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National Study of Low Income Energy Programs

National Study of Low Income Energy Programs. NARUC Consumer Affairs Committee David Carroll, APPRISE Jacqueline Berger, APPRISE Roger Colton, Fisher, Sheehan, and Colton 2/19/2008. Presentation Outline. 2. Presentation Outline. Scope of National Study Low Income Energy Needs

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National Study of Low Income Energy Programs

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  1. National Study of Low Income Energy Programs NARUC Consumer Affairs Committee David Carroll, APPRISE Jacqueline Berger, APPRISE Roger Colton, Fisher, Sheehan, and Colton 2/19/2008

  2. Presentation Outline 2

  3. Presentation Outline • Scope of National Study • Low Income Energy Needs • Legal and Regulatory Issues • Affordability Programs • Energy Efficiency Programs • Summary 3

  4. Overview of National Study 4

  5. Purposes • Inventory – How are ratepayer funded programs helping to meet the energy needs of low-income households? • Best Practices – What programs are most effective in meeting their targeted goals and in what ways they could be improved? • Research Framework – What additional information is needed to understand these programs? 5

  6. Study Scope • Analysis of 14 states – CA, CO, CT, IN, ME, MD, MO, NJ, NV, OH, OR, PA, WA, WI • Research on 21 Affordability Programs and 13 Energy Efficiency Programs • Review of Evaluations for 10 Affordability Programs and 12 Energy Efficiency Programs 6

  7. Sponsors • AARP • Colorado OEMC • Connecticut Operation Fuel • Indiana Utilities (CGCU, NIPSCO, and Vectren) • Maryland Department of Human Resources • Missouri Association for Community Action • Ohio Department of Development • Oregon Housing and Community Services • PECO Energy • Philadelphia Gas Works • Public Service Electric and Gas (contributor) • Washington State CTED 7

  8. Sponsors • Nonprofit Organizations – AARP, Operation Fuel, and MACA • State Agencies – Colorado, Maryland, Ohio, Oregon, Washington • Utilities – CGCU, NIPSCO, PECO, PGW, PSE&G, Vectren 8

  9. Needs Assessment Findings 9

  10. Needs Assessment National Context • Energy bills for low-income households grew from $22.6 billion in 2000 to $31.9 billion in 2005 (40% Increase) • From 2005 to 2007 – Electric prices increased by 12.5%, gas prices are stable, and fuel oil prices increased by 25%. 10

  11. Needs Assessment National Context – Energy Affordability • Needs • 7.1 million low-income households have residential bills that exceed 15% of income. • $6.1 billion needed to pay excess over 15% of income. • Federal Assistance • LIHEAP distributes $1.7 billion to 5 million households • Personal Responsibility • 80% of households in poverty pay all energy bills • Most LIHEAP recipients are “energy insecure” 11

  12. Needs Assessment National Context – Energy Efficiency • High Electric and/or Gas Usage - 8.0 million low-income households have high energy usage • Federal Assistance - WAP treats about 100,000 households each year • Actions by Low-Income Households - Most LIHEAP recipients report significant energy saving actions 12

  13. Needs Assessment State and Local Context – Targeted Households • PA – 150% Poverty – 20% of households • OR – 60% of State Median – 30% of households • MD – 150% of Poverty – 14% of households 13

  14. Needs Assessment State and Local Context – Affordability Average Energy Burden • CA – 7% of income • PA – 17% of income • CO – 10% of income 14

  15. Needs Assessment State and Local Context – Energy Efficiency High Electric Baseload • CA - 24% high electric baseload • IN - 80% high electric baseload • PA – 45% high electric baseload 15

  16. Needs Assessment State and Local Context – Energy Efficiency High Gas Usage • NV - 10% high gas usage • PA - 29% high gas usage • MD – 18% high gas usage 16

  17. Needs Assessment Energy Gap / Affordability Standard Definitions • Energy Gap = The amount that the energy bills of low income households exceed an affordable amount. • Affordability Standard = The percent of income that is affordable for households to pay for energy bills. 17

  18. Needs Assessment Energy Gap / Affordability Standard Example for 15% of Income Standard • Customer #1 • Income = $10,000 • Energy Bill = $2,500 • Affordable Energy Bill (at 15% standard) = $1,500 • Energy Gap = $1,000 • Customer #2 • Income = $5,000 • Energy Bill = $1,000 • Affordable Energy Bill (at 15% standard) = $750 • Energy Gap = $250 Total Energy Gap (15% Standard) for this Group = $1,250 18

