some thoughts I’m having about what you wrote. These are my opinions based on what I’ve read in articles (most of which I’ve referenced).

I’m going to respond to your comments and question starting by:

responding to your comment about how much hydro costs; then,

I’ll explain why I suspect it costs so much; then,

I’ll go over equalized billing; then,

debt collection and utility cut off laws; and lastly,

some ideas that might or might not work for you.

1. How much hydro costs and why

After reading your post I assumed you were in Manitoba and started looking into Manitoba Hydro who also seems to provide natural gas. Their logic in increasing rates by 46% over the next 5 years in incredibly flawed, and most certainly they don’t feel they have a choice, but it’s because of a bunch of bad decisions made along the way.

As it stands, Manitoba has the second cheapest hydro in Canada next to Quebec. So sure Manitoba Hydro wants to convince the public and the Public Utilities Board that the 46% is to pay for their infrastructure and they’ll probably try to justify it by saying that they will still be in line with the other provinces. But minimum wage in Manitoba is only $11.35 per hour, compared to say $14 in Ontario. The bigger issue is that Manitoba doesn't have a government funded utility subsidy for low income individuals like in Ontario, and some other provinces. I didn't have time to check them all out though. In section 5) I’ll explain the subsidy program in Ontario. Again I'm not sure if you’re low income or not, but but this might be helpful for someone else who is.

2. Why I suspect it costs so much

Public procurement (meaning when governments or crown corporations buy stuff or build things) is plagued by overpayments to “bidders” who are sometimes (not always, but sometimes) involved in big rigging. They also include plenty of clauses that allow them to add additional costs after the project has started which allows them to make lower initial bids. As an example you can look at the bid rigging in Quebec’s construction industry.

This happens because those who award the contracts are not incentivized to get the best deal or dig deeper into why bids might be so high. Not to say that it’s entirely their fault though. They can’t be expected to be experts on everything, but it’s part of a bigger systemic problem in procurement where no one is really accountable and the tax payer always gets stuck paying the bill (usually after the next election cycle when an opposing party has been voted in, and then of course they get blamed for it).

This means that Manitoba Hydro almost certainly has or will overpay for the Keeyask Generating Station and Bipole III transmission line.

From what I read, the initial contract for Keeyask Generating Station was $6.5billion and now that the project has begun estimates are between $8billion and $11billion. This cost is over the projected 5 years and most likely doesn't account for cost inflation over the years (things get more expensive every year), and dollar devaluation (value of the dollar going down).

On top of that, they probably used debt to finance it instead of having difficult conversations with the federal government for help while also hammering down the bidders to get better deals. This is because a common way for businesses to borrow money is by showing contracts that show income from whatever they’re building. In this case. Manitoba Hydro signed $4.5billion dollars worth of revenue contracts that depend on the production from the dam to the be sent down the transmission line to the US.

To make things worse, the buyers of these contracts most likely knew that Manitoba Hydro needed these contracts to get their financing, and so as part of the deal, they hammered Manitoba Hydro down on the price per megawatt, and added in severe penalties if there are delays in delivery.

I also wouldn't be surprised if a caveat to the export contracts included that Manitoba Hydro has to hire US based companies to to build the dam and transmission lines, and to buy the steel from the US. Again, this is just what is looks like from reading some articles this morning, so I may very well be wrong, and I hope I am. You decide. This CBC article shows a US company getting an $85million contract that was never tendered, meaning they didn't get companies to bid on it, they just awarded the contract to this company.

3. Equalized billing

A lot of utility companies including Manitoba Hydro offer equalized billing. I imagine this is what you were referring to in your comment. If it’s a new customer, they use either historical data for that house or unit, or maybe an historical average for the neighbourhood in order to estimate the costs for the first year. After the first year is done, either you owe them or they owe you. It’s always best to pay a bit more each month and have them owe you, or you can get stuck with a balloon payment to catch up which most people won’t be able to afford.

Then for the next year, they use that new information to adjust the monthly payment.

I’m pretty sure that during the year if you see that the numbers are really off, meaning you paying way too much or way too little, you can ask them to adjust it.

For anyone on a fixed monthly income, this billing method can be really helpful. Those balloon payments that can happen though, can be devastating at the same time.

5. Debt collection and utility cut off laws

As is the case all over Canada, debt collection is highly regulated. There are specific rules creditors and debt collectors have to follow. You can check out the rules in Manitoba here.

As a utility company, they are restricted by when they can cut off power. In Manitoba, they can’t just cut you off in the winter, but they can put a load limiter on to control how much you use. Unfortunately from what I can see, this means you can only use electricity to heat your home instead of natural gas.

5. Some ideas that might or might not work for you

These are just off the top of my head, so hopefully there will be something you can do.

If you rent, consider moving to an apartment building that includes heating (this is usually the case when they have a central boiler).

Also, pick a unit that is surrounded by other units if possible so your end up benefiting from the heat of the units around you.

If your place has poor insulation or drafty windows, try putting up heavy curtains. They are surprisingly good at helping to insulate. Also, plastic window insulation kits like this are good at reducing drafts.

In some countries, they even hang carpets on the walls to add insulation.

If you have some flexibility on the province where you live and you can find work elsewhere, explore moving to another province. Hydro might be more expensive, but for example if you move to Ontario, wages are higher, and the utility subsidies are excellent. But be sure to explore the programs that other provinces offer as well because there might even be something better there.

To give you and idea, these are three amazing programs the Ontario Energy Board offers based on my research:

Ontario Electricity Support Program (OESP)

This program provides low-income consumers with a monthly on-bill credit to reduce their electricity bill. This program provides ongoing help.

Low-income Energy Assistance Program (LEAP)

This program provides a one-time grant towards your electricity or natural gas bill if you are behind on your bill and may face having your service shut off. It is for emergency situations. This even works if the utility has already been shut off.

Special rules for low-income customers

Electricity utilities and unit sub-metering providers have to follow special rules when dealing with low-income customers; for example, waiving security deposits, allowing longer payment times and allowing payment times under arrears payment plans.

Well this might have been more than you expected but I hope it helps.

 

Stefan@DEBTCON