Overview of Low-Income Restructuring
Legislation and Implementation
Texas
Last Updated: March 2009
Summary
Texas' restructuring legislation authorized a system benefits charge (SBC), a nonbypassable fee of up to 65 cents per megawatt hour, to fund, among other things, low-income rate assistance and energy efficiency.
As a result, a low-income electric discount program called LITE-UP Texas began in January 2002, providing eligible households with a 10 percent electric bill discount that was increased to 17 percent in May – a discount that lasted less than three years, only to be reinstated for the summer of 2007 and the next two summers.
Despite enrolling nearly 800,000 households at its peak and being considered a national model for its automatic enrollment system, the discount faced trouble early on.
After only a year and a half, the Texas legislature began raiding the SBC to shore up the state general fund. The first raid, in the spring of 2003, took $183 million in SBC funds. That meant less funding for the discount and it went back down to 10 percent. The funding reduction, along with stricter eligibility rules effective in April of 2004, resulted in enrollment plummeting to about 350,000. The legislature also changed the language of the original 1999 deregulation law to allow it to transfer the SBC funds into general revenue funds.
The final blow came when the 2005 legislature shifted all SBC funds – about $427 million for the biennium – to the state general fund. As a result, nearly 400,000 low-income Texans lost their discount as of August 31, 2005.
In June 2007, the Texas legislature appropriated $30 million from the SBC for a summer discount (July through October) of about 12 percent, and $170 million for a summer (May through August ) discount for the next two years. About 300,000 households were receiving the discount as of September 2008.
(For more information on the initial LITE-UP program, see the LIHEAP Networker, issues # 42 and # 50.)
Noting that Texas electricity rates had risen to among the highest in the nation, several legislators had unsuccessfully – until 2007 – attempted to reinstate the discount. They pointed out that since deregulation took effect in 2002, the four power companies that control 70 percent of the Texas residential electricity market had increased their rates an average of 83 percent. As of November 2008, the average residential electricity rate in Texas was 13.23 cents per kWh compared to 8.40 cents in November of 2001.
Some utilities provided energy assistance aid in an attempt to make up for the decreased discount. For example, TXU Energy, which serves the Dallas area, provided eligible customers a 10 percent discount on their 2006 electricity bills, and it continued that discount year round after the above-mentioned 2007 summer discount was implemented. In October 2007, after TXU completed its merger agreement with Texas Energy Future Holdings Limited Partnership, it announced it would spend $25 million per year for five years to continue the 10 percent discount. About 123,000 households were receiving it as of January 2009.
Energy Efficiency
The rate discount was not the only casualty of the legislature; low-income energy efficiency programs also took a hit. The restructuring law stipulated that SBC funding would be used to continue weatherization programs that had previously been funded through utility rates and for customer education about electric deregulation.
SBC weatherization monies, about $8.9 million during FY 2003, were "piggybacked" with federal WAP funds to reach more low-income households and provide additional weatherization services such as new and/or insulated roofs, heating/cooling system replacement, and upgrading or repairs of windows and interior walls. The SBF allowed the state to address many homes that normally wouldn't have been weatherized.
However, as a result of the above-mentioned legislative raid, SBC funding for weatherization was eliminated and some $21 million that had been designated for that purpose was shifted to the state general fund in late 2003.
The 2005 legislature attempted to restore some funding for weatherization by passing SB 712, which required that SBF funds for low-income weatherization that were zeroed out in 2003 be restored by individual utilities as part of their energy efficiency plans.
As of August 2006, as part of a stipulation with the Texas PUC and advocates, utilities have committed to spending $5 million annually (including 2006) on weatherization services that will be coordinated with the Texas Department of Housing and Community Affairs (TDHCA), the federal weatherization grantee, under a program referred to as the targeted low-income weatherization program. For 2007, TDHCA reported over $2 million in utility-funded expenditures; for 2008 the amount was $825,000.
Utilities also spend several million dollars yearly on existing standard offer weatherization programs, known as the Hard-to-Reach Programs, available to households with incomes up to 200 percent of federal poverty guidelines. Administered by the utilities and implemented by private contractors who receive incentives for measures installed, the programs offer free, low-cost weatherization and energy-efficiency improvements. Utilities have been offering these programs since 2002, as mandated by the 1999 restructuring legislation. The largest of them, offered to TXU customers, is called the Low-Income Weatherization Program, not to be confused with the federal WAP or the targeted low-income weatherization program, administered by TDHCA.
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Page Last Updated: March 25, 2009
