LIHEAP NETWORKER ISSUE #39

LIHEAP NETWORKER
ISSUE #39
JULY 2001

Compiled by the LIHEAP Clearinghouse

(Note: The content of this publication does not necessarily reflect the views or policies of the U.S. Department of Health and
Human Services, nor does mention of trade names, commercial products, organizations, or program activities imply
endorsement by the U.S. Government or compliance with HHS regulations).

FY 2001 LIHEAP leveraging incentive grants have been announced by HHS. Awards are based on leveraging activities carried out by LIHEAP grantees during FY 2000. Check for more information on the Federal LIHEAP web site and the LIHEAP Clearinghouse web site

As of July 10, based on approvals by both houses, Congress was expected to appropriate $300 million for FY 2001 LIHEAP emergency contingency funds. Once LIHEAP emergency contingency funds are appropriated, they then must be released by the President, who has the option to release all or part of the funds to all or part of the states.

Additional 2001 funding will be welcomed by states after a tumultuous winter with some of the coldest weather and highest price spikes in the history of the program.

Because of the unusual winter, most states have spent all of their LIHEAP funds and have little reserves left either for summer cooling programs or for the start-up of the FY 2002 program, according to LIHEAP directors attending the National Energy Assistance Director’s (NEADA) annual meeting in June in Cincinnati.

LIHEAP directors also expressed concern over FY 2002 funding levels. At this point it’s unknown what amount Congress will appropriate, but LIHEAP Directors said a return to pre-2000 funding levels would create serious problems for the program after so many states expanded their eligibility levels and increased caseloads during 2000 and 2001. The latest figures from NEADA show that LIHEAP will serve at least 5.1 million households during 2001, an increase of 1.1 million over last year. At least 15 states have raised their poverty income guidelines to the maximum allowable – either 60 percent of their state’s median income or the federal maximum of 150 percent.

Additional LIHEAP funds should allow states that have exhausted their resources to go ahead with cooling programs or summer fill programs. The latter provide LIHEAP households delivered fuels (heating oil, propane or kerosene) at a reduced summer rate. Some states purchase and deliver the reduced price fuel during the summer months; others attain the reduced rate through a contract with vendors and deliver the fuel once the program has opened in the fall.

The Office of Community Services (OCS) and the Division of Energy Assistance (DEA) within the Department of Health and Human Services will have new leadership effective this month. DEA administers LIHEAP at the federal level.

Clarence H. Carter, former commissioner of the Virginia Department of Social Services (DSS), has been appointed director of OCS, the position formerly held by Don Sykes. Carter most recently served as Executive Director of the Virginia Tobacco Settlement Foundation. As commissioner of the Virginia DSS, he managed Virginia's social services programs, advised the Governor on legislative and social issues and trends and assisted in the design of the state's welfare reform legislation.

Jan Fox, director of the DEA since 1989, has retired and has been replaced by acting director Linda Hill, who has been at the division since 1990.

Fox spent over 32 years with the federal government, working with the Office of Management and Budget before coming to HHS.

Despite the fact that pre-payment meters are gaining interest worldwide, with programs operating in the United Kingdom, South Africa, Canada, New Zealand and the United States, and utilities report that their low-income customers appreciate them, they are not without controversy.

Proponents say the devices reduce utility bad debt and enable customers, especially the low income, to avoid disconnections by managing and monitoring their energy usage.

Opponents say they force customers to self-terminate their electricity, possibly with disastrous consequences and discriminate against low-income customers.

Prepaid meters, like phone cards, allow customers to use only the amount of electric service they’ve paid for in advance. Prepaid systems generally consist of three components: a display unit, a payment card, and a pay center. The customer takes the payment card to a payment center and credits the card with the desired amount of money then inserts the card in the display unit, which updates the credit level. The display unit is located in the customer's home and displays information such as the amount of credit remaining, rate use in dollars and kWh, and the number of days of credit remaining. The display unit issues an audible and/or written warning alert when credit is running low.

The following are summaries of pre-pay projects from the utility point of view:

Arizona
Salt River Project (SRP) in Arizona implemented a 'Pay As You Go' pilot program in 1993 with 2,000 participants. That program has grown to 9,000 with a target of 20,000 'budget challenged' participants by April 2002. Participants cross all income levels but medical accounts are prohibited. Customers can sign on with arrears and 30 percent of each payment is used to pay for arrears.

Pay centers are conveniently located and may have 24-hour access, 6 days per week. The average number of days between purchase is 6.5 and the average payment is $20. Cash, check or money orders can be used to credit payment cards.

For a LIHEAP-eligible customer, a payment history is provided by SRP to the local community action agency (CAA) for benefit determination. When a benefit amount has been approved, SRP is notified and the customer takes his/her payment card to the pay center where the benefit amount is credited to the card.

In 1999, SRP and the Arizona CAAs surveyed prepay customers in focus groups. Of those surveyed, 92 percent were satisfied or very satisfied with the program and 69 percent had a better opinion of SRP. Respondents said they liked the prepay program because there are no deposits, late fees or reconnect fees; it provides a way to pay arrears and manage budgets; and avoids the embarrassment of a utility vehicle coming to their house to disconnect service. Additionally, they liked having control over that part of their lives; they were able to monitor electricity use, and had increased awareness of the amount of energy used by individual appliances. Participants also reported energy savings of about 10 percent.

Benefits reported by CAAs were that all assistance funds go toward an energy payment, not fees and charges, and that the program helps move clients towards self-sufficiency.

Utility advantages included increased customer satisfaction and safety of field personnel, along with reduced arrears, uncollectibles, and billing costs.

Other U.S. Programs
Brunswick Electric Member Cooperative in North Carolina has installed prepayment meters for about 5,000 of their 60,000 customers. The program began in 1991 for customers with delinquent accounts and expanded to include any interested customer. