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LIHEAP Budget Update

On December 30, 2005, the President signed into law the FY 2006 Defense Appropriations Act (P.L. 109-148), which funds LIHEAP at $2 billion for the regular program and $183 million in LIHEAP emergency contingency funds, minus 1 percent (an across the board rescission). After the rescission, the FY 2006 funding for the regular program is $1.98 billion and $181 million in emergency funding. This compares with $1.88 billion in regular funding and $298 in emergency funding last year.

At press time, Congressional negotiations were continuing over supplemental funding. Over the past several months, there has been general agreement in both houses of Congress that LIHEAP needs additional funding, but disagreement over the source and the amount of the funding.

Among related programs, the Weatherization Assistance Program’s FY 2006 budget is $240 million (also subject to the 1 percent rescission) up $11.9 million from the FY 2005 level of $228.1. The Community Services Block Grant is funded at $636.8 million, the same as FY 2005. After the 1 percent rescission, the funding level is $630.4 million.

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Utilities Increase Funding This Winter to Help Low Income

Note: the following summary is based on announcements from utility companies and charitable funds about their projected low-income energy contributions over the next year. Actual expenditures may vary depending upon donations and matches received and other factors.

In response to the high energy prices this winter, utilities in at least 22 states have announced expected contributions of at least $90 million, mostly this year, to help their low-income customers.

The majority of the funding comes from utility shareholders, voluntary customer contributions, fines and settlements, rather than ratepayer surcharges or other funding administered by utility regulatory commissions. Most of the money goes to existing fuel funds for bill payment assistance, although some utilities are increasing funding for energy efficiency programs.

Xcel Energy is donating $2 million to Energy Outreach Colorado (EOC), which provides energy assistance through charities and nonprofit groups around the state and up to $1 million to match other donations to EOC from businesses and individuals. Wisconsin’s We Energies has made a special, one-time contribution of $5 million to the Keep Wisconsin Warm Fund.

The Iowa Utilities Board approved plans from two utilities to distribute $4.2 million for low-income and elderly Iowans. MidAmerican Energy will distribute $2.5 million to LIHEAP-eligible households through its I Care fund and Alliant Energy will add $2.7 million to its Hometown Care Energy Fund.

In Indiana, Vectren has contributed $500,000 and will match up to $200,000 in contributions to its Share the Warmth fund.

Aquila has increased its contribution to its Aquila Cares by $650,000, to be made available across its multi-state service area. It will also match contributions up to $250,000.

In Maryland, Constellation Energy and its regulated utility, Baltimore Gas and Electric (BGE), announced that they are making $20 million available over the next few years to various charities and programs. As part of this assistance, BGE announced a special $2 million direct cash contribution to the Fuel Fund of Maryland for customer assistance. The Fund also received a $450,000 grant from the Harry and Jeanette Weinberg Foundation, Inc., to be spent over the next three years for bill payment help.

Several Virginia utilities are more than doubling previous donations to heating assistance programs. Virginia 's electric cooperatives are donating $1.2 million; Virginia Natural Gas increased its yearly giving to $300,000. Dominion Resources will supplement its customer contributions to its Energy Share Program with $1 million. Other utility contributions were reported totaling $197,000.

Georgia Natural Gas has contributed $700,000 to it fuel fund and other nonprofits, and Atlanta Gas Light has contributed $315,000. Contributions from other vendors and government sources bring the total to be distributed by nonprofits in the state to around $1 million this year.

PPL Gas Utilities in Pennsylvania is tripling its donation to its fund, Operation Share; its donation will be $150,000. PPL Electric Utilities is increasing by 40 percent its contribution to the same fund for a total of $700,000.

Commonwealth Edison in Illinois will provide $1 million to the City of Chicago, to help low-income Chicagoans manage their winter energy bills and Peoples Energy contributed $2 million to the city’s assistance programs. Consumers Energy of Michigan notified the Salvation Army that it will increase its utility bill assistance for the PeopleCare program by $1 million this year.

Xcel Energy announced a $1 million donation to the HeatShare program in Minnesota, a fuel fund administered by the Salvation Army. Xcel also will match up to $500,000 in customer contributions to HeatShare.