  19. Needs Assessment Energy Gap / Affordability Standard What Standard is Affordable? • Pennsylvania • Median Household Income for 2005 = $44,537 • Affordable Energy Bill - 5% standard = $2,227 ($186 per month) • Affordable Energy Bill - 15% standard = $6,681 ($557 per month) • Affordable Energy Bill – 25% standard = $11,342 ($945 per month) • Fisher, Sheehan, & Colton – 6% standard = $2,672 ($223 per month) For a household in Pennsylvania with income at the state median – an energy bill at the 6% of income standard would be about $222 per month. 19

  20. Needs Assessment Pennsylvania – Energy Gap • 2005 • Low-Income Electric and Gas Bill - $1.48 billion • Need @ 5% Standard - $1.04 billion • Need @ 15% Standard - $491 million • Need @ 25% Standard - $290 million 20

  21. Needs Assessment State and Local Response • In 2005, state and local policymakers in 45 states and the District of Columbia invested $2.3 billion in affordability and energy efficiency programs In 2005, the amount of funding furnished by state and local policymakers matched the amount furnished by the Federal government through LIHEAP and WAP 21

  22. Needs Assessment State and Local Response • 15% Energy Gap = The amount that the energy bills of low income households exceed 15% of income. • Coverage of Energy Gap (15% Standard) by Public and Ratepayer Funds • Missouri - Funding covers 17% of 15% Energy Gap • New Jersey – Funding covers 84% of 15% Energy Gap • Pennsylvania – 2005 Funding covered 60% of 15% Energy Gap 22

  23. Legal and Regulatory 23

  24. Legal and Regulatory • Regulatory Programs …without “explicit” statutory authority • Colorado: Approved a pilot program to test effectiveness / “targeted to increase the net revenue received by Public Service” • Ohio: Ordered utilities to change the way that payment shortfalls are collected / “… was created in response to the inability of low-income households to maintain energy service.” • Pennsylvania: Order utilities to change practices that lead to “wasteful cycle” / “… how can Columbia Gas most effectively and least expensively collect as much as possible from customers that cannot afford to pay?” 24

  25. Legal and Regulatory • Legislative Programs … with “explicit” statutory authority • Washington State: Regulatory body has authority to approve programs proposed by utility companies • Maine: Requires each utility to implement a program, but allows each to select program options that best meet the needs of their customers • New Jersey: Required the development of a statewide program designed to increase the affordability of energy for all low-income ratepayers 25

  26. Legal and Regulatory • Legislative: Some legislatures have decided that ratepayer funded programs are the most effective way to address low-income affordability and energy efficiency issues. • Regulatory: Some commissions have mandated programs because they have determined that ratepayer funded programs are the most effective way to fulfill their obligation to serve all customers in a cost-effective way. • Utility: Some utilities have proposed ratepayer funded programs because they perceive that they are the best way to work with payment-troubled low-income customers. 26

  27. Affordability Program Design and Evaluation 27

  28. Program Design Sources of Payment Problems • Income Level • Income Inconsistency • Unexpected Expenses • Price Increases • High Usage Program designers need to understand the sources of payment problems in the targeted jurisdiction 28

  29. Program Design Customer Payment Problems • Arrearages • Inconsistent Payments • Annual Bill Shortfall • Health and Safety of Customers Program designers need to decide which manifestations of payment problems they need to address most 29

  30. Program Design Utility Payment Problems • Collections Costs • Accounts Receivable • Write-Offs • Customer Relations Program designers need to consider what utility problems are the most important to resolve. 30

  31. Program Design Program Solutions • Crisis Intervention • Preprogram Arrearage Forgiveness • Current Bill Assistance • Counseling and Referral • Usage Reduction Program designers need to determine what solution(s) best address the problems they are trying to solve 31

  32. Evaluation • Best Practices – Targeting • Serve those with demonstrated need • All high burden customers – NJ USF / MD EUSP • Customers with payment problems – PA CAP / OEAP • Best Practices – Programs • Match programs to problems • High burden – Payment subsidy / usage reduction / benefit referral – PA CAP/LIURP/CARES • Payment problems – Arrearage forgiveness / fixed payment / payment counseling – PA CAP / CARES 32

