Price Volatility Keeps Program Directors Looking for Solutions

For LIHEAP programs in the Northeast and Midwest , where heating oil and propane usage is significant, programs to help ease fuel costs for low-income households are like the markets themselves – unpredictable and problematic.

During FY 2006, about a dozen states had fuel discounts or other price reduction tools in place for their households that use delivered fuels such as heating oil, propane and kerosene. These included margin-over-rack (MOR) programs that allow oil dealers to charge a limited amount above their wholesale prices and summer fill or pre-buy programs where the LIHEAP office purchases fuels during the summer months when prices are supposedly lower, although they haven't been lately.

However, some of these longstanding approaches aren't paying off as well as they have in the past, mostly due to changes in the fuel markets and price volatility.

Vermont has had a summer fill program since 1991. Vermont operated the program this past summer and plans to continue it, according to LIHEAP Director Pam Dalley, even though summer prices didn't fall (they were higher than winter prices), dealer participation has fallen off since the first year, and the state is looking into other options.

Minnesota started a propane pre-buy program in late June, using $4 million in LIHEAP funds.  As of early August it had spent $3.7 million and purchased over 2 million gallons of fuel.  Director John Harvanko said the state saw limited savings because prices stayed high during the summer. The state is currently evaluating the program.

Iowa has also conducted a summer pre-buy for a number of years. According to Director Jerry McKim, the program savings, which sometimes have been negligible, are not as important as the fact that it provides low-income households an early fuel delivery they otherwise wouldn't get.

In Maine , where 70 percent of low-income households use heating oil, a new program has been implemented despite much opposition from oil vendors. The vendors have two options: they can offer a discount of $.04 to $.07 a gallon to LIHEAP households, or charge a margin from $.28 to $.37 per gallon depending on their location. (The MOR program is similar to programs offered in Massachusetts , Connecticut and New York .) The LIHEAP office believes it will be able to buy 500,000 more gallons of oil under this system than it would have otherwise.

Maine isn't the only state seeing opposition to its MOR program. Massachusetts has had the system since 1991 and has reported average yearly savings of about $2.7 million from it for the past five years. At a workshop on delivered fuels at the National Low Income Energy Consortium last June, Michael Ferrante, a spokesman for the state's heating oil industry, said the MOR system was outdated and inadequate and that the industry opposes it. He pointed out that oil dealers, generally small businesses, face a stagnant customer base because they are losing customers to natural gas, and they are less able to deal with increasing price volatility and increased operating expenses.

Nonetheless, Massachusetts is continuing its MOR program this year, with dealers allowed to charge a margin of $.30 over wholesale prices, up from $.285 several years ago. While the higher margin results in less savings per gallon, the state reported average savings of $.23 per gallon in its LIHEAP plan. Likewise, Connecticut continues its MOR program, which saved it an average $2 million annually for the last five years, but it has increased the margin this year to $.31.

Finally, some observers say the heating oil industry is changing because the traditional “mom and pop” dealers are being swallowed up by large companies, some of which, according to one LIHEAP director, are harder to negotiate with on behalf of low-income customers.

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Michigan Commission Approves More LIEE Funds

The Michigan Public Service Commission (MPSC) on October 24 awarded nine organizations $45 million in grants to help low- income utility customers with their bills.

The grants are part of the Low-Income Energy and Efficiency Fund (LIEE), which provides energy bill assistance for low-income customers and promotes the efficient use of energy by all customer classes. They were issued two months after the Commission requested proposals on August 21.

Most of the money was awarded to the Michigan Department of Human Services (DHS), the LIHEAP grantee. Of the $31 million DHS received, $28 million will be spent under the State Emergency Relief and Energy Direct program to prevent threatened shutoff of energy services, and $3 million for an Arrearage Payment program.

Other recipients included the Michigan Community Action Agency Association, which will provide $2.3 million for direct energy assistance.   The Heat and Warmth Fund and the Salvation Army each received $4.8 million for their low- income energy programs.

