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Overview of Low-Income Restructuring
Legislation and Implementation

Maryland
Last Updated: December 2008

Maryland’s Electric Universal Service Program (EUSP) entered its ninth year on July 1, 2008.

The program is a result of Maryland’s 1999 restructuring law, SB 300, which provided $34 million for a universal service program that is continuing and non-lapsing, to be administered by the Department of Human Resources (DHR) through the Maryland Office of Home Energy Programs (OHEP), the LIHEAP grantee.

The universal service program, known as the Electric Universal Service Program or EUSP, has three components: 1) bill payment assistance to help participants pay current electric bills; 2) arrearage retirement payments to help them pay some past due electric bills; and 3) weatherization to provide electric energy efficiency measures to reduce future electric bills. Effective July 1, 2005, (SFY 2006), the weatherization component was transferred from OHEP to the Department of Housing and Community Development, the state’s weatherization grantee. The Department receives $1 million yearly from EUSP funds for weatherization.

In its SFY 2009 proposal, OHEP outlined plans to spend EUSP funding in the amount of $57.7 million, of which $36 million is collected from ratepayers and available for bill payment and arrearage retirement assistance and $21.7 million comes from the state general fund. OHEP received approval to spend $47.2 million of the total on rate assistance, $6 million on arrears management, and the remainder on administration and outreach. The arrearage funds will be distributed on a state-wide basis with a minimum arrearage retirement assistance award of $300 and a maximum of $2,000.

In its FY 2009 plan, OHEP described FY 2008 as “truly challenging” because of a record number of assistance applications due to the impact of higher electric rates because rate caps, imposed under the restructuring bill, had expired in the state. A total of 117,217 applications were received in FY 2008, a 15 percent increase over the prior year, and the largest single year increase since the program’s inception. OHEP said it expects an 8 percent increase in applications during FY 2009.

The state has been providing state general funds to the EUSP since 2005. In response to escalating energy costs during the winter of 2005-06 and to the controversy that accompanied the rate cap expiration, the state legislature took the following actions:

1) in November 2005 allocated $11 million in state funds to be used for both the Maryland Energy Assistance Program (MEAP) and EUSP funding shortfalls

2) in March 2006 allocated $25.1 million in state general funds to the EUSP to be spent over four years; funds can also be used for non-electric bills under the MEAP

3) in June provided a one-time allocation of $6 million from corporate taxes to be earmarked for arrearage retirement payments during FY 2007

4) increased EUSP funding from $34 million to $37 million annually with the additional $3 million to be collected from industrial and commercial ratepayers, thus increasing the amount collected from them to $27.4 million, while the amount collected from residential ratepayers remains at $9.6 million

5) raised EUSP income eligibility from 150 percent of federal poverty guidelines to 175, and,

6) stipulated that the state general funds be used to serve households from 175 to 200 percent of FPG.

As a result, the EUSP budget for SFY 2007 was about $46 million, compared to about $34 million annually since the program's inception in 2001. Its 2008 budget was originally $52 million — $36 million from the above-mentioned customer charges and $16 million in state general funds. In June of 2007, reacting to soaring electric bills and political storms due to the expiration of the rate caps, Governor Martin O'Malley authorized an additional $5 million for the FY 2008 EUSP budget. The EUSP also began taking applications in June instead of its normal July 1 starting date.

During SFY 2008, the bill assistance component served a record 100,670 households with an average grant of $601. The program also provided nearly 8,000 households with arrearage retirement payments averaging $801.

During SFY 2007, the program served 93,323 households with an average grant of $510. Using state funds, OHEP spent $5.1 million on arrearage forgiveness, serving over 10,000 households with an average grant of $486.

As shown in the table below, EUSP bill payment assistance participation has increased substantially since the program’s inception. OHEP has reported that the increases are due to more families in need of assistance and more persons becoming aware of the program through OHEP’s expanded outreach.

EUSP Summary Data Program Year FY 2001-2008
Program Year
Type of Program
2008
2007
2006
2005
2004
2003
2002
2001
Arrearage
Applicants Served
7,957
10,468
3,900
3,894
4,888

3,551
5,148
26,211
Average Grant
$801
$486
$445
$385
$307
$432
$415
$270
Benefit Expenditures
$6.4*
million
$5.1*
million
$1.7
million
$1.5
million
$1.5
million
$1.5
million
$2 million
$7.7 million
Bill Assistance
Applicants Served
100,670
93,323
83,853
78,668
72,390
69,781
57,585
56,245
Average Grant
$601
$510
$410
$361
$396
$419
$287
$270
Benefit Expenditures
$58.6* million
$46.6*
million
$34.3
million
$28
million
$28.7
million
$29.2
million
$16.7 million
$17.6 million

*Includes state funds
Source: Maryland Department of Human Resources, Office of Home Energy Programs

History

SB 300, Maryland's 1999 restructuring law, defined a universal service program as one that "helps low-income customers maintain electric service," and includes "customer bill assistance and payment programs, termination of service protection, and policies and services that help low-income customers to reduce or manage energy consumption in a cost-effective manner."

