Overview of Low-Income Restructuring
Legislation and Implementation

New Jersey
Last Updated: April 2008

New Jersey ’s Universal Service Fund (USF) low-income energy assistance program, which began in October 2003, is now in its fifth year.

The USF program is called a fixed credit percentage of income payment plan under which participants are required to pay no more than six percent of their annual income toward electric and gas bills ─ three percent for electric and three percent for gas or six percent for all-electric heat customers. Credit to customers is capped at $1,800 annually.

New Jersey electric and gas customers whose household income is equal to or less than 175 percent of the federal poverty level are eligible for the program. First year participants were enrolled through an automatic enrollment process, through which the program administrator at the time, the Department of Human Services (DHS, the LIHEAP grantee), reviewed information it had on file about customers already enrolled in either LIHEAP or Lifeline (a state-funded rate assistance program for New Jersey’s elderly and disabled) from September 1, 2002 through August 31, 2003. Using this data, plus information provided by the utilities, DHS automatically enrolled customers who met the eligibility criteria. A manual enrollment process, wherein customers could apply directly, began in November 2004.

During fiscal year 2004, its first year of operations, the USF spent about $65 million on credits and enrolled about 130,000 households. By the end of FY 2007, it was serving over 187,000 households and provided benefits worth nearly $118 million, according to the state’s FY 2007 leveraging report.

The following table shows how the USF credit is calculated for a USF participant with an annual income of $10,000. The calculation takes the difference between the previous 12 months electric and/or gas billing, net of any LIHEAP and/or Lifeline benefits, and three percent (one service) or six percent (two services) of the eligible customer’s income.

	Annual	Monthly
Customer’s Annual Bill (Energy Burden)	$1200	$100
Customer’s PIP Payment (No more than 6% of Income)	600*	50
Remaining Energy Bill Balance	600	50
USF Credit Amount (credited monthly)	300	25**
*The PIP is the amount USF participants are required to pay the utility company.
**Fixed monthly benefit paid on behalf of the customer from the USF directly to the USF participant’s natural gas and/or electric utility. The yearly credit cannot exceed $1,800.

In March 2004, the New Jersey Board of Public Utilities (BPU) approved establishment of an arrearage payment plan, called Fresh Start, for USF enrollees. The program allows these enrollees a chance to have their past due bills forgiven if they start paying their monthly bills in full and do so for an entire year. The program began in April, 2004, available to about 135,000 USF enrollees. State officials said 40 percent of the people enrolled in the program – or about 50,000 – had accrued significant unpaid utility bills. Under the program, only pre-program arrears are eligible for forgiveness, and they must total more than $60.

During FY 2005, the first full year of Fresh Start operations, arrearage payments totaled $23 million; payments totaling $12.1 million were made during FY 2007 to over 50,000 households.

 History

The USF is a result of New Jersey ’s 1999 restructuring legislation that provided for a permanent fund to help address low-income energy needs. The program design was at least three years in the making, with input from various stakeholders including the state Ratepayer Advocate, New Jersey AARP, New Jersey Citizen Action, and the DHS.

The restructuring law left it to the BPU to determine the level of USF funding, its administration, purposes, and programs to be funded, as well as whether new charges should be imposed to fund new or expanded programs. The law also defined the USF as "nonlapsing," meaning it does not have a sunset.

The BPU began holding hearings on implementation of the USF in mid-2000. In September 2000, New Jersey ’s Ratepayer Advocate (RPA), with support from groups such as AARP, Legal Services of New Jersey, Citizen Action, and state government, submitted a detailed proposal for a comprehensive universal service program, designed to create affordable energy bills for New Jersey ’s low-income consumers and funded through a statewide universal service charge on both electric and gas customers. That program’s cost was estimated at $67 million.

RPA and advocacy groups from around the state pressed the BPU to create an interim low-income rate affordability program by the onset of the winter of 2000-2001. In November 2001, the BPU ordered the creation of an interim affordability program to help address bills for the winter of 2001-02. The order mandated that an interim USF be established for the eligible customers of Elizabethtown Gas Company, New Jersey Natural Gas Company, Public Service Electric and Gas Company, South Jersey Gas Company, Conectiv Power Delivery and Rockland Electric Company. GPU (aka Jersey Central Power and Light) was permitted to continue its previously approved low-income assistance pilot program, and was exempt from the November order.

On March 21, 2002 , the Board gave final approval to the interim program, authorizing $15 million to assist low-income consumers with the payment of their electric and natural gas heating bills through a $200 credit. LIHEAP income eligibility levels (175 percent FPG) were used and each utility administered the program in its own service territory. Nearly 59,000 eligible customers received the one-time credit of $200. Later in the year, the BPU approved the use of remaining USF funds, as well as approximately $1 million in unspent TANF funds, to provide a $100 benefit to some 41,000 households whose electricity and natural gas bills were included in their rent.

In March 2003, the New Jersey Board of Public Utilities’ (BPU) issued the long-awaited Universal Service Fund Order establishing a permanent statewide assistance program and it followed with another directive on July 16 ordering utilities to start assessing customers for the cost of the program.

First-year funding was originally estimated at about $30 million – it turned out to be about $65 million – plus 10 percent for administrative costs and for start-up costs, estimated at $500,000.