Energy assistance programs in Montana, South Dakota and Nebraska will share a $1 million challenge grant from NorthWestern Energy, the utility serving those states, to help those above LIHEAP income guidelines.

And in Oklahoma, the ONEOK Foundation will donate $1 million to assist residents with their gas bills, while the Chesapeake Energy Corporation and the Devon Energy Corporation, two Oklahoma City-based energy companies, have donated $250,000 each to the Oklahoma Fuel Fund.

Utilities in North Carolina, Duke Power and Progress Energy, have announced contributions of about $3.1 million, to be distributed through their fuel funds, as a match to state money committed by the governor.

In California, PG&E plans to double funding for its REACH fund, from $1.5 to $3 million through an extensive pledge drive. PG&E has already contributed $250,000 to REACH and will match new customer and employee donations up to an additional $750,000.

Other utilities are contributing $1 million to new fuel funds. Entergy Corporation partnered with the Foundation of the Mid South in early September to start the Power of Hope Fund for Hurricanes Katrina and Rita victims in Louisiana, Texas and Kansas. The fund focuses on helping victims transition from shelters back into the community.

Working with the National Fuel Funds Network, Entergy is also matching contributions from other utility companies across the nation that are specifically earmarked to provide emergency utility assistance for Entergy customers who were impacted by the hurricanes.

Another new fuel fund, “Help Thy Neighbor,” was initiated by Indiana ’s Governor and has received $1 million from the state’s three largest gas utilities, NIPSCO, Citizens Gas and Vectren. It also received $5 million from the Lilly Endowment.
Energy efficiency programs also are benefiting from increased utility funding. Xcel Energy in Colorado is contributing $2.4 million to Energy Saving Partners, a low-income energy-efficiency program administered through the state WAP office. Columbia Gas of Virginia will contribute $100,000 over four years to the state's Weatherization Program.

TXU Energy in Texas began a four-part customer assistance program called Energy Peace of Mind that includes up to $25 million to replace a low-income discount program that was eliminated by the Texas legislature. This will allow eligible TXU Energy and TXU SESCO customers to obtain a 10 percent discount on their 2006 electricity bills.

A list of new resources for energy assistance is continually updated on the Clearinghouse website.

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Utility Commissions Help Low Income Stay Connected

In addition to increasing low-income funding from ratepayer funds that they administer, (see first article) state public utility commissions have approved a variety of mechanisms that protect the low income by banning disconnections of certain households, extending shut-off moratoria periods and limiting deposit and reconnection fees. Some examples follow:

The Pennsylvania Public Utility Commission lowered reconnection fees of five utility companies, allowing them the flexibility to charge from $0 to $50 to reconnect customers during the winter months. Customers of Allegheny Power, Metropolitan Edison Co., National Fuel Gas Distribution Corp., Pennsylvania Electric Co. and Wellsboro Electric Co. will pay no more than $50 for reconnection. In December, the Commission approved a waiver of reconnection fees for some Duquesne Light Company customers and in November it ordered Philadelphia Gas Works to stop charging higher reconnection fees than allowed by law.

The Commission’s actions were in part due to the impacts of 2004 legislation, the Responsible Utility Customer Protection Act, which tightened the rules regarding utility disconnections, reconnections, deposits and payment plans, and which advocates say has resulted in a record number of utility disconnections, along with unreasonable reconnection fees and deposit requirements.

The California Commission directed utilities to waive reconnection fees and deposits for customers participating in California Alternate Rates for Energy, a low-income discount program. Utilities are also prohibited from shutting off service this winter to residential customers who make regular payments of at least 50 percent of their bills.

The Arkansas Public Service Commission amended the state’s cold weather rule to ban winter natural gas disconnections of certain income-eligible households provided they make a minimum payment, about 50 percent of their bill, effective December 1 through March 31.

The Michigan Commission passed emergency rules effective November 1, 2005 through March 31, 2006 . Utilities are prohibited from disconnecting service of certain elderly or low-income customers provided the customer advises the utility of his/her circumstances and pays a monthly amount equal to 6 percent of the customer’s estimated annual bill. Utilities also may not disconnect service to a customer who has entered into a settlement agreement provided that the customer makes designated payment amounts. The law also extends the due date for utility bills from 17 days to 22 days from the date of transmittal and places limits on deposits.

