Controlling Payment Troubles: Affordable Energy for Low-Income Customers Roger D. Colton Fisher, Sheehan & Colton Belmont, MA October 2006

E-Source Forum Why do we care? Starting Point: Home Energy Burdens w Shelter burdens affordable at 30% of income. w Utility costs affordable at 6% of income (20% of shelter costs).

E-Source Forum Iowa: Home Energy Burdens by Federal Poverty Level (FPL)

E-Source Forum Home Energy Affordability Gap Home energy is a crippling financial burden for low-income Iowa households. w 2002 Home Energy Affordability Gap: $137,598,051 w 2005 Home Energy Affordability Gap: $239,203,851 w Growth in Affordability Gap ( ): $101,651,800 w 2005 Home Energy Affordability Gap Index: 173.8

E-Source Forum Growth in EA Accounts in Arrears: Iowa

E-Source Forum Growth in EA Accounts Written-offs: Iowa

E-Source Forum Growth in Disconnects: Iowa

E-Source Forum The Need for a Toolkit Approach “When your only tool is a hammer, you tend to see every problem as a nail.”

E-Source Forum Home Energy Affordability Gap: Growth in Gap/LIHEAP Affordability Gap 2002: $137,598, : $239,203,851 Growth: $101,651,800 LIHEAP 2002: $31,226, : $34,570,110 Growth: $3,443,984

E-Source Forum Home Energy Affordability Gap: LIHEAP Heating/Cooling coverage 2002 Gap: $66.6 million LIHEAP: $31.1 million LIHEAP coverage: 46.7% 2005 Gap: $126.9 million LIHEAP: $34.6 million LIHEAP coverage: 27.3%

E-Source Forum Three “new” energy assistance tools: Sources of “energy-based” supplemental income w Food Stamp “excess shelter deduction” w Earned Income Tax Credit (EITC) w Public Housing Authority (PHA) utility allowances

E-Source Forum Tool #1: The Excess Shelter Deduction w Food Stamp eligibility based on “countable income.” Shelter expenses above 50% an income deduction. Shelter = rent/mortgage + utilities (include telephone) w Actual shelter costs/Standard Utility Allowance (SUA)

E-Source Forum FS Excess Shelter Deduction: Reason to Pay Attention w If household income is lowered: Some qualify for Food Stamps when they otherwise would not Some qualify for more Food Stamps w Every $3 reduction in income yields $2 in benefits. Implications for spike in fuel prices! w Customers indifferent as to source of dollars.

E-Source Forum Excess Shelter Deduction: Why do it? w $30 - $40/month for low-income HHs w Dollar-for-dollar passthrough to feds w USDA supports and encourages w Elderly/disabled have no maximum on excess shelter deduction.

E-Source Forum The Excess Shelter Deduction: What needs to be done? w Update the Standard Utility Allowance (SUA) annually w Ensure HHs are reassessed in light of increased energy bills.

E-Source Forum Tool #2: The Earned Income Tax Credit w Country’s primary anti-poverty program. w Refundable tax credit (cash back). w Average refund: around $2,000. w 3-year retroactive refund application.

E-Source Forum Earned Income Tax Credit: Reason to Pay Attention w 1/3 used to pay for past-due utility bills. w Only % of eligible claim. w Potential for innovative utility/CBO role. w Receipt at time of winter heating bills

E-Source Forum How Families Use the EITC

E-Source Forum Earned Income Tax Credit: What need to be done w Mass utility outreach campaigns (NJ) w “Gap filler” outreach campaign Part-time workers Women-workers Hispanic workers w VITA campaign (Illinois--Ameritech) w Targeted outreach w Call center recorded message

E-Source Forum Tool #3: PHA Utility Allowances w Tenant-paid utilities: Public housing Assisted housing w Covers: Electricity Heating/Cooling Water/Sewer

E-Source Forum PHA Utility Allowances: Reason to Pay Attention w Covers (theoretically) 100% of bill w Year-round -- not seasonal w Regular update (if enforced) w Public housing tenants <50% FPL

E-Source Forum PHA Utility Allowance What to look for w Annual review of utility allowances. w Adjust when “rates” change by 10% or more. Retroactive to date of rate increase

E-Source Forum PHA Utility Allowances: What Needs to be Done w Review utility allowances to ensure annual update. w Provide notice to PHAs whenever rates change by 10% or more. w Review whether utility allowance pays for cooling. w Review reasonableness of utility allowances.

E-Source Forum What low-income customers need from today’s energy industry! w Low-income customers need data reporting. w Low-income customers need energy assistance programs such as Pennsylvania, New Jersey, Ohio, Indiana. w Low-income customers need energy industry leadership. w Low-income customers need energy industry advocacy.

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