The MPSC has been collecting LIEE funds since 2002 and has awarded over $250 million to state agencies and nonprofits for low-income energy assistance and energy efficiency projects through rounds of competitive bidding at least once per year.

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Colorado Has New Funding Source

A Colorado assistance organization expects to distribute more energy assistance funding in the coming year as a result of a new law effective September 1 requiring energy companies to offer programs that provide their customers with the opportunity to donate to energy assistance.

Energy Outreach Colorado (EOC), a nonprofit statewide fuel fund, worked with the Colorado legislature and energy companies to pass the Low-Income Energy Assistance Act in 2005. 

As a result, the six investor-owned utilities operating in the state – Xcel Energy, Atmos Energy, Aquila , Kinder Morgan, Eastern Colorado Utilities and Colorado Natural Gas – have created check-off programs on their energy bills to enable customers to include a tax-deductible donation each month when paying their bills. Other energy companies launched a variety of new initiatives during September in order to encourage customer donations, including several rural electric utilities that are adding a check-off option to their bills

When the Act passed, EOC estimated it would generate from $2 to $3 million in donations yearly.  ECO announced in October that it would distribute $6.15 million to energy assistance organizations across the state in the next year, including $2.15 million to the Colorado LIHEAP.

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Rural Alaskans Struggle with Exorbitant Utility Bills

Rural Alaskan villagers are faced with energy costs that are two to five times higher than those in more urban areas of the state, which, in turn, are higher than those in the lower 48 states. As winter approaches, many rural households are delinquent with energy payments and may face shutoffs.

Unpaid electric bills have mounted for customers of Alaska Village Electric Cooperative (AVEC). More than 300 residential customers owed $900,000 at the beginning of the summer, a record amount, said Meera Kohler, president and chief executive of the Electric Cooperative. She added that rates will rise if people don't pay.

AVEC is a non-profit electric utility with the largest service area in the world, serving 52 villages from Kivalina in the north to Old Harbor on Kodiak Island in the south, and from Gambell on St. Lawrence Island in the west to Minto in the east.

Only one of those villages is on the state road system, which means fuel must be brought in by barge or plane. Rising fuel and transportation prices have boosted the cost of everything, while high unemployment in many villages adds to a household's inability to pay utility bills.

In Nunapitchuk, a village of 516 in Western Alaska , unemployment hovers around 80 percent. In Emmonak, where the price of gasoline is more than $5 a gallon, many people won't be able to pay their electric bills even with help, according to city manager Martin Moore. Villagers in Elim, where winter temperatures can fall to minus 50, pay $4.65 for a gallon of gasoline, threatening the subsistence lifestyle for hunters who travel by snow machine to get moose or by boat to fish for salmon. Other villages report that heating oil costs up to $7 per gallon.

The high cost of transportation and fuel affects the price of electricity where diesel generators provide electrical power, the case in more than 180 Alaska villages. AVEC charges residential customers 47 cents per kWh, more than three times the residential rates of Chugach Electric Association, which serves much of Southcentral Alaska .

Residents of rural villages get some help from Power Cost Equalization (PCE), a state-funded program that has paid a portion of the monthly electric bills of rural consumers since1985. PCE funding is provided for 97 rural electric utilities, which collectively serve about 90 communities and 76,000 residents across the state.

Customer eligibility for the PCE subsidy is based on usage; residential consumers can receive support for up to 500 kWh hours per month.

The PCE program this year will help cut rural residential costs in half since the legislature fully funded the program last spring. In 2005, $3.6 million helped pay electric bills for 6,550 rural low-income households.

LIHEAP benefits will also be available November 1. LIHEAP helped about 9,500 households with energy bills last winter, according to LIHEAP Director Patty Donovan. While LIHEAP pays mostly for home heating expenses, 25 percent of the benefit can be applied to electric bills. The average Alaska LIHEAP recipient received $1,100 last year, and could have applied $275 towards electricity bills, Donovan said.

