State PBF/USF History, Legislation, Implementation
Last Updated: April 2013
Texas' restructuring legislation authorized a system benefits charge (SBC), a nonbypassable fee of up to 65 cents per megawatt hour, to fund, among other things, low-income rate assistance and energy efficiency.
As a result, a low-income electric discount program called LITE-UP Texas began in January 2002, providing eligible households with a 10 percent electric bill discount that was increased to 17 percent in May — a discount that lasted less than three years, only to be reinstated in 2007.
The 17 percent discount continued through September of 2010 but in 2011 the PUC reduced the electric bill discount to 10 percent. In FY2011, 915,281 households received almost $67 million in discounts. The legislature appropriated $73.6 million for the FY2012 discount and $78.5 million for the FY2013 discount. An estimated 920,000 households received an average $20 per month discount for at least 1 month in FY 2012.
The 10 percent electric discount, approved through August 2013, is applied to bills May - August. The current legislative session will determine whether the discount will continue for FY's 2014 and 2015.
Since 2002, lawmakers have allowed the system benefit fee to accumulate and funds for the low-income discount have ballooned from $50 million to $851 million in 2012.
The restructuring law stipulated that SBC funding would be used to continue weatherization programs that had previously been funded through utility rates and for educating customers about electric deregulation.
SBC weatherization monies, about $8.9 million during FY 2003, were "piggybacked" with federal Weatherization Assistance Program (WAP) funds to reach more low-income households and provide additional weatherization services such as new and/or insulated roofs, heating/cooling system replacement, and upgrading or repairs of windows and interior walls. The SBC allowed the state to address many homes that normally wouldn't have been weatherized.
Effective June 2011, SB 1434 amended the Utilities Code by changing funding for targeted low-income programs from the base floor of 2003 funding levels to 10 percent of the utility's overall energy efficiency budget. The legislation also allowed that unobligated funds for these programs could be reallocated after July of each year to hard-to-reach programs to ensure that those funds will be spent for the purpose of providing low-income customers with access to energy efficiency. In 2011, utilities provided almost $10.7 million in weatherization measures to about 3,080 low-income households. Estimated funding for these programs is $11.7 million for 2012.
Utilities spend several million dollars yearly on existing standard offer weatherization programs, known as the Hard-to-Reach Programs, available to households with incomes up to 200 percent of federal poverty guidelines. Each utility meets at least 5 percent of its savings goal for each year through programs targeted to this customer class. Administered by the utilities and implemented by private contractors who receive incentives for measures installed, the programs offer free, low-cost weatherization and energy-efficiency improvements. Utilities have been offering these programs since 2002, as mandated by the 1999 restructuring legislation. In 2011, utilities spent about $16.6 million on Hard-to-Reach Programs for over 23,600 households. Estimated funding for these programs is $14.3 million for 2012.
Despite enrolling nearly 800,000 households at its peak and being considered a national model for its automatic enrollment system, the LITE UP discount faced trouble early on.
After only a year and a half, the Texas legislature began raiding the SBC to shore up the state general fund. The first raid, in the spring of 2003, took $183 million in SBC funds. That meant less funding for the discount and it went back down to 10 percent. The funding reduction, along with stricter eligibility rules effective in April of 2004, resulted in enrollment plummeting to about 350,000. The legislature also changed the language of the original 1999 deregulation law to allow it to transfer the SBC funds into general revenue funds.
The next blow came when the 2005 legislature shifted all SBC funds — about $427 million for the biennium — to the state general fund. As a result, nearly 400,000 low-income Texans lost their discount as of August 31, 2005.
In June 2007, the Texas legislature appropriated $30 million from the SBC for a summer discount (July through October) of about 12 percent, and $170 million for a summer (May through August) discount of 17 percent for the next two years.
In 2011, the electric bill discount was reduced from 17 percent to 10 percent and after HB4 was signed in June 2011, over $86 million was raided from the system benefit fund and transferred to the state general fund.
The rate discount was not the only casualty of the legislature; low-income energy efficiency programs also took a hit. Funds for energy efficiency were also raided in 2003 when SBC funding was eliminated and some $21 million that had been designated for weatherization was shifted to the state general fund.
The 2005 legislature attempted to restore some funding for weatherization by passing SB 712, which required that SBC funds for low-income weatherization that were zeroed out in 2003 be restored by individual utilities as part of their energy efficiency plans.
As of August 2006, as part of a stipulation with the Texas PUC and advocates, utilities have committed to developing weatherization services that are coordinated with the Texas Department of Housing and Community Affairs (TDHCA), the federal weatherization grantee.
2012 Utility Energy Efficiency Plans & Reports, regulatory filings
2013 Scope of Competition in Electric Markets in Texas, Public Utility Commission of Texas