Roger D. Colton Fisher, Sheehan & Colton Belmont, MA October 2008

1. Meeting Indiana’s Energy Assistance Needs:Affordable Energy Resources for Indiana’s Low-Income Customers Roger D. Colton Fisher, Sheehan & Colton Belmont, MA October 2008

2. The Need for a Toolkit Approach “When your only tool is a hammer, you tend to see every problem as a nail.”

3. The Parable of the Olive Trees Once upon a time, a mansion owner called his gardener in and asked him to plant 100 olive trees. The gardener was aghast. “But sir,” the gardener said, “those trees will not bear fruit for 50 years.” Nodding in agreement, the mansion owner responded: “Yes. That is why I would like you to plant them today.”

4. Filling the Home Energy Affordability Gap in Indiana • Public funds • Utility funds • Rates and customer service as “low-income assistance” • Non-energy funding sources • Usage reduction • The special case of bulk fuels

5. Public Funds: Sources of “energy-based” supplemental income • Earned Income Tax Credit (EITC) • Public Housing Authority (PHA) utility allowances • Food Stamp “excess shelter deduction”

6. Tool #1:The Earned Income Tax Credit • Country’s primary anti-poverty program. • Refundable tax credit (cash back). • Average refund: around $2,000. • 3-year retroactive refund application. • Few jurisdictions cannot increased by 5%.

7. Earned Income Tax Credit:Reason to Pay Attention • 1/3 used to pay for past-due utility bills. • Only 50 - 80% of eligible claim. • Potential for innovative utility/CBO role. • Receipt at time of winter heating bills

8. How Families Use the EITC

9. Earned Income Tax Credit (EITC) Potential CAA Action Steps • Mass utility outreach campaigns (NJ) • “Gap filler” outreach campaign • Part-time workers • Women-workers • Hispanic workers • VITA campaign (Illinois--Ameritech) • Targeted outreach • Utility call center recorded message

10. Tool #1 (A):Alternatives to Paid Tax Preparers • Low-income households often lose $300 or more of their EITC • Pay between $100 and $200 to have their tax returns prepared. • Sold “refund anticipation loans” at a cost of 400% in interest. Things for CAA to do • VITA campaign (Illinois--Ameritech) • Nonprofit tax preparation (AARP) (Belmont) • CAA as nonprofit tax preparation.

11. Tool #2:PHA Utility Allowances • Tenant-paid utilities: • Public housing • Assisted housing • Covers: • Electricity • Heating/Cooling • Water/Sewer

12. PHA Utility Allowances:Reason to Pay Attention • Covers (theoretically) 100% of bill • Year-round -- not seasonal • Regular update (if enforced) • Public housing tenants <50% FPL

13. PHA Utility Allowances:What Needs to be Done • Review utility allowances to ensure annual update. • Provide notice to PHAs whenever rates change by 10% or more. • Review whether utility allowance pays for cooling More advanced advocacy: Review reasonableness of utility allowances Call for help!

14. Tool #3:The Excess Shelter Deduction • Food Stamp eligibility based on “countable income.” • Shelter expenses above 50% an income deduction. • Shelter = rent/mortgage + utilities (include telephone) • Actual shelter costs/Standard Utility Allowance (SUA)

15. FS Excess Shelter Deduction:Reason to Pay Attention • If household income is lowered: • Some qualify for Food Stamps when they otherwise would not • Some qualify for more Food Stamps • Every $3 reduction in income yields $2 in benefits. • Implications for spike in fuel prices! • Customers indifferent as to source of dollars.

16. Excess Shelter Deduction:Why do it? • $30 - $40/month for low-income HHs • Dollar-for-dollar passthrough to feds • USDA supports and encourages • Elderly/disabled have no maximum on excess shelter deduction.

17. Food Stamps: Standard Utility Allowance Annual Review • Take increased energy prices into account. • Take water and wastewater into account • Take all components of telephone bills into account. More advanced advocacy: Take load curves into account. (not simply average)

18. The Excess Shelter Deduction:What needs to be done? • Update the Standard Utility Allowance (SUA) annually • Ensure HHs are reassessed in light of increased energy bills.

19. Utility/Ratepayer Funding:Tool #4: Rate Affordability Programs Four Essential Elements • Rate affordability assistance • Arrearage forgiveness • Crisis assistance • Energy efficiency • Performance measurement

20. Rate Affordability Assistance Needs To • Be burden-based • Address payment-troubles • Recognize the “paid but unaffordable” bill • Be tariff-based assistance

21. Arrearage Forgiveness Needs To • Be affordability-based • Administratively practicable • Allow for customer contribution

22. Crisis Assistance Needs To • Be shutoff free if agreed payments made • Recognize economic fragility • A “reasonable amount” set aside.