In the meantime, Citgo, the oil company owned by the Venezuelan government, announced during the summer that it was offering free heating oil valued at about $5 million to 151 Native villages. Every household in each village – more than 12,000 homes – would get 100 gallons for free under a program to begin November 1.

According to news reports, most villages have accepted the oil, but at least four have turned it down after the controversy surrounding the Venezuelan president's remarks at the United Nations on September 20. As a result of the news reports, donors from across the state and country sent money to help those villagers with their fuel bills.

One tribal organization, the Aleutian Pribilof Islands Association, said it couldn't support the Venezuelan political agenda, and instead set up accounts to help the villages pay for fuel.

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PA Says Residential Customers Must Continue to Pay Low-Income Costs

The Pennsylvania Public Utility Commission (PUC) has decided to stick with its current funding mechanism for the state's low-income rate affordability programs (called CAPs or Customer Assistance Programs), that is, residential customers will continue to foot the bill.

In a decision issued October 19, the PUC concluded a review of CAP funding and other issues, and provided direction for new program guidelines. The decision said that CAP costs should be borne by the only customer class whose members are eligible for the program - residential customers. “The Commission should not initiate a policy change that could have a detrimental impact on economic development and the climate for business and jobs within the Commonwealth,” the decision stated.

The PUC opened a proceeding in December 2005 and requested comments from stakeholders on CAP funding levels, cost recovery mechanisms, design and other issues. Representatives of residential customers, including the state's Office of Consumer Advocate (OCA), as well as the Commission's staff, recommended that current policy be changed so that CAP costs could be spread among all customer classes: residential, commercial and industrial. Business customers and utilities recommended that the utilities continue collecting CAP costs from the residential class.

Comments filed by the OCA noted that in 19 out of the 26 states that have low-income rate affordability programs, costs are spread among all customer classes.

In states with the largest expenditures on low-income rate affordability programs – California , Ohio , New Jersey , Illinois and Massachusetts – recovery of program costs is assessed to all customer classes, the OCA noted. In Pennsylvania , residential customers bear most CAP costs, although several utilities charge a small percentage of those costs to commercial or industrial customers.

Among other issues addressed by the October 19 decision:

Cost recovery: Utilities will be allowed the option to recover CAP costs through a surcharge rather than a base rate (currently both methods are used). This option, the PUC said, would establish a charge that tracks the actual amount spent and allows customer rates to be adjusted on a regular basis to recover the actual costs in a transparent, efficient and fair manner.

Funding levels: The PUC should not attempt to establish a specific funding level for all utilities. Instead, it should continue to review funding on a case-by-case basis as part of each utility's triennial review.

Policy guidance: The PUC should revise its policy statement on CAPs to expressly state that the Commission will consider the interests of all customers, not just those enrolled in CAPs programs.

Administrative costs and arrearage forgiveness programs: Utilities can recover administrative costs as a legitimate CAP cost; they can also recover arrearage forgiveness program costs as long as they can prove they haven’t already recovered these costs in their claims for uncollectible expenses.

The Commission's Law Bureau will now prepare a proposed rulemaking based on the October 19 decision for further consideration by the Commission.

Pennsylvania 's electric and gas utilities spent nearly $243 million on CAPS during 2005, enrolling over 350,000 households.

For more information, see the PUC's October 19 decision and its 2005 report on CAPs and other universal service programs. To read the stakeholder comments on CAPs, visit the PUC web site's document search page and search docket M-00051923.

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New Hampshire Expands Electric Assistance Enrollment

Beginning October 1, New Hampshire 's Electric Assistance Program (EAP), entered its fourth year with a new program design that increases enrollment to about 30,000 households.

The change came about after the New Hampshire Public Utilities Commission (PUC) asked stakeholders to review the program for possible changes for FY 2007. After several months of review, the PUC issued an order incorporating the new program design, which was based on consensus among the stakeholders including utilities, the state LIHEAP office, the community action association and the utility consumer advocate.

