National Study of Low Income Energy Programs NARUC Consumer Affairs Committee David Carroll, APPRISE Jacqueline Berger, APPRISE Roger Colton, Fisher, Sheehan, and Colton 2/19/2008

Presentation Outline 2

Scope of National Study Low Income Energy Needs Legal and Regulatory Issues Affordability Programs Energy Efficiency Programs Summary 3

Overview of National Study 4

Purposes Inventory – How are ratepayer funded programs helping to meet the energy needs of low-income households? Best Practices – What programs are most effective in meeting their targeted goals and in what ways they could be improved? Research Framework – What additional information is needed to understand these programs? 5

Study Scope Analysis of 14 states – CA, CO, CT, IN, ME, MD, MO, NJ, NV, OH, OR, PA, WA, WI Research on 21 Affordability Programs and 13 Energy Efficiency Programs Review of Evaluations for 10 Affordability Programs and 12 Energy Efficiency Programs 6

Sponsors AARP Colorado OEMC Connecticut Operation Fuel Indiana Utilities (CGCU, NIPSCO, and Vectren) Maryland Department of Human Resources Missouri Association for Community Action Ohio Department of Development Oregon Housing and Community Services PECO Energy Philadelphia Gas Works Public Service Electric and Gas (contributor) Washington State CTED 7

Sponsors Nonprofit Organizations – AARP, Operation Fuel, and MACA State Agencies – Colorado, Maryland, Ohio, Oregon, Washington Utilities – CGCU, NIPSCO, PECO, PGW, PSE&G, Vectren 8

Needs Assessment Findings 9

Needs Assessment National Context Energy bills for low-income households grew from $22.6 billion in 2000 to $31.9 billion in 2005 (40% Increase) From 2005 to 2007 – Electric prices increased by 12.5%, gas prices are stable, and fuel oil prices increased by 25%. 10

Needs Assessment National Context – Energy Affordability –Needs 7.1 million low-income households have residential bills that exceed 15% of income. $6.1 billion needed to pay excess over 15% of income. –Federal Assistance LIHEAP distributes $1.7 billion to 5 million households –Personal Responsibility 80% of households in poverty pay all energy bills Most LIHEAP recipients are “energy insecure” 11

Needs Assessment National Context – Energy Efficiency –High Electric and/or Gas Usage million low- income households have high energy usage –Federal Assistance - WAP treats about 100,000 households each year –Actions by Low-Income Households - Most LIHEAP recipients report significant energy saving actions 12

Needs Assessment State and Local Context – Targeted Households PA – 150% Poverty – 20% of households OR – 60% of State Median – 30% of households MD – 150% of Poverty – 14% of households 13

Needs Assessment State and Local Context – Affordability Average Energy Burden CA – 7% of income PA – 17% of income CO – 10% of income 14

Needs Assessment State and Local Context – Energy Efficiency High Electric Baseload CA - 24% high electric baseload IN - 80% high electric baseload PA – 45% high electric baseload 15

Needs Assessment State and Local Context – Energy Efficiency High Gas Usage NV - 10% high gas usage PA - 29% high gas usage MD – 18% high gas usage 16

Needs Assessment Energy Gap / Affordability Standard Definitions –Energy Gap = The amount that the energy bills of low income households exceed an affordable amount. –Affordability Standard = The percent of income that is affordable for households to pay for energy bills. 17

Needs Assessment Energy Gap / Affordability Standard Example for 15% of Income Standard –Customer #1 Income = $10,000 Energy Bill = $2,500 Affordable Energy Bill (at 15% standard) = $1,500 Energy Gap = $1,000 –Customer #2 Income = $5,000 Energy Bill = $1,000 Affordable Energy Bill (at 15% standard) = $750 Energy Gap = $250 Total Energy Gap (15% Standard) for this Group = $1,250 18

Needs Assessment Energy Gap / Affordability Standard What Standard is Affordable? –Pennsylvania Median Household Income for 2005 = $44,537 Affordable Energy Bill - 5% standard = $2,227 ($186 per month) Affordable Energy Bill - 15% standard = $6,681 ($557 per month) Affordable Energy Bill – 25% standard = $11,342 ($945 per month) Fisher, Sheehan, & Colton – 6% standard = $2,672 ($223 per month) For a household in Pennsylvania with income at the state median – an energy bill at the 6% of income standard would be about $222 per month. 19

Needs Assessment Pennsylvania – Energy Gap 2005 –Low-Income Electric and Gas Bill - $1.48 billion 5% Standard - $1.04 billion 15% Standard - $491 million 25% Standard - $290 million 20

Needs Assessment State and Local Response –In 2005, state and local policymakers in 45 states and the District of Columbia invested $2.3 billion in affordability and energy efficiency programs In 2005, the amount of funding furnished by state and local policymakers matched the amount furnished by the Federal government through LIHEAP and WAP 21

Needs Assessment State and Local Response –15% Energy Gap = The amount that the energy bills of low income households exceed 15% of income. –Coverage of Energy Gap (15% Standard) by Public and Ratepayer Funds Missouri - Funding covers 17% of 15% Energy Gap New Jersey – Funding covers 84% of 15% Energy Gap Pennsylvania – 2005 Funding covered 60% of 15% Energy Gap 22

Legal and Regulatory 23

Legal and Regulatory Regulatory Programs …without “explicit” statutory authority –Colorado: Approved a pilot program to test effectiveness / “targeted to increase the net revenue received by Public Service” –Ohio: Ordered utilities to change the way that payment shortfalls are collected / “… was created in response to the inability of low- income households to maintain energy service.” –Pennsylvania: Order utilities to change practices that lead to “wasteful cycle” / “… how can Columbia Gas most effectively and least expensively collect as much as possible from customers that cannot afford to pay?” 24