23. Energy Efficiency Needs To • Be integrated with rate affordability. • Minimize lost opportunities program-wide. • Minimize lost opportunities per each household.

24. Using the Regulatory Process • End the regulatory “war on the poor” • Enforcing regulatory requirements • Using regulatory steps for innovative funding

25. Tool #5:End the Regulatory “War on the Poor” • Eliminate late fees on low-income customers. • Eliminate late fees on paid-up DPAs. • Eliminate one-strike-you’re-out deferred payment arrangement (DPA) policies. • Eliminate barriers to entering budget billing. • Sharpen the trigger for issuing shutoff notices • Don’t send notices that utilities do not intend to follow-up on.

26. Tool #6:Enforce Regulatory “Requirements” • Enforce consideration of ability-to-pay in structuring deferred payment plans for arrears. • Absolute income • Discretionary income • Fragility of income • Seasonality of income (income, expenses) • Ability to meet exigencies • Enforce consideration of all regulatory factors in structuring deferred payment plans for arrears. • Time arrears outstanding. • Reason for arrears. • Ability to pay.

27. Tool #7:Alternatives to Cash Security Deposits • Agency-provided surety or “guarantee of payment” • Provide letter guaranteeing payment • Guarantee only “kicks in” if customer leaves system with bad debt. • For new deposit demands. • Substitute guarantee or surety for existing deposit. • Use existing deposit to help pay arrears. • Agency-generated guarantees by local business/houses of worship. • Behavioral responses • Financial literacy training • Budget billing

28. Tool #8: Utility Rate Refunds • When utility money is not utility money. • Supplier refunds / rate refunds appropriate. • Refunds can come years after-the-fact. • LI mobility is 35%+: 2 - 2.5x total population. • Refunds returned to other than those who paid. • Refunds do not “belong” to current customers. • Concept of “cy pres” is established concept. • Kansas ad valorem tax refund/Colorado rate refunds.

29. The Role of Non-Energy Programs in Providing Energy Assistance Tool #9: Summer Food Service Program • Summer time generally considered “low cost” energy months. • ”Kid-related food expenses”: second-leading financial problem for customers in financial trouble with their utility. • If you have: • two kids at home and spend $3/meal (VERY conservatively), • that's $12/day x 20 school days a month or $240 EACH MONTH • 2.85 million kids each day in Summer Food Service Program. • BUT only 17.7 kids receive summer Food Service for every 100 kids in school lunch/school breakfast programs

30. Non-Energy Programs as “Energy Assistance”Tool #9: Summer Food Service Program Things to do: • Promote Summer Food Service Centers. • YMCA/YWCA • Recreation Department summer sites • Public schools • Other nonprofits • Promote participation at Summer Food Service Centers. Visit: http://www.FRAC.org (Food Research and Action Council)

31. Usage Reduction Funding Sources • Housing related programs • Affordable housing plans • Utility-related programs

32. Tool #10: Efficient energy usage in affordable housing • Require energy efficient construction in publicly-funded new construction/rehab. • Home Investment Partnership funding (Consolidated Plan) • Community Development Block Grant (Consolidated Plan) • Low-Income Housing Tax Credit (Qualified Allocation Plan) • Insert Energy Star mandate into all publicly-issued housing procurements.

33. Energy Star building:Why doesn’t everyone do it? “Split Incentives” • Incentive exists if owner/developer are identical. • If owner/developer/resident are not the same then no/incentive is said to be “split.” • Developer alone – no incentive unless competing developer is offering Energy Star homes. • Lender –no incentive. • Buyer – often not involved in building decisions.

34. Energy Star in Affordable HousingWhat needs to be done • Insert “Energy Star” into RFP/specifications for affordable housing. • Insert “Energy Star” into Con Plan (HOME/CDBG) • Insert “Energy Star” into Qualified Allocation Plan (LIHTC) • Use of CDBG funds for energy efficiency matching.

35. Recommended Action Homeownership and rental units developed as either new construction or substantial rehabilitation by grantees or participating jurisdictions should be developed to Energy Star standards.

36. HUD Recommendation Include following in any Request for Proposals or procurement process: “All new buildings and gut rehab shall be designed to meet the National Energy Five Star efficiency performance standard of 86. All procedures used for this rating (86) shall comply with National Home Energy Rating System guidelines.”

37. Tool #11: Inserting Energy into the HUD Consolidated Plan • Identifies affordable housing needs. • Discusses housing market. • Identifies barriers to affordable housing. • Identifies and ranks action steps.