The new design made the EAP a uniform statewide program, rather than utility specific, maintained the program funding level at 1.2 mils per kWh (about $14 million annually) and expanded enrollment to about 30,000 households annually, up from about 24,000 previously.

The PUC and stakeholders favored increased EAP enrollment in order to maintain the FY 2006 level, which had been expanded in response to escalating energy costs. Late in 2005, the New Hampshire legislature temporarily boosted EAP funding by allowing $3 million to be borrowed from the state's energy efficiency programs. The funding law, SB 228, required the state's electric utilities to allocate more money to the EAP, up to $3 million, and then pay themselves back from the energy efficiency fund over the next three years. As a result, about 6,500 low-income households on the EAP waiting list received assistance during the winter of 2006 through a temporary program called the Supplemental Winter EAP.

Another change is that benefit level determination criteria will be based on percentages of the federal poverty guidelines rather than household income alone, in order to help target benefits to the neediest.  As a result of this change and the expanded enrollment, the average EAP benefit will be smaller for some households with higher incomes and larger for some with smaller incomes.  There are six benefit levels for households from at or below 75 percent of FPG to 185 percent, with an average annual benefit of about $400 compared to over $600 previously.

The new EAP design eliminated different discount levels for electric and non-electric heat usage. The program was originally structured so that low-income households had electric bill payments equal to, on average, four percent of household income for general use customers and six percent for electric heat users; under the new design customers are responsible for electric bills equal to approximately 4.5 percent of household income. Electric heat users will receive a LIHEAP benefit for the heating portion of their bill.

During FY 2005, the EAP provided discounts to 26,783 households at a cost of about $13.7 million. The program, along with energy efficiency programs for all program classes, is funded by a system benefits charge of 3.0 mills per kWh paid by all electric customers. The charge is divided between the EAP (1.2 mills) and the energy efficiency programs (1.8 mills).

For more information, see Order No 24,664.

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Iowa Participates in Energy/Health Survey

The Iowa Bureau of Energy Assistance, the state LIHEAP grantee, has entered into an agreement with the Iowa Department of Public Health (DPH) through which the health agency will collect data, conduct research and produce a report on the public health implications related to unaffordable energy.

The DPH will add two questions (see below) supplied by the LIHEAP office to its Behavioral Risk Factor Surveillance System (BRFSS) survey for calendar year 2007. In fiscal year 2008, DPH will conduct cross tabulations between the supplied questions and the remaining survey questions and report its findings.

Additionally, DPH will produce a white paper that includes a bibliography of current research focusing on topics such as fire safety risk, air quality risk, nutritional health impacts and prevalence of death, disease, and illness associated with indoor air temperatures and weather-related health threats, including the public health impact of the disconnection of home energy service.

The questions are as follows:

"Was there ever a time in the past 12 months when you wanted to use your main source of heat but could not for one or more of the following reasons: (a) you ran out of fuel oil, kerosene, LPG, propane, coal, or wood because you were unable to pay for a delivery; (b) the utility company disconnected your gas or electric service because you were unable to pay your bill?"

"In the past 12 months, did you: keep your home at a temperature that you felt was unsafe or unhealthy at any time of the year? (with possible answers being: almost every month, some months, only 1 or 2 months, never.)

More information about the BRFSS can be found at its web site. It is the world's largest, on-going telephone health survey system, tracking health conditions and risk behaviors in the U.S. yearly since 1984. Conducted by all state health departments with support from the Centers for Disease Control, BRFSS provides state-specific information about many health issues.

Federal, state, and local health officials and researchers use this information to track health risks, identify emerging problems, prevent disease, and improve treatment. The Iowa LIHEAP office is interested in the results in order to better educate policy makers about the adverse health impacts of unaffordable energy bills and energy disconnections, according to Director Jerry McKim.

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FY 2006 REACH Grants Awarded

The Department of Health and Human Services has awarded FY 2006 grants totaling over $6.5 million under the Residential Energy Assistance Challenge (REACH) Option Program to 4 states, 14 tribes and 2 territories.