Legal and Regulatory Legislative Programs … with “explicit” statutory authority –Washington State: Regulatory body has authority to approve programs proposed by utility companies –Maine: Requires each utility to implement a program, but allows each to select program options that best meet the needs of their customers –New Jersey: Required the development of a statewide program designed to increase the affordability of energy for all low-income ratepayers 25

Legal and Regulatory Legislative: Some legislatures have decided that ratepayer funded programs are the most effective way to address low-income affordability and energy efficiency issues. Regulatory: Some commissions have mandated programs because they have determined that ratepayer funded programs are the most effective way to fulfill their obligation to serve all customers in a cost-effective way. Utility: Some utilities have proposed ratepayer funded programs because they perceive that they are the best way to work with payment-troubled low-income customers. 26

Affordability Program Design and Evaluation 27

Program Design Sources of Payment Problems Income Level Income Inconsistency Unexpected Expenses Price Increases High Usage Program designers need to understand the sources of payment problems in the targeted jurisdiction 28

Program Design Customer Payment Problems Arrearages Inconsistent Payments Annual Bill Shortfall Health and Safety of Customers Program designers need to decide which manifestations of payment problems they need to address most 29

Program Design Utility Payment Problems Collections Costs Accounts Receivable Write-Offs Customer Relations Program designers need to consider what utility problems are the most important to resolve. 30

Program Design Program Solutions Crisis Intervention Preprogram Arrearage Forgiveness Current Bill Assistance Counseling and Referral Usage Reduction Program designers need to determine what solution(s) best address the problems they are trying to solve 31

Evaluation Best Practices – Targeting –Serve those with demonstrated need All high burden customers – NJ USF / MD EUSP Customers with payment problems – PA CAP / OEAP Best Practices – Programs –Match programs to problems High burden – Payment subsidy / usage reduction / benefit referral – PA CAP/LIURP/CARES Payment problems – Arrearage forgiveness / fixed payment / payment counseling – PA CAP / CARES 32

Evaluation Best Practices – Administration –Build on existing linkages New Jersey – LIHEAP / Utility / Community Agencies Ohio – LIHEAP / PIPP / EPP Best Practices – Funding –Multiple Sources New Jersey – Federal LIHEAP / State Lifeline (Elderly) / Ratepayer USF / Charitable NJ SHARES Oregon – Federal LIHEAP / Ratepayer OEAP / State Funding Supplement / Oregon HEAT 33

Evaluation Align Funding Source with Need –LIHEAP to furnish health and safety for vulnerable households –State Supplements when Increased Energy Bills are associated with Increased Tax Revenues –Ratepayer Funding to addresses goals of providing universal access and avoiding wasteful collections cycle –Charitable Funds offer flexibility to address needs of households that do not meet categorical requirements 34

Energy Efficiency Program Design and Evaluation 35

Program Design Sources of Usage Problems Housing Quality HVAC Equipment Efficiency Appliance Efficiency Energy Using Practices Program designers need to understand the sources of usage problems in the targeted jurisdiction 36

Program Design Customer Barriers Investment Capital Energy Knowledge Information Feedback Program designers need to decide which barriers they need to address most 37

Program Design Utility Usage Issues Peak Shaving Load Shifting Consumption Reduction Affordability Subsidies Program designers need to consider what utility issues are the most important to resolve. 38

Program Design Program Solutions Weatherization HVAC Repair and Replacement Appliance Replacement Energy Education Program designers need to determine what solution(s) best address the problems they are trying to solve 39

Program Evaluation 40 Targeting High Usage – Energy efficiency programs must target high usage customers to be cost- effective –1,200 Therms –8,000 kWh Baseload –12,000 kWh Baseload/Water –16,000 kWh Electric Heating

Efficiency Program Evaluation Electric Baseload Usage Impacts 41

Efficiency Program Evaluation Gas Heating Usage Impacts 42

Efficiency Program Evaluation 43 Comprehensive Programs Should… Target high usage households Use tools to identify sources of energy problems Align spending with opportunities Be prepared to address health and safety issues Have guidelines for “walk-away” and/or referral These programs are more expensive per unit but can deliver long-term savings to low-income households, furnish reliable benefits to utility capacity planners, and deliver significant carbon reduction impacts

Efficiency Program Evaluation 44 Targeted Programs Should… Target high usage households Prescreen clients for opportunities Minimize service delivery costs Piggyback with comprehensive programs and/or other service delivery These programs are less expensive to administer and perform well in the short run, but must be well run to deliver promised benefits

Efficiency Program Evaluation Best Practices – Targeting –Serve those with demonstrated need High usage Demonstrated Opportunities Best Practices – Programs –Service Delivery Quality Protocols Effective Training Clear Decision Criteria Quality Control 45

Efficiency Program Evaluation Best Practices – Administration –Build on existing linkages Ohio – LIHEAP / PIPP / EPP Integration New Jersey – USF / Comfort Partners Integration Best Practices – Funding –Multiple Sources Oregon – Federal WAP / LIHEAP Transfer / Ratepayer Funded / State Funding Supplement Vermont – Federal WAP / LIHEAP Transfer / Ratepayer Funded / All Fuels Funding Supplement 46

Summary of Findings 47

Summary Energy Needs – Low-income energy needs are daunting, but some state policymakers have made significant progress toward meeting those needs Legal/Regulatory – There are excellent models of legislative and regulatory frameworks for ratepayer-funded low- income programs 48

Summary Program Design – There are important design choices that make a difference in the performance of low-income affordability and energy efficiency programs. Since needs vary from state to state and even within state, policymakers need to identify their goals and design programs to meet goals. Reporting and Evaluation – The PA PUC models for reporting and program evaluation furnish a good example of how to document performance of ratepayer funded low-income programs. 49

David Carroll APPRISE