State OK's a late fee for Verizon

Over the strong objections of Attorney General Thomas F. Reilly , state regulators have given Verizon Corp. the green light to assess a 1.5 percent late fee on consumers who pay their monthly bills more than 30 days late.

Officials at the Massachusetts Department of Telecommunications and Energy said they approved the late fee after persuading Verizon to exempt customers with Lifeline service, which is available to consumers receiving public assistance.

Reilly said Verizon's fee is exorbitant (19.56 percent on an annual basis), higher than what business customers are charged, and tantamount to double billing, because the phone giant's rates already include an allowance for the cost of customers paying late.

Reilly's aides said they plan to fight the late fee in another proceeding that's pending before the DTE.

The attorney general had urged the DTE to bar Verizon from imposing a late fee, just as state law currently prohibits electric, natural gas, and water utilities from assessing late fees.

DTE officials said the Legislature has to decide which utilities can and cannot charge late fees, but they noted that bad debt is becoming a growing problem for the state's gas and electric companies, particularly as the cost of energy rises.

The DTE officials said all ratepayers end up paying for the unpaid bills of other customers, in the form of higher charges for power and distribution services, and that late fees may help cut down the rate of bad debts.

``The bad debt doesn't evaporate," said Timothy J. Shevlin Jr. , executive director at the DTE. ``Everybody else pays."

Bay State Gas, for example, reported bad debt of $10.2 million in 2004. The company allocated $3.1 million of the bad debt to its distribution business, and the balance to its power supply operations. The company was allowed to roll the $3.1 million into its base distribution rates for future years and permitted to recover $7.1 million from customers the following year by raising power charges.

Uncollected power charges are reconciled on an annual basis, while uncollected distribution charges are reconciled during rate hearings, which occur every several years.

In contrast with the electric and gas utilities, Verizon has been aggressively trying to reduce its bad debt. The company recently began reporting to the nation's three major credit bureaus those customers who pay their bills on time and those who pay late. A company spokesman characterized the credit reporting as a small stick designed to get customers to pay on time.

The company has declined to say when it will issue a negative credit report on a customer. In a June 1 letter to the DTE, John L. Conroy , a Verizon vice president, said disclosing publicly how big a debt the customer would have to run up before the credit report would be affected would undermine the company's collection efforts.

``It will only provide a road map to customers who do not pay their bills regarding the length of time, and the amount of any bill, that they can ignore without negative consequences," he wrote.

A Verizon spokesman said in April that roughly 15 percent of the company's customers would be subject to a late fee. He declined yesterday to say what impact the removal of Lifeline customers would have on that earlier 15 percent estimate.

On a $40 bill, the 1.5 percent late fee would represent a charge of 60 cents.

Bruce Mohl can be reached at mohl@globe.com.