 National Center for Appropriate Technology 3040 Continental Drive Butte, MT 59702 406.494.8662 Fax 406.494.2905 |
Overview of Low-Income Restructuring
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Annual |
Monthly |
|
| Customer’s Annual Bill (Energy Burden) | $1200 |
$100 |
| Customer’s PIP Payment (No more than 6% of Income) | 600* |
50 |
| Remaining Energy Bill Balance | 600 |
50 |
| USF Credit Amount (credited monthly) | 300 |
25** |
| *The PIP is the amount USF participants are required to pay the utility company. | ||
| **Fixed monthly benefit paid on behalf of the customer from the USF directly to the USF participant’s natural gas and/or electric utility. The yearly credit cannot exceed $1,800. | ||
In March 2004, the New Jersey Board of Public Utilities (BPU) approved establishment of an arrearage payment plan, called Fresh Start, for USF enrollees. The program allows these enrollees a chance to have their past due bills forgiven if they start paying their monthly bills in full and do so for an entire year. The program began in April, 2004, available to about 135,000 USF enrollees. State officials said 40 percent of the people enrolled in the program – or about 50,000 – had accrued significant unpaid utility bills. Under the program, only pre-program arrears are eligible for forgiveness, and they must total more than $60.
During FY 2005, the first full year of Fresh Start operations, arrearage payments totaled $23 million; payments totaling over $10 million were made during FY 2008 to about 50,000 households.
History
The USF is a result of New Jersey’s 1999 restructuring legislation (the Electric Discount and Energy Competition Act or EDECA) that provided for a permanent fund to help address low-income energy needs. The program design was at least three years in the making, with input from various stakeholders including the state Ratepayer Advocate, New Jersey AARP, New Jersey Citizen Action, and the DHS.
The restructuring act left it to the BPU to determine the level of USF funding, its administration, purposes, and programs to be funded, as well as whether new charges should be imposed to fund new or expanded programs. The law also defined the USF as "nonlapsing," meaning it does not have a sunset.
The BPU began holding hearings on implementation of the USF in mid-2000. In September 2000, New Jersey’s Ratepayer Advocate (RPA), with support from groups such as AARP, Legal Services of New Jersey, Citizen Action, and state government, submitted a detailed proposal for a comprehensive universal service program, designed to create affordable energy bills for New Jersey’s low-income consumers and funded through a statewide universal service charge on both electric and gas customers.
In March 2003, the BPU issued the long-awaited Universal Service Fund Order establishing a permanent statewide assistance program and it followed with another directive on July 16 ordering utilities to start assessing customers for the cost of the program.
First-year funding was originally estimated at about $30 million – it turned out to be about $65 million – plus 10 percent for administrative costs and for start-up costs, estimated at $500,000.
The July 16 order also told utilities to begin assessing customers for the cost of the Lifeline program. Historically, that program had been funded from state casino revenues, but New Jersey’s Governor, in setting the 2004 state budget, decided Lifeline should be funded through a surcharge on utility bills beginning August 1.
Lifeline provides an annual energy bill credit of $225 to low-income seniors and disabled residents. It has been and will continue to be administered by the Department of Health and Senior Services. For FY 2008, about $70 million was spent with about 314,000 households receiving benefits.
In late 2006, the state decided to switch administration of the USF from the DHS, where it had been since its inception, to the Department of Community Affairs (DCA). This change followed the transfer of LIHEAP administration from DHS to DCA.
For FY 2009, the USF budget has been set at $248 million, including $12 million for Fresh Start.
Evaluation
Also during 2006, the program’s first evaluation was completed by Applied Public Policy Research Institute for Study and Evaluation (APPRISE). It analyzed the program's operations and results from its start in October 2003 through FY 2005.
During 2005, the program served 120,000 households and provided USF credits totaling $74 million, plus $22 million for arrearage forgiveness. About 177,000 households have received USF benefits since the program began, the evaluation reported; 139,000 households received electric benefits and 100,000 received gas benefits. On average, USF participants received $626 per year in USF credits.
Among positive aspects of the program, APPRISE found the following:
- The impact of the USF is significant for those who receive it – it covers about 40 percent of the total energy bill for eligible clients.
- The program’s standard of energy affordability, i.e., six percent of income, is one of the most progressive in the country. Similar programs in Ohio and Pennsylvania require low-income households to pay up to 17 percent of their income on energy bills.
- About 41 percent of participants had incomes at or below $10,000, and 37 percent of households had an elderly member.
