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State PBF/USF History, Legislation, Implementation

Michigan
Last Updated: October 2014
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Rate Assistance

The year 2013 found the Michigan Energy Assistance Program (MEAP) up and running for its first year. Established by Public Act 615 of 2012 the program awards grants to help low-income households deal with crisis situations; help them pay their energy bills; and move them toward self-sufficiency when it comes to their energy needs. The self-sufficiency efforts can include a range of activities from case management to participation in energy efficiency programs. MEAP defines low-income as households with incomes up to 150 percent of federal poverty guidelines (FPG).

MEAP's funding comes from two sources—the Low Income Energy Assistance Fund (LIEAF) and Michigan LIHEAP. Roughly $50 million is generated by a LIEAF surcharge that is collected by participating utilities. Public Act 95 of 2013 directed the Michigan Public Service Commission (MPSC) to create the surcharge for electric customers, but it allowed utilities to opt out of collecting it. The Act capped the amount of money that could be raised at $50 million and said the monthly charge could be no more than $1.00. The Michigan Department of Human Services (DHS) contributes between $30 million and $40 million in LIHEAP dollars to MEAP. MPSC and DHS circulate a request for proposals and then disburse the funds to the selected grantees.

For its first grant cycle, the MPSC announced over 20 utilities had opted to participate in the program and set the monthly LIEAF surcharge at $0.99 per month to raise the $50 million. The surcharge revenue was combined with about $40 million of LIHEAP funds from DHS. In late October 2013, the MPSC and DHS approved over $89 million in MEAP grants to 14 entities.

According to Public Act 615 of 2012, 70 percent of MEAP funds have to be distributed during the "crisis season" of November 1 through May 31 every year. In response to the new law, DHS changed the starting date for its LIHEAP crisis program to match with MEAP. This created some challenges for local agencies and low-income households in 2013, as they were accustomed to being able to access LIHEAP crisis assistance as of October 1, the start date in previous years.

Going forward, MEAP hopes to mitigate the challenges encountered in 2013. Thirty percent of MEAP funding can be used June 1 through October 31. Since MEAP wasn't up and running until late October 2013, these non-crisis funds weren't available. Also, some clients and local agencies relied on how LIHEAP crisis had been run in previous years and didn't notice that DHS changed its dates. With these issues addressed, all those involved hope the 2014-2015 heating season will run smoother.

History

MEAP finally provides a permanent replacement for the Low-Income Energy Efficiency Fund (LIEEF), which ran from 2002 until the Michigan Court of Appeals struck it down in 2011.

The "Customer Choice and Electricity Reliability Act of 2000" initially established the LIEEF, and it was continued by subsequent MPSC orders. The purpose of the fund was to provide shutoff and other protection for low-income customers and to promote energy efficiency by all customers.

Initially, Detroit Edison was the only utility contributing to the fund due to the "Customer Choice" act's wording. In a February 2004 order, the MPSC established a surcharge on Detroit Edison's distribution rates to fund the LIEEF at $39.9 million annually.

Another funding source for the LIEEF came in December 2005 when the MPSC, in a rate case settlement with Consumers Energy, directed the company to contribute $26.5 million annually to the LIEEF from its electric customers. Additionally, in November 2006, the MPSC authorized Consumers Energy to fund $17.4 million annually for the LIEEF from its natural gas customers, bringing the total annual LIEEF funding to nearly $84 million. Finally, in June 2010, the MPSC issued an order authorizing Michigan Consolidated Gas Company to provide $5 million annually to the LIEEF, bringing annual revenue for the fund to nearly $88.9 million.

Beginning in 2002, the MPSC administered the grant money through a competitive process, awarding about $60 million in grants each year. Most years the DHS received a large portion of the funds and used them for energy crisis assistance. The funds were also awarded to such entities as the Michigan Community Action Agency Association, The Heat and Warmth Fund (a Detroit-based statewide fuel fund), and the Salvation Army for energy assistance and energy efficiency projects. Overall, the PSC allocated approximately 68 percent of the grants to low-income energy assistance programs, about 17 percent to low-income energy efficiency programs, and the remainder to the development of energy efficiency programs for all customers.

As a result, the majority of the funding between 2002 and 2010—about $452 million—went to low-income bill payment assistance, with a significant portion granted to DHS for distribution. Most of the remaining funds—about $113 million—supported low-income energy efficiency projects.

In July 2011, the Michigan Court of Appeals struck down the fund saying the PSC no longer had authority to maintain it and disburse money from it. The court said the legislature implicitly intended to halt authorization for the LIEEF, because it had omitted references to the fund while amending the "Customer Choice" act in 2008. The court was not persuaded by the argument that the legislature didn't intend to terminate the fund, as witnessed by its yearly allocations to the LIEEF after 2008.

The Michigan legislature responded to the court ruling by creating the "Vulnerable Household Warmth Fund" to help low-income households pay their energy bills. The act gave one-time appropriations to both the MPSC and DHS for emergency energy assistance during the 2011-2012 heating season. The legislature then revisited the issue for the 2012-2013 heating season. In January 2013, it passed the bill creating MEAP; however, the companion bill that created a funding mechanism that generated up to $60 million annually for MEAP failed to pass.

As a result of the funding bill's failure, the legislature made two one-time state appropriations totaling approximately $60 million to provide energy assistance for Fiscal Year 2013. The money came from two sources, TANF and the state general fund. The $27.7 million from the general fund made its way to the PSC via an agreement with DHS that the funds be used to aide low-income households. The PSC granted the money to nine organizations, a majority of which had received funding from the LIEEF in the past. The $32.2 million in TANF funding was spent through DHS' LIHEAP crisis assistance component, called State Emergency Relief. The legislature also removed the surcharge from the bills of electric customers for 2013.

Finally, with passage of Public Act 95 of 2013, electric utilities received the option to administer the LIEAF surcharge to ratepayers with the MPSC's oversight. Up to $50 million from this ratepayer charge goes to fund MEAP's programs to help low-income customers.

Energy Efficiency

Most of the LIEEF funding supported energy assistance; however, grants also were awarded for low-income energy efficiency. During 2002 to 2010, over $113 million went to such projects. While the loss of the LIEEF negatively impacted the amount of money available, another source of funding supports energy efficiency for all customer classes.

In 2008, the legislature passed the "Clean, Renewable, and Efficient Energy Act." The act required all gas and electric utilities to implement programs to reduce overall energy usage by specified targets, in order to reduce the future costs of gas and electric service to customers. These "optimization plans," the law stated, had to include programs for "each customer class, including low income residential." The act established a surcharge on the bills of all electric and gas customers to cover energy-efficiency programs.

In establishing rules for the act, the MPSC stated it was dedicated ensuring that "every effort is made to enable low income customers to experience net reductions in their energy bills in the near term." As a way of reaching low-income households, the MPSC awarded a grant to the Michigan Community Action Agency Association to administer Efficiency United, a partnership of 19 utilities' efforts. In 2012, Efficiency United spent over $600,800 in services to low-income consumers. Two of the largest utilities, Detroit Edison and Consumers Energy, spent over $24 million in 2012 on low-income efficiency programs.

For more information:

Michigan Public Service Commission, Report on the Low-Income and Energy Efficiency Fund, October 2011

Michigan Public Service Commission, 2012 Report on the Implementation of P.A. 295 Utility Energy Optimization Programs, Nov. 30, 2012

 
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Page last updated: November 14, 2014