Illinois, Montana and Ohio all received $1 million grants. The District of Columbia's $1.1 million grant included $100,000 for efficiency education services. This is the third REACH grant received by the District, the second by Montana and Illinois and the first by Ohio . State projects are awarded for a three-year period.

The following tribes received grants of $150,000: Assiniboine & Sioux Tribe (MT), Blackfeet Tribe, (MT), Cherokee Nation (OK), Chickasaw Nation (OK), Choctaw Nation (OK), Kickapoo Tribe (OK), Miami Tribe (OK), Northern Cheyenne Tribe (MT), Rosebud Sioux Tribe (SD), Shoshone Bannock Tribe (ID), and United Tribes of Kansas & Southeast Nebraska (KS). The Central Council of Tlingit and Haida (AK) received $164,724; the Grand Traverse Band (MI) received $162,356, and the Quileute Indian Tribe (WA) received $175,000.

The Grand Traverse Band, the Central Council of Tlingit and Haida and the Quileute Tribe awards included funds for energy efficiency education.

Several of the tribes have received awards in other years. Four tribes – Kickapoo, Miami , Assiniboine & Sioux and Quileute are first-time recipients (see related article.) Project periods extend up to 24 months for tribes.

For more information, visit the LIHEAP Clearinghouse web site for state and tribal REACH history and project summaries and evaluations, if available.

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Tribal REACH Projects

Three tribes are first-time recipients of 2006 REACH awards for projects that will reduce household energy costs.

The Miami Tribe in Oklahoma has an agreement with the city of Miami to provide energy audits to assess the energy efficiency of homes. Energy efficiency measures provided for a house could include replacing a water heater or furnace with an energy-efficient model, replacing windows and doors and installing insulation and ceiling fans. Some homes may receive rooftop solar panels.

The tribe plans to weatherize eight houses each year for two years, targeting homes with elderly, disabled or young children. Lou Bowman, social services director, said the project goes beyond LIHEAP assistance by providing a more permanent solution to energy self-sufficiency. The tribe plans to monitor the program by comparing households' energy bills prior to and after installation of efficiency measure.

All Miami tribal households will receive flyers with tips for lowering energy bills.

Montana's Assiniboine and Sioux Tribes' project will start by reviewing the energy use of all LIHEAP applicants to determine which households are most in need of weatherization. Energy efficient measures provided to the selected houses will include furnace repair or replacement, insulation, door and window replacement or anything to help reduce the energy use, said Clarence MacDonald, director of community services.

The project will include energy education and will target households with the lowest incomes. Energy usage will be monitored to determine savings.

The Quileute Nation in Washington will identify vulnerable households that are at risk due to lack of heating and provide measures to reduce energy costs.

Many rural homes on the reservation are dependent on electric lines that run for long distances. Power outages sometimes last for weeks, causing hardships and health threats for families. Four households will receive wind turbines and/or solar panels to reduce the risk of loss of power.

Fifty households will receive energy conservation education through workshops and weatherization measures. Another ten households will receive new energy-efficient refrigerators.

The tribe is working with Northwest Sustainable Energy for Economic Development, a non-profit, that will provide technical, financial and management services for the project.

Visit the LIHEAP Clearinghouse for more information on tribal REACH grants.

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Energy Forums in Nebraska Address Efficiency and Needs

Nebraska has a new network this year that is promoting energy efficiency and energy education. Nebraska Energy Assistance Network (NEAN) is a statewide coalition of utilities, governmental agencies, regulators, and other organizations such as Salvation Army and community action agencies, that have come together in the realization that bills are not getting cheaper and people need more energy-efficient homes, energy education and information about state and local assistance programs.

Mike Kelly, state LIHEAP director, said, “It's good for different groups to come together with the same thoughts – that there are people without enough money to meet their basic needs and they need help.”

NEAN's objectives include educating customers on how to understand and manage their energy costs, encouraging and motivating customers to reduce energy costs by using energy wisely, and informing customers of energy related resources available within the community.