The July 16 order also told utilities to begin assessing customers for the cost of the Lifeline program. Historically, that program had been funded from state casino revenues, but New Jersey ’s Governor, in setting the 2004 state budget, decided Lifeline should be funded through a surcharge on utility bills beginning August 1.

Lifeline provides an annual energy bill credit of $225 to low-income seniors and disabled residents. It has been and will continue to be administered by the Department of Health and Senior Services. For FY 2007, $68 million was spent with 302,310 households receiving benefits.

In late 2006, the state decided to switch administration of the USF from the DHS, where it had been since its inception, to the Department of Community Affairs (DCA). This change followed the transfer of LIHEAP administration from DHS to DCA.

For FY 2008, the USF budget has been set at $174.4 million, including $10.8 million for Fresh Start. Additionally, the Lifeline budget has been set at $76.8 million.

 Evaluation

Also during 2006, the program’s first evaluation was completed by Applied Public Policy Research Institute for Study and Evaluation (APPRISE). It analyzed the program's operations and results from its start in October 2003 through FY 2005.

During 2005, the program served 120,000 households and provided USF credits totaling $74 million, plus $22 million for arrearage forgiveness. About 177,000 households have received USF benefits since the program began, the evaluation reported; 139,000 households received electric benefits and 100,000 received gas benefits. On average, USF participants received $626 per year in USF credits.

Among positive aspects of the program, APPRISE found the following:

• The impact of the USF is significant for those who receive it – it covers about 40 percent of the total energy bill for eligible clients.
• The program’s standard of energy affordability, i.e., six percent of income, is one of the most progressive in the country. Similar programs in Ohio and Pennsylvania require low-income households to pay up to 17 percent of their income on energy bills.
• About 41 percent of participants had incomes at or below $10,000, and 37 percent of households had an elderly member.
• The majority of USF customers, 67 percent, were able to pay 100 percent of their annual utility bills.
• The USF program eliminated about 90 percent of preprogram arrears for USF customers.
• Compared to LIHEAP recipients in other Northeastern states, USF participants had a lower rate of utility shutoffs.

Although the program targets the lowest-income households, it does not necessarily reach the most vulnerable groups such as the young, the elderly, groups with language barriers, or those households with the highest energy burdens, the evaluation found.

The evaluation provided recommendations for improving client outreach to overcome identified barriers and to better reach vulnerable populations; it also contains programmatic recommendations to increase client bill payment.

Since its release, the evaluation has been reviewed by USF staff at the BPU, who have issued their own recommendations for program changes. (These recommendations are included with the APPRISE evaluation.) A stakeholder process has been underway where stakeholders are reviewing the evaluation and the staff recommendations. As of early 2008, the BPU has made no major revisions to the program, although there have been and are pending changes in processes to streamline enrollment and increase outreach.

Energy efficiency

The restructuring law also created a societal benefits charge (SBC) to fund continuation of pre-restructuring demand side management programs, renewable energy, nuclear plant decommissioning, low-income energy efficiency, consumer protection and other social programs as approved by the Board.

In March 2001, the Board ordered a three-year, $358 million program, called New Jersey Clean Energy, to develop energy efficiency and renewable energy sources, including a low-income energy efficiency program, all to be funded through the SBC. In 2004, funding for all programs was approved for 2005-2008 with a budget of $745 million.

The low-income energy efficiency program, called New Jersey Comfort Partners,  in which the seven major electric and gas utilities participate effective May 9, 2001 , was initially funded at $15 million yearly and expected to serve about 6,100 households yearly. It replaced the low-income energy efficiency programs previously operated by of New Jersey ’s utilities. Funding for 2005-2008 is about $19 million yearly.

The Comfort Partners Program is available to any New Jersey household with significant electric use, having an income at or below 175 percent of the federal poverty guidelines.

The low-income program includes direct installation of cost-effective energy efficiency measures addressing all fuels, comprehensive personalized customer energy education and counseling, and arrearage forgiveness for participants who agree to payment plans.

Among the measures to be considered for each home are efficient lighting products, hot water conservation measures, replacement of inefficient refrigerators, programmable thermostats, insulation upgrades, blower-door guided air sealing, duct sealing and repair, heating/cooling equipment maintenance, repair and/or replacement and other custom measures.

For 2003, the BPU created a senior pilot program under which the above-mentioned measures were available in selected areas to seniors with incomes up to 300 percent of FPG. Additionally, seniors with incomes between 301 and 400 percent of FPG may receive "Shared Cost" program services, under which the program will pay for one-half of the total cost of the measures and services, up to a maximum of $750, with the total job cost not to exceed $2,500.

During 2007, Comfort Partners provided services to about 8,000 households with a budget of over $21 million.

For more information:

The text of the Act can be accessed at:
www.njleg.state.nj.us/9899/Bills/a0500/16_i1.htm

FAQs about the USF can be found at:
www.state.nj.us/bpu/residential/assistance/usf.html

Several evaluations of New Jersey Comfort Partners are on the APPRISE website at:
www.appriseinc.org/reports_usage.htm

For more information on energy efficiency programs go to:
www.njcleanenergy.com/

New Jersey Clean Energy Program Annual Report

 

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Page Last Updated: August 28, 2008