Several Missouri utilities reached an agreement with the state to waive deposits, reconnect fees and tank settings until March 31, 2006 .

For more details on related utility commission actions, see the Clearinghouse website.

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New York PSC Extends Electric Efficiency Program

The New York State Public Service Commission (PSC) on December 14 approved a five-year extension of a statewide electric energy efficiency and research program funded through a system benefits charge (SBC) on electricity bills. It also increased the program’s annual funding from $125 million to $150 million.

The SBC program, known as New York Energy $mart^SM, provides electric efficiency programs for all customer classes, including low-income renters and homeowners. Annual funding for low-income programs will increase by $11 million per year, the Commission ruled, noting that the state's low-income and elderly populations are disproportionately impacted by higher commodity prices.

This is the PSC’s second extension of the SBC program, which was created in 1998, and the second time the Commission has increased funding for low-income energy efficiency. The SBC program was created to ensure that certain public benefit energy efficiency and energy research programs were adequately maintained during the state’s transition toward a more competitive electric market.

The SBC program has been administered by the New York State Energy Research and Development Authority (NYSERDA and was scheduled to expire at the end of June, 2006. The December decision commits $875 million in funding for energy efficiency and research between July, 2006 and June, 2011.

The program was initially funded for three years at an annual level of about $78 million, averaging $14 million per year for the low income. In 2001, it was extended for an additional five years with annual funding averaging $150 million, and averaging $25 million per year for low-income initiatives.

The six investor-owned electric utilities in New York collect the SBC revenues from customers, retain a portion of the revenues to fund certain utility-administered, unexpired public-benefit programs that predated the SBC program, and transfer the remainder to NYSERDA.

The latest evaluation of Energy $mart^SM, finalized in May 2005, noted the following about the low-income program initiatives:

• They accounted for 13.4 percent of the total 8-year (1998-2006) budget, or $128.4 million.
  
  
• The Assisted Multifamily Program is increasing awareness and understanding of energy efficiency among owners of low-income multifamily buildings. As of year-end 2004, nearly 7 percent of eligible low-income multifamily housing units were participating in the program.
  
  
• The Low-Income Direct Installation Program, administered between 1998 and 2002, installed efficiency measures in 10,236 low-income homes, with a net annual energy savings of 11,500 MWh.
  
  
• The Weatherization Network Initiative, which provides electric efficiency measures to households up to 60 percent of SMI and has been available since late 2003, serviced 1,426 units of low-income housing with electric reduction measures, saving 1,423 kWh per unit at an average cost of $686 per unit. Overall, the program has saved 2,030 MWh per year.

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Michigan Commission Approves More LIEE Funds

The Michigan Public Service Commission (MPSC), in a rate case settlement with Consumers Energy on December 22, directed the company to contribute $27 million annually to the state’s Low Income and Energy Efficiency Fund (LIEE).

Consumers Energy had proposed spending $15 million on low-income energy programs, but the Commission increased the amount, saying that state law allows it to take the necessary steps to assure that low income and energy efficiency funds are available and sufficient.

The MPSC has been collecting LIEE funds since 2002 and has awarded $194 million to state agencies and nonprofits for low-income energy assistance and energy efficiency projects through periodic rounds of competitive bidding. Initially the LIEE funds came from securitization savings from Detroit Edison, as required under the state’s 2000 restructuring legislation. In 2004, the MPSC changed the funding mechanism to a surcharge on Detroit Edison customers, amounting to about $40 million annually.

Consumers Energy will also recover its costs through customer charges. A MPSC spokesman said it’s likely the $27 million from Consumers Energy will be spent in the same manner as other LIEE funds, that is, the MPSC will issue requests for proposals for low-income and energy efficiency projects. On January 31, the MPSC issued a request for proposals for low-income energy assistance projects with $25 million available from revenues generated by Detroit Edison and Consumers Energy customer surcharges. This action came shortly after Governor Jennifer Granholm asked the MPSC to dedicate $25 million in LIEE funds to low-income assistance this year.