38. Impacts on affordable housing • Impacts of energy on affordable housing: • Reduce the “affordable sales price” of single family homes. • Freeze some lower income households out of the market altogether. • Force lower income households into less expensive homes. • Increase the risk of default by consumers. • Other Advantages: • Adds value. • Higher debt load for developer or a buyer. • Increased discretionary income for a tenant or owner/resident.

39. Tool #12:Replicating and expanding Indiana’s Refrigerator Replacement Program • Existing Duke/INCAA program • Section 8 rental housing • Energy efficiency utility allowance • Low-income multi-family rental housing • Previously constructed LIHTC/HOME properties • First time home buyers

40. Tool #13:Addressing Bulk Fuel Needs • Maine’s Fair Trade Practices Act • Applies to heating sales: Oct 15 - April 30 • Once “established customer” (2+ cash purchases) • Immediate delivery/unscheduled delivery • Defines charge for less than full fill-up • Must sell for cash, even if arrears • Vermont’s Fair Trade Practices Act • Minimum notice before refusal to deliver • Requires reasonable payment plan for arrears • No minimum delivery >100 gallons • Must deliver for cash payment

41. Tool #14:Addressing LPG (Propane) Gas Propane Education and Research Council (PERC) • 20% of PERC assessment collected in a state funneled back to state propane councils (or similar entity). • $38 million total PERC nationwide (2003). • More than 35 percent of the households using propane to heat their homes are eligible for LIHEAP. • GAO (2003): appropriate to use PERC funding to address the unaffordability of propane prices to low-income households.

42. Addressing LPG (Propane) Gas Needs • Potential uses of PERC funding: • Education re. “price stabilization” options: • off-season purchases. • budget-billing • PERC funding is not likely available for comprehensive weatherization. • However, low-cost energy efficiency packets can be one element of a propane education program.

43. Tool #15:Using Your Rural Electric Co-ops • Soliciting “patronage capital refunds.” • Iowa average patronage capital refund: $67/year • Impact of solicitation of “found money” • CEAF (now Energy Outreach Colorado): rate refund • 10% of all customers donated something • Collected 4% of total refund back to distribute as energy assistance ($25 average per contribution) • Normal: 2% contributor and $10 contribution.

44. For more information: http://www.fsconline.com News Library

45. For more information: roger@fsconline.com

46. My list of things to do on Monday: • Begin to draft internal process to calculate shelter costs as percentage of income for all CAA clients. • Begin to draft process of notifying Food Stamp if >50%. • Request from state Food Stamp director: (a) last year’s Standard Utility Allowance (SUA); (b) this year’s SUA; and (c) date of most recent update to reflect change in prices. • Request from relevant Local Housing Authorities: (a) the utility allowance schedules currently in use for section 8, for public housing, and for any other assisted housing. Ask for date of most recent update to those utility allowances. • Contact state utility commission (state energy office?) and ask for any regular periodic reports on energy prices for primary fuels in state. • Submit request to Internal Revenue Service (IRS) for the local penetration of EITC among eligible recipients. Submit locally (or to Atlanta).

47. My list of things to do on Monday: • Draft letter to all local utilities asking for how they promote the EITC. Find out who administers “call center” for local utility. • Obtain script for a call-center EITC message for utility call centers and schedule appointment to discuss using such script on call-center “holds.” • Obtain EITC outreach kit from Center on Budget and Policy Priorities EITC Outreach Campaign (Washington D.C.). • Find all all free tax preparation clinics (VITA, AARP, other) and prepare outreach for all persons making in-person contact with CAA. • Draft letter to all utility contacts asking for complete set of policies on the extent to which utility accepts alternatives to cash security deposits. • Begin drafting process through which to ask all clients making in-person contact with CAA: (a) do you have a cash deposit with the utility; (b) do you want a deposit refund (in whole or in part) if possible; and (c) do you want us to request such a refund if available. • Review Roger’s “5 Things to Do” handouts.

48. My list of things to do on Monday: • Find state propane council. Obtain their most recent (or two most recent) annual reports and annual budgets. • Find list of all Summer Food Service Program sites in your locality. Find out who is local director and schedule appointment. • Contact state utility commission to obtain a list of all Rural Electric Cooperatives (RECs) in the state. • Inquire as to which of these RECs have fuel funds. • Inquire as to what policies exist regarding abandoned patronage capital credits. • Obtain annual report (including annual financial report). • Contact FSC in Belmont (MA) for a copy of the Iowa Community Action Association (ICAA) REC fuel fund proposals. • Write letter to State Treasurer to request data on the number of dollars that have escheated to the state each year for the past five years from utilities or RECs. • Post e-mail and phone number of Roger on office wall (or on computer) in order to contact him for help with pursuing any of these suggestions.