‘We’re seeing freeloading all across the state…’
In the early days of the Wuhan virus panic, North Carolina’s Democratic Gov. Roy Cooper ordered utility companies to provide electricity and water services to people even if they didn’t pay their bills.
Cooper continues to impose the mandate, and predictably, people have stopped paying even if they can afford it. As a result, utilities are going broke.
“We’re seeing freeloading all across the state,” Paul Meyer, spokesman for the North Carolina League of Municipalities, told WRAL.
“People just say, ‘Hey, they’re not going to turn my power off so I’m not going to pay,’” Meyer said. “So we’ve seen collection rates plummet.”
In North Carolina, water and sewer systems are run by cities. In many parts of the state, cities also run electricity, gas and even cable services.
But whether publicly owned or private investor-owned, Cooper’s March executive order didn’t differentiate between consumers who became unemployed due his ruthless Wuhan virus economic shutdown or those who can pay regardless. The order is slated to continue through the end of July.
Ratepayers are supposed to repay delinquent bills, assuming Cooper will allow enforcement measures. But in many cases, taxpayers will be forced to pick up the slack as cities move to replace lost utility revenues.
Meyer said $75 million vanished from utility balance sheets in March and April thanks to Cooper’s unqualified order.
“It was well-intended,” he said. “I get that. It really was. But when you put people behind four and five months on their payments, you know how this goes. People just won’t ever be able to pay.”
Cooper’s order is also expected to create a cascading effect of lost revenues and additional burdens on cash-strapped residents.
Utility services often make up half of local government budgets. But by removing the incentive to pay, Cooper has created a moral hazard where good-faith ratepayers are punished, and deadbeats get off scot-free. More and more people are likely to stop paying thereby exacerbating the problem he created.
Additionally, with such huge budget shortfalls, cities and towns are likely to double-down on new forms of revenue, such as taxes, fees, bogus code enforcement activities, and even traffic citations. This will further squeeze remaining ratepayers and make their ability to keep up with utility bills more difficult.
But even that might not be enough to keep North Carolina municipalities from financial ruin.
State Treasurer Dale Folwell recently said that if smaller cities’ utilities are bankrupted, then there’s a real possibility that the cities themselves might have to be taken over by the state.
“The ones I’m particularly concerned about are the eastern municipal power agencies,” Folwell said, adding, “and those are the citizen-owned utilities east of Raleigh.”
Folwell said that he intends to ask Cooper at a Council of State meeting on Tuesday to allow all citizen-owned utilities to start collecting on overdue accounts immediately — which isn’t just good for cities, towns and utility companies, but also non-paying consumers who may be forced to pay off months upon months of bills for years to come.
“They have been dealing for decades with folks who have trouble paying their bills,” Folwell said. “Ultimately, if these bills aren’t paid, we’re putting these citizens in a hole they can never climb out of.”
“Eventually that’s going to result in much higher rates — not just for these utilities but also property taxes, which is the last thing that rural North Carolina needs, especially eastern rural North Carolina,” he added.