The purpose of the LIEE fund is to provide shut-off and other protection for low-income customers and to promote energy efficiency by all customer classes.

Consumers Energy provides electric and gas services to over 6 million Michigan residents.

The MPSC website has more information about LIEE.

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Study Shows Increase in Burden, Bills From FY 2001-2006

• Households in poverty, (earning less than 100 percent of FPG) more than 13 million, will spend an average of 25 percent of their entire FY 2006 annual income on their energy bills just to maintain their modest levels of usage.
  
  
• The average burden for the LIHEAP-eligible population of about 33 million, which includes those in poverty, will be 16 percent of annual income.
  
  
• These statistics mean that residential energy bills alone will wipe out any income gains made in the last five years by many low-income consumers and even middle-income consumers.
  
  
• All 33 million LIHEAP-eligible low-income households added together will need to spend nearly $64 billion to pay their energy bills. Approximately $2 billion is available for FY 2006 LIHEAP.

As for impacts by fuel type, the study found that eligible fuel oil users will experience the most dramatic cost burdens, 23 percent of income, while those using natural gas or propane will need to spend about 18 percent.

Impacts were also found to vary by region. The average annual energy bill for 12 million LIHEAP-eligible consumers in Southern states will be slightly lower than the average energy bill for 7.4 million eligible Midwesterners; incomes in Southern states are also lower than in other regions. In both the South and Midwest, low-income consumers will need to spend between 17 and 19 percent of income to keep as warm or cool as five years ago, when they spent between 13 and 15 percent. The 1.6 million LIHEAP-eligible households in New England are facing an especially grave situation. They can expect to spend 21 percent of their income on energy bills, a 40 percent greater share of income than five years earlier.

LOW-INCOME ENERGY RESOURCES

LIHEAP Energy Burden Evaluation Study, Final Report, July 2005. Prepared for the Division of Energy Assistance, U.S. Department of Health and Human Services. Assesses to what extent the LIHEAP program is serving the lowest income households that have the highest energy burdens. Concludes that the LIHEAP program targets LIHEAP benefits to the households with the highest home energy needs, as defined by the LIHEAP statute (vulnerable households and high burden households). However, the program could further increase the rate at which it targets households that both are vulnerable and have a high home energy burden. In addition, the study finds that, on average, the program does not give higher benefits to the households that are in the greatest need. Provides suggestions for improving LIHEAP program targeting and data collection.

“Out In The Cold: How Much LIHEAP Funding Will Be Needed to Protect Beneficiaries from Rising Energy Prices?,” Center on Budget and Policy Priorities, January 2006. Originally released in October, 2005, this is an update with figures on the amount of funding each state will need in 2006 to keep LIHEAP recipients from paying more out-of-pocket for their winter heat.

LIHEAP Grants Decline to Lowest Level in Five Years, January 24. The National Energy Assistance Directors’ Association (NEADA), representing the state directors of the LIHEAP, released a study finding that between the winter heating season of 2001-02 and 2005-06, the share of heating expenditures covered by the average LIHEAP grant is projected to decrease for heating oil from 50.9 percent to 19.5 percent; natural gas from 68.6 percent to 28.8 percent and propane from 43.4 percent to 22.4 percent. The drop is because of three factors:

• Since the winter heating season 2001-02, the price of home heating costs for heating oil increased from $627 to $1474, natural gas from $465 to $1000 and propane from $736 to $1286.
  
  
• The number of families receiving LIHEAP grants during this period is projected to increase by 33.1 percent, from 4.2 million in to 5.6 million, while the federal appropriation has increased by only 20.1 percent from $1.8 billion to $2.16 billion
  
  
• As a result, average grant assistance for home heating during has decreased by 9.8 percent from $319 to $288.

Tribal LIHEAP Manual. The content of this manual is the result of contact with many tribal LIHEAP staff throughout the United States to seek ideas and examples of how their programs are run. The Department of Health and Human Services has updated this manual to reflect current program requirements. It is now available on the LIHEAP Clearinghouse website.

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