Utility bills may be missed
Mike Zaccardi, CFA, CMT
COVID-19 has affected so many areas of our lives. If we are fortunate, we’re working from home. We are schooling our kids. The home kitchen is fired up, though here in Florida our restaurants are open for business almost like normal.
Not everyone is lucky enough to have their job doable from home though. Unemployment has skyrocketed to near 15% and tens of millions are out of work – many of whom are lower-income individuals.
Joblessness has naturally led to folks having to make tough choices when it comes to the money they have on hand. A recent survey shows that utility payments may among the first to go.
Doxo Insights provides the chart associated with this piece. It was featured in the Wall Street Journal’s Daily Shot page (highly recommended, by the way) on May 12.
Customers delaying their utility bill payments is no-doubt a concern for utility companies who depend on cash flow from rate payers to keep their operations afloat. Municipal utilities could be particularly at risk since munis usually depend more on residential customers versus commercial and industrial entities.
The Federal Reserve of the United States did step in a provide the Municipal Liquidity Facility (MLF) back in early April to help ease some of the burden, but the MLF is not directly accessible for muni utility firms unfortunately. Individual states can, though, use the MLF and then use proceeds to help out their utilities. The MLF is a $500 billion lending program to state and municipalities with an additional $35 billion from the Treasury.
More assistance may be needed, and some groups have been voicing concerns. We are obviously approaching the summer period when electric bills can spike, so if there is not an immediate upturn in economic conditions, utilities could be caught in a perilous position without more assistance.
Here is the full story from Doxo: https://www.doxo.com/insights/doxoinsights-covid-19-impact-report/