  33. Evaluation • Best Practices – Administration • Build on existing linkages • New Jersey – LIHEAP / Utility / Community Agencies • Ohio – LIHEAP / PIPP / EPP • Best Practices – Funding • Multiple Sources • New Jersey – Federal LIHEAP / State Lifeline (Elderly) / Ratepayer USF / Charitable NJ SHARES • Oregon – Federal LIHEAP / Ratepayer OEAP / State Funding Supplement / Oregon HEAT 33

  34. Evaluation • Align Funding Source with Need • LIHEAP to furnish health and safety for vulnerable households • State Supplements when Increased Energy Bills are associated with Increased Tax Revenues • Ratepayer Funding to addresses goals of providing universal access and avoiding wasteful collections cycle • Charitable Funds offer flexibility to address needs of households that do not meet categorical requirements 34

  35. Energy Efficiency Program Design and Evaluation 35

  36. Program Design Sources of Usage Problems • Housing Quality • HVAC Equipment Efficiency • Appliance Efficiency • Energy Using Practices Program designers need to understand the sources of usage problems in the targeted jurisdiction 36

  37. Program Design Customer Barriers • Investment Capital • Energy Knowledge • Information Feedback Program designers need to decide which barriers they need to address most 37

  38. Program Design Utility Usage Issues • Peak Shaving • Load Shifting • Consumption Reduction • Affordability Subsidies Program designers need to consider what utility issues are the most important to resolve. 38

  39. Program Design Program Solutions • Weatherization • HVAC Repair and Replacement • Appliance Replacement • Energy Education Program designers need to determine what solution(s) best address the problems they are trying to solve 39

  40. Program Evaluation Targeting • High Usage – Energy efficiency programs must target high usage customers to be cost-effective • 1,200 Therms • 8,000 kWh Baseload • 12,000 kWh Baseload/Water • 16,000 kWh Electric Heating 40

  41. Efficiency Program Evaluation Electric Baseload Usage Impacts 41

  42. Efficiency Program Evaluation Gas Heating Usage Impacts 42

  43. Efficiency ProgramEvaluation Comprehensive Programs Should… • Target high usage households • Use tools to identify sources of energy problems • Align spending with opportunities • Be prepared to address health and safety issues • Have guidelines for “walk-away” and/or referral These programs are more expensive per unit but can deliver long-term savings to low-income households, furnish reliable benefits to utility capacity planners, and deliver significant carbon reduction impacts 43

  44. Efficiency ProgramEvaluation Targeted Programs Should… • Target high usage households • Prescreen clients for opportunities • Minimize service delivery costs • Piggyback with comprehensive programs and/or other service delivery These programs are less expensive to administer and perform well in the short run, but must be well run to deliver promised benefits 44

  45. Efficiency ProgramEvaluation • Best Practices – Targeting • Serve those with demonstrated need • High usage • Demonstrated Opportunities • Best Practices – Programs • Service Delivery Quality • Protocols • Effective Training • Clear Decision Criteria • Quality Control 45

  46. Efficiency ProgramEvaluation • Best Practices – Administration • Build on existing linkages • Ohio – LIHEAP / PIPP / EPP Integration • New Jersey – USF / Comfort Partners Integration • Best Practices – Funding • Multiple Sources • Oregon – Federal WAP / LIHEAP Transfer / Ratepayer Funded / State Funding Supplement • Vermont – Federal WAP / LIHEAP Transfer / Ratepayer Funded / All Fuels Funding Supplement 46

  47. Summary of Findings 47

  48. Summary • Energy Needs – Low-income energy needs are daunting, but some state policymakers have made significant progress toward meeting those needs • Legal/Regulatory – There are excellent models of legislative and regulatory frameworks for ratepayer-funded low-income programs 48

  49. Summary • Program Design – There are important design choices that make a difference in the performance of low-income affordability and energy efficiency programs. Since needs vary from state to state and even within state, policymakers need to identify their goals and design programs to meet goals. • Reporting and Evaluation – The PA PUC models for reporting and program evaluation furnish a good example of how to document performance of ratepayer funded low-income programs. 49

  50. David Carroll APPRISE 609-252-8010 david-carroll@appriseinc.org 50

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