NEAN is conducting 21 forums at Senior Centers around the state during October and November. Forum participants will get practical tips on how to use less energy in their home by using efficient lighting, sealing around windows and doors, maintaining their heating and cooling system and minimizing water usage. NEAN will distribute up to 1,000 weatherization kits to participants and provide information about financial and material resources to help them meet their needs.

More information about NEAN will be available at its web site.

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BPA Makes Largest-Ever Weatherization Contributions

Low-income households in Washington , Oregon , Idaho and Montana will benefit from increased weatherization funds allocated to these states by the Bonneville Power Administration (BPA).

BPA, the region's federal power marketing agency, announced on October 23 that the states will receive $15 million over the rate period of FY 2007-2009, the largest amount BPA has provided for low- income weatherization in its 69-year history.

The weatherization funds are allocated to each of the four states based on their relative numbers of low-income residents per the 2000 census. A total of $500,000 will be set aside annually for Northwest tribal weatherization programs and the remaining $4.5 million annual allocation is divided among the states as follows: Washington will receive $2,305,000, Oregon $1,235,000, Idaho $518,000, and Montana $441,000.

During the most recent BPA rate period, from 2000 to 2006, BPA committed about $3.7 million per year for weatherization in the four states and $150,000 per year for the tribal weatherization programs.

BPA distributes its weatherization funds through cooperative agreements with the four states.  The funds are to be used in conjunction with existing state-run low-income weatherization programs that follow U.S. Department of Energy Weather Assistance Program guidelines. Funds earmarked for low-income tribal weatherization programs are allocated similarly through direct contracts with Northwest tribes.

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Low-Income Energy Resources

2006 NLIEC Presentations:  Some presentations from the June NLIEC conference in Washington are now available online at the web page for the 2007 Conference agenda. Click on the name of any speaker that is underlined to access the speaker's presentation.

2003 Joint Annual Report, District of Columbia Energy Office (DCEO), August 2003. Report on the District of Columbia 's successful annual Joint Utility Discount Day, a city-wide fall event to enroll eligible households in LIHEAP and in low- income natural gas, electric, telephone and water discounts.  Describes the 2002 event, the various discounts, the outreach activities to increase LIHEAP and discount enrollments conducted by various entities including the LIHEAP office, and discount day results.

Report on 2005 Universal Service Programs and Collection Performance of the Pennsylvania Electric Distribution and Natural Gas Distribution Companies. Pennsylvania Public Utilities Commission, October 2006. Latest annual summary on the universal service and collection performance of the major electric and natural gas distribution companies. Details their universal service programs types, which include customer bill assistance plans (called CAPs or customer assistance plans) usage reduction/ energy conservation, arrears forgiveness, and utility hardship or fuel funds, including participation rates, spending levels, program costs, and source of income for participants. Breaks down spending by program component, i.e., administrative costs, customer credits and arrears forgiveness. The report also details utility hardship funds, listing ratepayer and utility shareholder contributions, number of households served, and average grants received.

Ohio Home Weatherization Assistance Program (HWAP) Training Evaluation, Ohio Home Weatherization Assistance Program (HWAP) Process Evaluation , Ohio Home Weatherization Assistance Program (HWAP) Impact Evaluation, prepared by Quantec, 2006.  A series of evaluations for the Ohio Home Weatherization Assistance Program covering the program's impacts, processes and training during 2003. The impact evaluation concluded that Ohio has one of the most successful programs in the nation in terms of energy savings when compared with recent studies from other states.

Report on the Impacts and Costs of the Iowa Low-Income Weatherization Program — Calendar Year 2004, August 2005. Found that for homes weatherized by the program in 2004, there was an average savings of $389 per household per year in heating and electric costs. Also reported was a savings to investment ratio of 1.4; improved client health and safety through the identification and mitigation of carbon monoxide, moisture, and other indoor air quality problems; retention of affordable housing for low-income persons and reduced utility arrearages.

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