Articles of Collections - Part 1
Getting the Money in the Door: Solving the Problem of Collections
Water purveyors face a myriad of operational issues on a daily basis, from ensuring an adequate supply of water to meeting the increasing number of regulations governing drinking water. They must manage employees and meet the expectations of their customers, all while operating within the confines of an annual budget driven by a desire to keep rates as low as possible. Public agencies and mutual water companies do not operate to make a profit, and this makes the need to ensure that bills are timely collected all the more important. In the current economic climate, however, customers also face tight budgets and have to make difficult decisions about which bills to pay, and which to put off until later.
In this 2-part series, we will look at the various means available to water purveyors to ensure that their bills stay at the top of their customers’ “pay” list.
Part I: Discontinuing Water Service for Non-Payment
The most common way a water district or mutual water company enforces collection of a delinquent account is by threat of termination of service. Where the account is for residential service, districts [Government Code §§60370-60375.5] and water companies [Public Utilities Code §§777-780 – although mutual water companies are not subject to the jurisdiction of the Public Utilities Commission, they are “water corporations” and are thus subject to some provisions of the Public Utilities Code] must comply with a statutory procedure before service can be terminated. An outline of those procedures follows.
1.Notify Customer of Right to Protest Bill. The termination notice must contain provisions notifying the customer how they may initiate a complaint or investigation regarding their water service or charges. We recommend these provisions also be printed on or otherwise included with each billing, as this can effectively prevent a customer from using the complaint procedure as a means of avoiding or postponing payment of the bill (see item 7 below). The following notice satisfies the statutory requirements:
“If you have a question about this bill or a dispute regarding the amount charged, you must submit a complaint or request for investigation in writing to the > office within five (5) days of receipt of this bill. If the representative determines that an investigation is warranted, your service will not be terminated until the investigation has been completed and you have been notified of the decision. You will then be given an opportunity to pay the bill, without penalty, to avoid termination of service.”
2.Give Notice of Delinquency and Disconnection of Service. This notice, the “Notice of Delinquency,” may be sent to the delinquent account holder once the water bill remains unpaid for at least 19 days after the date of the original bill for the water service.
A. Notice (described in item 3 below) is mailed on the twentieth day after the billing period invoice date. Notice need not be mailed registered or certified mail.
B. Notice must be mailed at least fifteen days prior to the date stated in the notice for termination of service
C. After receipt of the Notice of Delinquency and Disconnection of Service, and prior to the date set for disconnection, the customer may request an amortization payment plan as set forth below in item 6.
D. Notice should also be sent to any third party designated by the customer where the district/company has received request for third-party notification (see item 8 below).
3.Contents of Notice of Delinquency. The Notice of Delinquency and Disconnection of Service must contain the following information in a “clear and legible format”.
A. Customer’s name and address:
B. Amount of the delinquency;
C. Date and time (must be during normal district/company business hours) by which payment or arrangement for payment must be made in order to avoid termination (in other words, the date and time set for turn-off);
D. Procedure by which the customer may initiate a complaint or request an investigation regarding service or charges;
E. Procedures for requesting amortization of the unpaid balance (see item 6 below);
F. Procedures for obtaining information on financial assistance; and
G. Telephone number of the purveyor’s representative who can provide additional information or institute payment arrangements.
4. Additional Information Required in Notice for Multi-Unit Residential Structures. Special rules apply in situations involving a multi-unit residential building, a mobile home park or permanent housing in a farm labor camp. Those rules impose different requirements where service is provided through a master meter and not through individual meters (where one customer is still responsible for paying the bill, e.g., the landlord):
A. Individual meters: The district/company must make “every good faith effort” to advise the residential occupants of the impending termination of service, and provide them with information regarding their right to become direct customers without being required to pay the past due amount. The district/company is not obligated, however, to make service available unless each residential occupant agrees to the district/company’s terms and conditions of service, and meets all other applicable requirements. If one or more of the occupants are willing and able to assume responsibility for the entire account to the district/company’s satisfaction or if there is a way to selectively terminate service to those occupants who have not met the district/company’s requirements, the district/company must then make service available to those residents that meet the requirements.
