State PBF/USF History, Legislation, Implementation
Last updated: April 2012
Electric and natural gas investor-owned utilities in Massachusetts provided low-income utility rate discounts to over 395,000 households in 2011 — 252,737 electric accounts and 142,663 gas accounts. The savings to low-income households leveraged by the discounts totaled at least $113.5 million.
The natural gas discount is mandated by state regulation, while the electric discount is codified through the state's 1997 utility restructuring legislation. Since restructuring, a number of regulatory and policy changes have occurred that have impacted discount enrollment and funding levels, causing them to steadily increase most years. In most cases, the changes were instituted as a result of periodic investigations and subsequent rulings by the state's regulatory commission, sometimes spearheaded by an active network of advocates. The changes, which relate to the discount program, automatic enrollment in the discount, arrearage management programs, and energy efficiency, are chronicled below, starting with the most recent ones.
An order released September 15, 2008 by the state's regulatory agency, the Department of Public Utilities (DPU), required utilities to file new low-income discount rates that restored the percentage value of those discounts to their level as of 1998.
The DPU and advocates had noted that since the advent of restructuring, the actual value of the discounts had been eroding considerably due to higher commodity prices. Specifically, Massachusetts' residential natural gas prices had increased 64 percent between 2002 and 2007 and average electricity prices had jumped at least 52 percent. The escalating prices had prompted the DPU in February 2008 to open an investigation into expanding low-income consumer protections and assistance, including standards for arrearage management programs, the discount rates, service termination, and energy efficiency programs.
Comments filed by the utilities, the Massachusetts Energy Directors Association, the Low-Income Weatherization and Fuel Assistance Network, and others almost unanimously supported the need to expand the discounts. Utilities were to file their new bill tariffs by October 15, with the discounts to begin November 1.
An order by the DPU in February 2010 required utilities to file bill tariffs that resembled a filing by National Grid in a 2009 rate case. In an order approving that company's low-income rate design, the DPU said other gas and electric companies should file revised rate design proposals for low-income customers that comply with the standard set by National Grid. Its revised discount was a flat 25 percent off the total bill compared to prior discounts that varied by consumption. According to the DPU, the revised model is beneficial because the low-income discount would be uniform regardless of consumption or energy prices, thus eliminating the need for frequent adjustments and lessening confusion among customers. Companies were instructed to file revised tariffs; by the end of 2010 all companies had complied, proposing discounts in the 25 percent range.
Additionally, on November 6, 2008, the DPU ordered electric companies to increase the discount rate eligibility level to that of the state's LIHEAP program, which had been raised to 60 percent of state median income (SMI) from 200 percent of federal poverty guidelines as of November 1. According to Massachusetts state law, eligibility for the discounts must follow LIHEAP eligibility. The state had raised the LIHEAP income maximum because its LIHEAP funding had nearly been doubled after Congress appropriated LIHEAP a record $5.1 billion nationally in September 2008.
This wasn't the first time the state had raised the discount income eligibility maximum. In response to higher energy prices during the winter of 2005-2006, the Massachusetts legislature raised the income eligibility ceiling for the discounts to 200 percent of the federal poverty guidelines from the previous level of 175 percent, again to correspond with the LIHEAP income maximum.
Automatic Enrollment Process
Also important to increasing enrollment in the utility discounts is an automatic enrollment process begun in 2005 by the DPU's predecessor, the Department of Transportation and Energy (DTE). Comments filed during the 2008 DPU investigation credited automatic enrollment with enrolling 90,000 new households into the discount rates.
The process began in December 2001, when the DTE opened a proceeding (D.T.E. 01-106), to investigate increasing the penetration rate for the electric discount, as well as discounts for natural gas and telephone service.
In August 2003, after extensive meetings with stakeholders, the DTE issued an order establishing a process for automatic enrollment for the gas and electric discounts. The order stipulated the following:
- A Memorandum of Understanding between DTE and the state's Executive Office of Health and Human Services (EOHHS) outlined changes that were to be made to EOHHS application forms for such means-tested benefit programs as food stamps and TANF. (EOHHS administers a range of health and human service programs through over a dozen departments within it and has a database of program beneficiaries).
- Applicants are asked to give their permission to release limited information to utility companies (name, address, a unique identifying number). This allows EOHHS to certify the EOHHS applicant/beneficiary as income eligible for utility discounts.
- Utilities must share information electronically with EOHHS to identify those EOHHS-served households that are income-eligible for the discounts. EOHHS will use its database to match the names on customer lists provided by utilities.
- The utilities must presumptively place these income-eligible households on the appropriate discount rate within 60 days of learning that they are income eligible. The utilities also must send notices to the households informing them that they have been placed on the discount rate and that they have the right to be removed from the discount upon request.
It took over a year for various issues related to implementation of the August order, including cost recovery by the utilities, to be resolved. On December 6, 2004, the DTE ordered all state electric and gas companies to share their customer lists within 30 days of the order date with the EOHHS so that automatic enrollment could begin. That agency is responsible for identifying eligible utility customers and then directing the utilities to automatically enroll them unless the customers opt out. An opt-out form may be placed on utility websites.
The DPU requires utilities to submit quarterly reports tracking the number of customers enrolled in the discounts through the computer match as well as by traditional means such as the LIHEAP application process at community action agencies and through utilities. The number added through computer matching has increased every year, totaling about 16,000 additional customers for the three largest utilities during 2011.
