Affordability pressure is becoming a financial risk for utilities. As bills rise and household budgets tighten, customers make trade‑offs that can lead to missed payments and slower repayment.

Recent data shows that many customers are already under financial strain. In February 2026, E Source surveyed 662 adults from US households earning less than $75,000. Seventy-six percent reported their financial situation hadn’t improved from the prior year, including 38% who said it had worsened. Sixty percent said paying their utility bill caused financial stress, and during high‑bill months, 22% said they were unlikely to keep up with payments.

Rising energy costs are adding pressure for many households, with prices increasing at roughly three times the rate of general inflation. Sixty-two percent of respondents reported higher utility bills than the year before, and 35% said they cut back on food to stay current. For households already balancing trade-offs across food, housing, and health care, a single high-bill month can create a debt cycle that’s difficult to reverse.

Utilities often notice missed payments first because arrears are easy to measure, but financial risk starts earlier, when rising bills begin to change how and when customers pay.

How affordability pressure becomes financial exposure

Affordability challenges first show up as missed payments. These missed payments become arrears, and arrears persist until they are paid, resolved through recovery activity, or written off. As balances age, recovery becomes more costly and less certain.

Unrecovered debt increases collection costs and can contribute to future rate pressure. This cycle also affects how customers perceive fairness. As bills rise, additional customers may struggle to pay, reinforcing the same pattern that contributed to the original arrears.

Why arrears still feel routine inside many utilities

Arrears can feel routine because nonpayment has always been part of utility operations. When total balances appear within expected ranges, leaders may not see an immediate reason to reexamine payment arrangements and collections processes.

Some utilities experience periods where arrears appear relatively contained, even as customer payment behavior begins to change. Early warning signs often appear in how customers pay and whether arrangements are resolving balances before the risk shows up in total arrears.

That doesn’t mean utilities are ignoring the issue. In many organizations, arrears are recognized as a problem but compete with other urgent priorities, delaying deeper review of how affordability pressure is accumulating. Some utilities are already examining policy changes or other types of customer assistance to ease the pressure. Others assume uncollectible expense can be addressed through future rate recovery. As affordability concerns grow, regulators and intervenors may ask whether utilities took reasonable steps to manage arrears before passing costs to ratepayers.

Current responses aren’t reaching enough customers

Most customers who fall behind need support aligned with their actual ability to pay. Payment plans and other forms of bill support can help, yet many customers remain unaware that these options exist. The E Source 2026 Q1 LMI Pulse Survey found that 80% of customers have little or no familiarity with utility assistance programs. When need is high and awareness is low, even well‑designed programs fail to reach the customers who need them most.

Utilities are responding through a mix of expanded assistance promotion and alternative payment options. Payment arrangements remain a primary tool for addressing arrears. When these arrangements don’t result in full repayment, utilities need to know whether the terms reflect actual ability to pay or simply delay debt that becomes harder to recover.

The challenge is that these responses are often managed across separate teams. When customer support efforts are disconnected from financial risk, outreach can increase while high-risk customers fall further behind. Programs are most effective when they’re part of a coordinated affordability and arrears strategy that identifies where exposure is growing and which interventions change outcomes.

E Source benchmarking shows that assistance isn’t matching the scale of arrears exposure. In a late-2025 arrearage benchmark survey with 40 participating utilities, total outstanding debt exceeded $5.5 billion. Across respondents, the share of customers in arrears exceeded the share receiving financial assistance. At the median, 11% of customers were in arrears, while only 7% were receiving assistance. This comparison shows how debt can accumulate faster than relief reaches customers, even before factoring in future rate increases.

Disengagement accelerates risk

Financial exposure increases when customers disengage. Customers in arrears may delay contacting the utility or avoid communication altogether because they fear collections or disconnection. Once engagement declines, lower-cost interventions lose effectiveness because they rely on a customer’s willingness to communicate.

Survey responses show that under sustained financial stress, many customers believe reaching out won’t change their situation. When payment feels unattainable, communication drops off and recovery becomes slower and more costly.

Utilities need a coordinated affordability and arrears strategy

Utilities need a clearer view of where arrears are forming and how current policies affect repayment. This process begins by understanding whether assistance reaches customers early enough and whether payment arrangements prevent balances from aging beyond realistic recovery.

Participation in the E Source Arrears Benchmark Questionnaire can provide an initial snapshot of portfolio exposure relative to peers. For some utilities, the results confirm that current approaches are working. For others, they show where current policies may be allowing unpaid balances to age.

Benchmarking shows where exposure exists, while a fuller arrears and credit risk assessment explains what is driving it. A deeper assessment connects payment behavior to outcomes and identifies where arrangements fail to support repayment. These findings help leaders distinguish short‑term operational fixes from policy changes that require more time. A broader affordability strategy aligns customer support with the financial and regulatory risks utilities need to manage.

See where your utility stands on arrears risk, take our benchmark survey today and we'll be in touch to discuss your results and options.

 

The cost of doing nothing

Familiar arrears patterns can mask rising risk until intervention options narrow. Delayed assessment can leave utilities with larger balances, lower engagement, higher recovery costs, and greater regulatory scrutiny.

Affordability now appears routinely in rate cases and local and state policy debates. Utilities that can’t clearly demonstrate how they’re managing arrears risk may face more resistance when seeking rate relief. Customer trust also becomes harder to protect. The E Source 2025 Customer Experience Management Survey shows affordability is now the second‑largest driver of customer satisfaction. Utilities perceived as prioritizing collections over support can weaken that trust, making future rate cases and infrastructure investments harder to defend.

Arrears may begin with missed payments, but the effects extend across financial planning, customer relationships, operations, and regulatory confidence. Utilities that recognize this shift early can adjust how they engage customers and manage credit before balances grow and engagement declines. In an environment where affordability pressure is unlikely to ease soon, a coordinated affordability and arrears strategy is essential to protect financial performance and maintain trust.