Overview of Low-Income Restructuring
Legislation and Implementation
Illinois
Last updated:
July 2009
Summary
A percentage of income payment plan (PIPP) for low-income natural gas and electricity consumers in Illinois has finally become a reality. Legislation to create a PIPP had long been in the making and was signed into law July 10, 2009. This is the second PIPP for the state, which had one in operation from 1985-1991.
The PIPP will begin as a small pilot in the fall of 2009, with full implementation expected by September 2011. Participants will pay no more than 6 percent of their incomes for gas and electric service and the PIPP will also include an arrearage reduction program and client education. The maximum PIPP benefit is $1,800 per year.
Program funding will come through LIHEAP and an existing meters charge that currently funds low-income energy assistance and energy efficiency (see “History” section below) at about $75 million annually. SB 1918 increases the meters charge by about 20 percent, from 40 cents to 48 cents for residential customers and a comparable increase for commercial/industrial customers. Utilities will also make a one-time $22 million contribution toward program costs, along with $9 million in redirected funds from an electric rate relief settlement in 2007.
Under the arrearage reduction component, participants who make their monthly PIPP payments on time will receive a monthly credit amounting to 1/12th of their past due bills, up to $1,000 per year for gas bills and the same amount for electric bills. The PIPP will also include client education to inform customers about the PIPP and about their rights and responsibilities under the program. The Illinois Department of Commerce and Economic Opportunity (DCEO), the LIHEAP and weatherization grantee, will administer the program and it will be coordinated with LIHEAP, with income eligibility the same as LIIHEAP - up to 150 percent of federal poverty guidelines.
Proponents say costs will be controlled by limiting program enrollment; however, they say if LIHEAP funding remains at its current level of $5.1 billion, and LIHEAP caseloads remain the same, most households at up to 150 percent of FPG will be able to participate in the PIPP. The Illinois LIHEAP served about 375,000 households in 2008 with a combination of LIHEAP and state (meters charge) funds.
The bill requires Illinois natural gas utilities to reduce natural gas use by seven percent below today’s levels by 2020, and an additional 1.5 percent per year thereafter. The utilities will be required to establish energy efficiency programs through a variety of programs and incentives, including programs for low-income households. They must submit program plans to the Illinois Commerce Commission by October 1, 2010, and must coordinate with the DCEO in designing their programs.
History
For over a decade, Illinois has operated the Supplemental Low-Income Energy Assistance Fund (SLEAF), created through restructuring legislation passed in November 1997. Paid for by the above-mentioned meters charge on electricity and natural gas bills, the legislation earmarked 80 percent of the fund for low-income bill payment assistance.
The fund has been administered by the LIHEAP office through the state LIHEAP and weatherization network of community agencies and in coordination with LIHEAP; this will also be the case with the new PIPP.
The state LIHEAP office makes payments from the fund directly to utilities. SLEAF funds may be used only for assistance to low-income customers of the regulated gas and electric utilities that assess the meters charge. Most of the state’s municipal and rural cooperative utilities do not assess the charge, so their LIHEAP customers cannot benefit from SLEAF funds, although they can receive LIHEAP.
During FY 2008 SLEAF funds amounting to about $65 million, combined with LIHEAP funds, provided energy assistance benefits to around 375,000 Illinois households.
The restructuring legislation allowed 10 percent of the SLEAF funds to be spent on low-income weatherization and 10 percent on program administration. Under the state-funded weatherization component, average funding is about $7 million per year, and around 1,110 households are served, with a limit of up to $7,500 per household. These are households that normally couldn’t be served under the federal weatherization program because their dwellings need roof replacements or other major repairs. The 10 percent set aside for weatherization will continue.
In August 2007, the Illinois legislature extended the SLEAF, otherwise scheduled to sunset at the end of 2007, through December 2013.
In the meantime, almost from the inception of the SLEAF, various entities had sought changes in Illinois’ energy assistance program. The advocacy group ACORN had several times introduced legislation to create a PIPP-type program. The state’s largest gas utility, People’s Gas, serving Chicago and the surrounding area, presented a white paper in March 2004 titled “Improving Energy Assistance in Illinois.” The state community action association, part of a working group of advocates, energy policy advisors, researchers, and community leaders called the Illinois Affordable Energy Campaign (IAEC), had also advocated program changes at the legislative level.
The IAEC published a paper outlining an Affordable Energy Plan in September 2004. The paper called for a PIPP with a 10 percent maximum payment, along with other components such as arrearage reduction and client education.
After an electric rate relief package was approved in Illinois in the fall of 2007, utilities, advocates, and the LIHEAP office agreed to move forward with a PIPP pilot using Ameren rate relief funds to help bring down participants’ bills to 10 percent of their income and to help pay their pre-program arrears. The pilot did get underway, but logistical problems prevented it from enrolling as many households as planned. The Ameren pilot will continue another year and it will be evaluated with the aim of using the results and lessons learned in implementing the new statewide PIPP.
Additionally, under the rate relief settlement, each of the major electric utilities, Commonwealth Edison and Ameren, agreed to fund rate relief programs that included low-income initiatives for the next several years. Ameren was to provide over $30 million for several low-income assistance programs, including the PIPP pilot. As mentioned above, some $9 million of rate relief funds will be redirected to the new PIPP.
Illinois now joins a handful of other states that have statewide PIPPs. It has incorporated many of the features of the New Jersey PIPP, implemented in 2003, and considered one of the best in the country. New Jersey , too, has a 6 percent maximum PIPP payment, provides fixed credits of up to $1,800 per year and has a similar arrearage reduction program. Ohio has the oldest and largest PIPP in the country, which was recently reformed and has reduced its maximum percentage of income payment from 15 percent to 12 percent. New Hampshire has a percentage of income plan for electric bills only; participants make monthly payments equal to, on average, 4.5 percent of income.
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Page Last Updated: September 24, 2009
