Overview of Low-Income Restructuring
Legislation and Implementation
Massachusetts
Last updated: May 2007
More than a dozen gas, electric and combination investor-owned utilities in Massachusetts offer low-income utility rate discounts that totaled over $52.5 million in FY 2006 (compared to $42 million in FY 2005) and ranged from 11 to 43 percent of low-income households' bills. Around 300,000 households received the discount during 2006.
The natural gas discount is mandated by state regulation, while the electric discount is codified through the state's 1997 restructuring legislation. The increase is in part due to full scale implementation of an automatic enrollment process (see below).
Additionally, in response to higher energy prices during the winter of 2005-2006, the Massachusetts legislature raised the income eligibility ceiling for the discounts to 200 percent of the federal poverty guidelines from the previous level of 175 percent.
While the Massachusetts discounts are some of the most generous in the nation, there have been problems with them, as pointed out by the Massachusetts Community Action Program Directors' Association, Inc., (MASSCAP) in comments filed in January 2005 as part of a state regulatory proceeding. While restructuring promised small consumers new choices and lower prices, it has, instead, brought skyrocketing electricity prices, new price volatility and little choice in electricity suppliers for residential customers, MASSCAP wrote. MASSCAP represents the community action agencies that administer most federal and utility funded low-income energy assistance and energy efficiency programs across the state.
As a result of restructuring, MASSCAP said, the low-income discount hasn't always kept up with escalating supply costs, and, in fact, it has been eroded in value. Because the discount is applied only to distribution rates on electricity and natural gas bills and not the energy (or supply) rates, price increases have been as much as 41 percent or greater for low-income households. In its comments, MASSCAP said the full value of the low-income discount should be restored and arrearage management programs, in place at several utilities, should be expanded to other utilities.
A second problem noted by MASSCAP, as well as by the Department of Telecommunications and Energy (DTE), the regulatory agency, and others, is that less than one third of those eligible for the discounts have received them. (Note: As of April 2007, the DTE was reorganized into two agencies and the Department of Public Utilities now handles electric and gas utility issues formerly handled by DTE). Historically, LIHEAP recipients have been automatically enrolled into their utility's discounts as part of the LIHEAP application process. However, LIHEAP serves only a fraction of the low-income population; as a result, a significant percentage of the state's low-income aren't reached through the LIHEAP process. Advocates sought a method wherein recipients of other means tested low-income programs such as food stamps, medical aid and TANF could automatically receive the discounts.
As a result of efforts by MASSCAP, the DTE and others, an expanded automatic enrollment process for the discounts is now underway in Massachusetts and, as mentioned above, it has shown significant results. It began in December 2001, when the DTE opened a proceeding (D.T.E. 01-106), to investigate increasing the penetration rate for the electric discount, as well as discounts for natural gas and telephone service.
In August 2003, after extensive meetings with stakeholders, the DTE issued an order establishing a process for automatic enrollment for the gas and electric discounts. The order stipulated the following:
- A Memorandum of Understanding between DTE and the state's Executive Office of Health and Human Services (EOHHS) outlined changes that were to be made to EOHHS application forms for such means-tested benefit programs as food stamps and TANF. (EOHHS administers a range of health and human service programs through 15 departments within it and has a database of program beneficiaries).
- Applicants are asked to give their permission to release limited information to utility companies (name, address, a unique identifying number). This allows EOHHS to certify that the EOHHS applicant/beneficiary is income eligible for utility discounts.
- Utilities must share information electronically with EOHHS to identify those EOHHS-served households that are income-eligible for the discounts. EOHHS will use its database to match the names on customer lists provided by utilities.
- The utilities must presumptively place these income-eligible households on the appropriate discount rate within 60 of learning that they are income eligible. The utilities also must send notices to the households letting them know that they have been placed on the discount rate and that they have the right to be removed from the discount if they so request.