B. Master meters: The district/company is required to make “every good faith effort” to post the turn-off notice on the door of each residential unit at least 15 days prior to termination of service. If individual posting is “not reasonable or practicable,” two copies of the notice must be posted in each accessible common area and at each point of access to the structure or structures. The notice must include, in addition to the information specified in item 3 above, information regarding each occupant’s right to become customers without being responsible for the past due balance, what must be done to prevent termination and establish service in their name, the estimated monthly cost of service, the name, address and phone number of the district/company service representative to contact for further assistance, and the address and telephone number of a legal services project recommended by the local county bar association. Again, the district/company is obligated to continue service where one or more of the occupants are willing to assume responsibility for the entire account, and must, where possible, selectively terminate service as discussed above.
C. Deposits: Where credit worthiness is required to establish service, the statutes provide that residence and proof of “prompt payment” of rent or other credit obligation over a time period established by the district/company is deemed to be a satisfactory equivalent.
D. Languages of Notice: The Notices under items A and B, above, must be provided in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean.
5. Give 48-hour Notice of Discontinuation of Service.
A. At least forty-eight hours prior to the disconnection date provided in the Notice of Delinquency, the district/company must make a “reasonable attempt” to contact an adult of the residence by telephone or in person, and provide them with the information set forth in item 3 above.
B. As the statute is unclear as to what constitutes a “reasonable attempt,” we would recommend that at least one attempted personal contact be made, coupled with a “door hanger” or other written notification left at the customer’s residence at the time of the attempted personal contact. A copy of the Notice of Delinquency should also be left at the customer’s residence at that time.
C. In a situation involving a multi-unit residential structure, the notification requirements set forth in item 3 above also apply to the 48-hour notice.
D. Although it does not appear to be required, third-party notice should also be given where the district/company has previously received a request for such notification.
6. Amortization of Unpaid Balance.
A. If the customer:
i. Is unable to pay within the normal payment period; and
ii. Is willing to enter in to an amortization agreement,
the customer may request, in writing, a 12-month amortization payment plan.
B. Where the customer also provides certification by a licensed physician that termination of service would be life-threatening to the customer, upon confirmation of the doctor’s certification and approval of the request, an amortization plan must be entered into between the district/company and the customer.
C. The district/company may charge an administrative fee to the customer, representing the cost to the district/company of administering the amortization plan.
D. The customer must comply with the amortization plan and remain current as charges accrue in each subsequent billing period. The customer may not request further amortization of any subsequent unpaid charges while paying delinquent charges pursuant to an amortization plan.
E. Failure to comply with the terms of an amortization plan will result in a 48-hour notice of termination. The district/company should then follow the procedure set forth in item 5 above.
7. Disputed Bills.
A. Within five days of receipt of the bill for water service (10 days after mailing), the customer has a right to initiate a complaint or request an investigation regarding the bill. The protest must be made in writing and delivered to the district/company office.
B. The district/company should designate a review officer for purposes of reviewing and possibly hearing such disputes.
C. The review must include consideration of whether the customer will be permitted to amortize the unpaid balance of the account over a reasonable period of time, not to exceed twelve months.
D. The customer may appeal an adverse determination by the hearing officer to the water supplier’s Board of Directors. The time within which such appeal must be brought should be reasonable, and can be established by the Board.
8. Third-party Notification Service. The district/company must make a third-party notification service available to all customers 65 years or older and to any customer who is a dependent adult [an adult deemed unable handle their affairs], whereby the district/company will attempt to notify a person designated by the customer when the account is past due and subject to termination. The request form should be provided by the district/company, and must include the written consent of the third-party. Third-party notification must include information on what is required to prevent termination of service. The same notices as those given to the customer would satisfy this requirement. Note that the third-party notification is in addition to the notice requirements outlined above.
9. When Service Cannot be Terminated. The district/company may not terminate service under any of the following conditions;
A. During the pendency of an investigation into a disputed bill;
B. When a customer has been granted an extension of the period for payment;
C. During pending amortization, where the customer is complying with the terms of the amortization agreement, including payment of current bills.
D. Master Meters: In a multi-unit residential structure with a master meter, service cannot be terminated, in addition to the situations listed above, where:
i. A public health or building officer certifies that termination would cause a significant health or safety risk to the occupants or the public; or
ii. The delinquent account related to another property owned, managed, or operated by the customer.
In conclusion, the foregoing rules are very technical and we recommend that district/company staff receive proper training with respect to the application of these procedures, and that the district or company adopt appropriate policies to implement these procedures. If questions arise, you should promptly seek guidance from your legal counsel. The next edition of the California Water Journal will address further collection alternatives if these procedures do not yield success in collecting amounts owed to your entity.
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