Along with more unaffordable utility bills and less valuable bill discounts, Massachusetts has also seen increased numbers of low-income households with high arrearages in the years after restructuring. In 2006, as a result of a new state law (Chapter 140), the DPU directed each gas and electric company to establish an arrearage management program (AMP) targeted at their low-income customers with overdue utility bill balances. Enrollees must agree to an affordable payment plan and, in return, they receive some forgiveness of their debt.
Chapter 140 requires that each company offer all low-income consumers with an account in arrears a payment plan of no less than four months, with a down payment of no more than 25 percent of the total arrearage. The remaining arrears balance is divided into equal payments, and a company may seek approval from the DPU for a payment agreement of less than four months if good cause is shown.
Eligibility for an AMP is based upon a customer's "receipt of any means tested public benefit" or eligibility for LIHEAP. Each company's AMP must offer eligible low-income consumers affordable payment plans and must provide credits toward a customer's accumulated arrearage when the customer complies with the terms of the program. The payment plan must offer the customer the opportunity to pay off his or her arrearage over a period of not less than four months, including an initial down payment of not more than 25 percent of the balance of the arrearage.
The programs have grown considerably since their initiation in 2006 when about 3,500 households participated. At the end of 2011, there were 19,568 participants in four electric utility arrearage management programs and 7,645 in six gas utility AMPs. During the year, the electric utilities collected nearly $12.7 million from AMP participants and forgave $11.9 million in arrearages; gas utilities collected $4.3 million from participants and forgave $4.9 million.
Massachusetts' restructuring law also established a low-income conservation fund through a 0.25 mills per kWh charge on every electric customer, which historically has amounted to about $15 million per year for low-income electric efficiency programs. A conservation charge on natural gas customer's bills has funded about $7 million per year in gas low-income energy efficiency programs. About 17,000 households were helped each year.
In 2011, these programs spent about $35 million serving over 23,000 households. The increase over previous years was largely due to impacts of the Green Communities Act, a comprehensive energy reform bill passed in 2008 that added new funding sources (detailed below) to the utility funds. The Act requires all electric and gas distribution companies and municipal aggregators to develop energy efficiency plans that provide for the acquisition of all available energy efficiency and demand reduction resources that are cost-effective or less expensive than supply.
In an order dated January 28, 1010, the DPU approved three-year energy efficiency plans with programs for all customer classes, including low income, by the state's natural gas utilities, and another order approved the electric utilities.
According to the Act, electric program administrators must dedicate 10 percent of their efficiency program funds to low-income customers, gas program administrators 20 percent.
According to the plans submitted, electric low-income programs were to receive $36.5 million in 2010 (more than double the $15 million they received in prior years), increasing to $48.3 million in 2011 and $61.2 million in 2010. They include single- and multi-family building retrofit programs and new construction. Gas low-income programs were to receive $16.6 million in 2010 (about double what they received in 2009); this increases to $21.4 million in 2011, and $27.6 million in 2012.
Per the plans, the electric programs included five sources of funding: 1) the above-mentioned mandatory 2.5 mills per kWh system benefits charge; (2) revenues from the forward capacity market administered by Independent System Operator-New England; (3) revenues from cap and trade auctions known as the Regional Greenhouse Gas Initiative (RGGI); (4) other funding sources; and (5) an energy efficiency surcharge to collect additional funds as needed.
The gas utility programs will continue to be funded by the conservation charge, which is now called the energy efficiency surcharge.
During 2008, about $4 million in RGGI funds paid for heating system repairs and replacements for low-income households; in 2009 RGGI funds expanded existing utility energy efficiency programs, including those for low-income. There were no RGGI funds in 2010 or 2011.
The low-income energy efficiency programs have been and will continue to be implemented through the existing weatherization and energy assistance network, primarily community action agencies. The utility funds are combined with federal weatherization funds to expand the number of jobs completed and the work performed in low-income dwellings. Typical measures include attic and/or wall insulation, blower door directed air sealing, heating system repairs and replacements and ventilation. Priority is given to high-use households, as well as to elderly households and those with young children. Because high usage is often the cause of high arrearages, the efficiency programs are well-coordinated with the arrearage management programs. Services are offered to customers with incomes below 60 percent of the state's median income, which equates to about 225 percent of federal poverty guidelines.
According to the Network's comments in D.P.U. 08-4, in the past ten years, Massachusetts' low-income energy efficiency programs have won many national awards and proven cost-effective on a societal basis. The electric programs, achieved a benefit/cost ratio of 2.9 in the period of 2003-2005, according to a recent report. In 2006, the low-income electricity programs saved 17 MW of summer demand, 44 MW of winter demand, and 179,000 mWh of energy.
For participants, this has meant average savings of about 10 percent in baseload electricity consumption and about 20 percent in heating fuel. The high quality and cost-effectiveness of these programs could not have occurred without the skill and cooperation of the utilities and the program administrators, the Network wrote.
For more information:
Documents filed on the DPU's February 2008 investigation into the discount, arrearage and energy efficiency programs are available at the DPU website's File Room, type in 08-4.
Earlier documents filed on the low-income discount enrollment issue are available at the DPU website's File Room, type in 01-106.