Collection of the universal service funds from customers started in July 2000, and OHEP then began operating the newly-created Electric Universal Service Program with the three components: bill payment assistance, arrearage retirement payments and weatherization

The restructuring law said that for the first three years, at least half of the fund should be spent on bill payment assistance, and the remainder on energy efficiency and retirement of arrearages incurred by low-income households prior to the initial implementation date of the program (July 1, 2000). The law's provision for arrearage retirement stemmed from studies showing that low-income households' inability to pay utility bills was partly due to accrual of significant arrearages.

The restructuring law authorized the EUSP for three years. On June 30, 2003, Maryland finished the initial three years. In April 2003, the EUSP was given an extension, and its funding of $34 million per year was continued, subject to annual review and approval by the PSC and the legislature. SB 504, the bill to extend the program, was signed into law April 22, 2003.

SB 504 continued the original program structure, except that it capped arrearage retirement funding at $1.5 million per year, although the funding cap was removed for the 2007 program, and limited payments to those customers who hadn’t previously received arrearage retirement assistance. (SB 504 also allowed the program to waive income eligibility guidelines to provide bill payment assistance to customers experiencing "extraordinary circumstances" such as major medical emergencies or losses due to major natural disasters.

The lion's share of the EUSP funding comes from industrial and commercial customers; during the first 6 years it was $24.4 million; due to the above-mentioned actions of the state legislature, it is now $27.4 million. The remaining $9.6 million comes from residential customers, who pay about 40 cents per month.

Because EUSP is administered by OHEP, clients can apply at local LIHEAP agencies for both programs year round, as well as for the Maryland Weatherization Assistance Program, operated by another department. EUSP has the same income eligibility level as MEAP.

In designing the SFY 2006 program, OHEP proposed and attained PSC approval for changes in its benefit determination methodology for the bill assistance component with a goal of better targeting assistance to the most needy. These changes remained in effect for SFY 2007 and 2008. The bill payment program calculates benefits based on income and household size, actual household electricity consumption, and electricity price. Previously, OHEP’s calculation took into account average or approximate consumption and income. The EUSP benefit is integrated with the state’s LIHEAP benefit, which, as of FY 2006, also utilizes a more targeted benefit matrix. OHEP explained in its program proposal that its previous benefit calculations had resulted in some households with low consumption receiving a credit on their utility bills.

Beginning in SFY 2006, OHEP reconfigured its poverty criteria for determining benefit levels by utilizing groupings of 0-75 percent of federal poverty guidelines, 76-110 percent FPG and 111-150 percent FPG in order to provide better targeting of benefits. For the 2007 and 2008 program year, it added another grouping: 151-175 percent FPG.

For FY 2008, the income group of 0-75 percent of poverty received a benefit that was equal to 75 percent of the estimated annual bill; at 76-110 percent, it was 60 percent. The group from 111-150 percent received a benefit equal to 50 percent of the estimated annual electric cost. Those households living in subsidized housing received a benefit that was 14.5 percent of the annual cost. If the applicant heated with electricity and received a MEAP benefit for electricity an additional 15 percent of the estimated bill was received through a MEAP benefit.

Under the arrearage management component, OHEP added a requirement that applicants must have a minimum of $100 in past due bills (this was changed to $300 for FY 2008) and the maximum benefit amount is capped at $2,000. In its annual reports and in its proposal for 2008, OHEP has noted that the $1.5 million for arrears retirement is exhausted early in the program and has suggested that the statutory funding limit be changed because there is not enough funding to serve everyone who is eligible.

In EUSP documents, both the OHEP and the PSC noted that implementation of the weatherization program lagged behind the other two components. Because of start-up issues and delays in issuing an invitation to bid for program operation, the EUSP weatherization funds were under spent most years. The transfer of the weatherization component to the state weatherization office is expected to result in a more efficient program because it will be coordinated with the federal weatherization program.

Evaluation

In May 2007, an evaluation of the EUSP presenting the results of process and impact evaluations of the programs conducted from July 1, 2004 to June 30, 2006 was completed by PA Consulting group.

Among the conclusions of the evaluation:

  • The program is reaching and helping households with some of the most severe needs.
  • New or recent participants in the program don’t exhibit improved bill payment behaviors and probably can’t respond with improved bill payment behaviors in the short term because they other substantial needs as well.
  • Participants continuing in the program do show improvements in bill payment behavior.
  • The annual growth in eligible applicants served since 2001 is 48 percent.
  • The program is reaching households in great need of electric assistance as seen by the high average electric burden of participants and the customer survey results showing the needs of these households and their concerns with meeting monthly electric costs
  • High participant satisfaction was shown with the budget billing and arrearage component of the program as well as with the application process

Among recommendations for improvements, the evaluation said OHEP should: explore ways to increase program retention of eligible households from year to year; investigate the trade-off between greater program standardization to deliver services consistently throughout the state and inefficiencies that may result from greater standardization; strengthen program processes that will improve the equitable distribution of EUSP benefits across the state; convene the EUSP working group to discuss ways to increase the effectiveness of EUSP administration, in particular, review changes needed in administrative funding limitations in order to address improvements in application processing, local agency training and the OHEP information system; and explore ways to better coordinate EUSP with other assistance programs.

For more information on Maryland's EUSP, check the following:

 

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Page Last Updated: December 18, 2008