It took over a year for various issues related to implementation of the August order, including cost recovery by the utilities, to be resolved. On December 6, 2004, the DTE ordered all state electric and gas companies to share their customer lists within 30 days of the order date with the EOHHS so that automatic enrollment could begin. That agency is responsible for identifying eligible utility customers and then directing the utilities to automatically enroll them unless the customers opt out. An opt-out form may be placed on utility websites.
By early 2006, the DTE noted that discount enrollment had increased, but it hadn't yet analyzed records to determine whether the gains could be attributed to automatic enrollment. It also noted that some utilities had start-up and implementation problems with the database matching process during 2005; as a result, automatic enrollment wasn't fully underway until late in the year.
As of mid-2006, the process had begun to show results: an estimated 61,000 additional households had been enrolled in gas or electric utility discounts, with an aggregate savings to the households of at least $9 million, according to the National Consumer Law Center, one of the advocacy groups that worked on the enrollment process.
The DTE requires utilities to submit quarterly reports tracking the number of customers enrolled in the discounts through the computer match as well as by traditional means such as the LIHEAP application process at community action agencies and through utilities. The tracking began in April 2005 and reports were available through June 2006. About 24,295 additional electric utility customers received the discount via computer matching along with 36,955 gas customers, for a total of over 309,000 in June 2006, compared to 237,742 in April 2005.
Additionally, during December of 2003, the major utilities joined together with state agencies, community action agencies to launch a new effort called "Energy Bucks," an integrated campaign combining grassroots outreach, community-based activities and advertising to build awareness of the variety of energy efficiency and discount services available to families on limited income and encourage them to utilize the services.
Energy Efficiency
Massachusetts' restructuring law also established a low-income conservation fund through a 0.25 mills per kWh charge on every electric customer, which amounts to about $15 million per year for low-income electric efficiency programs. A conservation charge on natural gas customers funds about $7 million in gas low-income energy efficiency programs.
The programs are implemented through the existing weatherization and energy assistance network, primarily community action agencies. The utility funds are combined with federal weatherization funds to expand the number of jobs completed and the work performed in low-income dwellings. Typical measures include attic and/or wall insulation, blower door directed air sealing, heating system repairs and replacements and ventilation.
About 17,000 low-income households received efficiency services through the utility funds during FY 2006. Services are offered to customers with incomes below 60 percent of the state's median income, which equates to about 225 percent of federal poverty guidelines.
According to MASSCAP, these programs are among the leading low-income energy efficiency programs in the nation and have earned wide recognition for their comprehensiveness and effectiveness. Impact evaluation studies show savings of 10 percent of electricity consumption and 20 percent or more of natural gas consumption. The programs are coordinated with each other and with the U.S. Department of Energy Weatherization Assistance Program.
Other issues
All electric customer classes in Massachusetts, including low-income, were affected when lower-priced standard offer service ended as of March 1, 2005, and all customers reverted to default service, now called basic service, which is based on open market prices.
The state's Electric Restructuring Act had established standard offer service (SOS) and default service during the seven-year period that was intended to transition customers from electricity sold under a monopoly system to electricity sold in a competitive market. SOS provided a discounted rate for electricity to those who were customers of their electric company as of March 1, 1998 , and who remained so during the transition period.
Customers who left SOS for a competitive energy supplier and then returned to regulated service or who were not customers as of March 1998 were required to take default service, which was typically higher than SOS. However, low-income customers who received the utility rate discounts were exempt from default service and received SOS until its cessation on March 1, 2005.
For more information:
Documents filed on the low-income discount enrollment issue are available at the DPU website's File Room, type in 01-106.
Massachusetts Community Action Program Directors Association and the Massachusetts Energy Directors Association, Additional Comments in proceeding DTE 01-106, “Increasing the Penetration Rate for Discounted Electric, Gas and Telephone Service, November 14, 2002.
Massachusetts Division of Energy Resources, "Electric Discount Rate Outreach and Eligibility Report: Findings and Recommendations," January 2002.
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Page Last Updated: January 11, 2008