- The majority of USF customers, 67 percent, were able to pay 100 percent of their annual utility bills.
- The USF program eliminated about 90 percent of preprogram arrears for USF customers.
- Compared to LIHEAP recipients in other Northeastern states, USF participants had a lower rate of utility shutoffs.
Although the program targets the lowest-income households, it does not necessarily reach the most vulnerable groups such as the young, the elderly, groups with language barriers, or those households with the highest energy burdens, the evaluation found.
The evaluation provided recommendations for improving client outreach to overcome identified barriers and to better reach vulnerable populations; it also contains programmatic recommendations to increase client bill payment.
Since its release, the evaluation has been reviewed by USF staff at the BPU, who have issued their own recommendations for program changes. (These recommendations are included with the APPRISE evaluation.) A stakeholder process then ensued where stakeholders reviewed the evaluation and the staff recommendations. As of early 2009, the BPU has made no major revisions to the program, although there have been changes in processes to streamline enrollment and increase outreach. One of these, adopted in July 2008, affects some households receiving Lifeline. These households were required to reapply based on a new application form that eliminates discrepancies between the LIHEAP/USF and the Lifeline income eligibility requirements.
Energy efficiency
The restructuring law also created a societal benefits charge (SBC) to fund continuation of pre-restructuring demand side management programs, renewable energy, nuclear plant decommissioning, low-income energy efficiency, consumer protection and other social programs as approved by the Board.
In March 2001, the Board ordered a three-year, $358 million program, called New Jersey Clean Energy, to develop energy efficiency and renewable energy sources, including a low-income energy efficiency program, all to be funded through the SBC. In 2004, funding for all programs was approved for 2005-2008 with a budget of $745 million. In January of 2009, the Clean Energy budget for 2009 through 2012 was approved totaling $1.2 billion.
The low-income energy efficiency program, called New Jersey Comfort Partners, in which the seven major electric and gas utilities participate, was initially funded at $15 million yearly and expected to serve about 6,100 households yearly. It replaced the low-income energy efficiency programs previously operated by of New Jersey’s utilities.
The low-income program budget was set at $30 million annually for the four-year period, except for 2009, when the budget is $36.6 million, due to carryover funds, compared to $26.3 million in 2008. Effective in 2009, the income eligibility level for the program was increased from 175 percent of federal poverty guidelines to 225 percent in order to better align it with the Lifeline, LIHEAP and Pharmaceutical Assistance to the Aged and Disabled programs, all of which have income eligibility at 225 percent of FPG.
Program savings are achieved through the installation of energy efficiency measures (including air sealing against drafts, insulation, and duct sealing), installation of high-performance products and appliances (such as compact fluorescent lighting and ENERGY STAR refrigerators), performance of health and safety testing to detect, reduce, or prevent the existence of dangerous combustion by-products, and energy efficiency education. Comfort Partners prioritizes its outreach efforts to high usage USF customers. During 2007, about 8,600 households received services at a funding level of $21 million. Several evaluations of New Jersey Comfort Partners are on the APPRISE website.
In setting the 2009 through 2012 budgets, the BPU reviewed past program performance and noted the following:
- Between 2001 and 2006, 66 percent of the energy efficiency funding was expended on the residential program, and of that, about 29 percent was spent on Comfort Partners and other low-income pilots.
- The low-income programs achieved 11 percent of the residential electric savings and 1.8 percent of the residential natural gas savings. However, the utilities that manage Comfort Partners indicated that the reported savings for the low-income programs were artificially low because the protocols that were in place prior to 2008 capped savings and the protocols approved in December 2007 should result in higher savings being reported for the low-income programs.
- While these programs may not be as cost effective as other Clean Energy
programs, they are necessary and needed programs from a societal perspective and are consistent with EDECA.
In April of 2009, the BPU sought comments from stakeholders on whether USF and LIHEAP clients should be required to participate in a home energy audit provided by either Comfort Partners or the federal WAP, after which they would be expected to agree to have the recommended free energy conservation measures installed in their homes. If implemented, the requirement and subsequent measures would lower energy usage and therefore energy costs for those enrolled in USF and LIHEAP, lower USF program costs, and reduce low-income households’ dependence on energy assistance grants.
For more information:
The text of the EDECA can be accessed at:
www.njleg.state.nj.us/9899/Bills/a0500/16_i1.htm
FAQs about the USF can be found at:
www.state.nj.us/bpu/pdf/usffaq.pdf
For more information on energy efficiency programs go to:
www.njcleanenergy.com/
Page Last Updated: September 24, 2009