Collection Practices for Delinquent Utility Accounts

Overview

All publicly owned and operated utilities in Washington State have a variety of tools they may use to collect delinquent utility charges and ensure payment. These include liens, shut-offs, payment plans, collections agencies, and courts. However, the availability of some these methods depends not only on the type of municipality that owns and operates the utility, but also the type of utility service for which charges are delinquent.

Utilities may not file a court action to collect on a delinquent utility account that is more than six years old. This restriction is based on the statute of limitations for accounts receivable set out in RCW 4.16.040(2). Court action to collect the debt is prohibited when the statute of limitations has run, but local government agencies can still use non-judicial methods to collect the debt, such as assigning the account to a collection agency. It is important to know your options once charges become delinquent and to pursue them in a timely manner.

Collections Agencies

Utilities may assign delinquent customer debts to licensed collections agencies under the authority provided in RCW 19.16.500 and pursuant to a written contract with a licensed agency. At least 30 days before assigning debt, the utility must first attempt to notify the debtor of the existence of the debt and that the debt may be assigned to a collection agency if not paid. According to RCW 19.16.500(1)(b), utilities may also add a reasonable collections fee to the outstanding debt.

Courts

The relationship between a utility and its customers is contractual, and customers who do not pay their bills on time may be regarded as having breached that contract. Washington courts have jurisdiction to resolve contractual disputes, and utilities may take delinquent customers to court. Utilities may attempt to collect unpaid charges in small claims court for debts that do not exceed $5,000 and in district court for debts that do not exceed $100,000. See RCW 12.40.010 and 3.66.020.

Payment Plans

Utilities may set up payment plans with customers to bring their utility accounts current. However, in order to avoid violating the state constitution’s prohibition against lending credit and gifting public funds, utilities must charge a reasonable rate of interest.

Utility Liens and Termination of Service (Shut-offs)

State law gives municipal utilities liens for unpaid utility charges that attach to the premises to which the utility service is being provided. A lien has the effect of securing the charges owed to the utility against the premises served. (Though, for city water and electric utilities, the statutory lien can be enforced only by shutting off service. RCW 35.21.300(1).) Usually, the lien is satisfied when the customer pays, the property is sold, or the utility or another lien holder forecloses on the property.

Shutting off a customer’s utility service, or the mere threat of it, is often the most effective way to get them to pay. Where utilities are authorized by statute to shut off utility service to enforce payment of delinquent charges, those provisions must be strictly followed. Moreover, utility customers enjoy procedural protections under state and federal law when facing shut-off of their utility service.

The availability of these options depends not only on the type of municipality that owns and operates the utility, but also the type of utility service for which charges are delinquent. See our Utility Liens and Shut-Offs tool for more information.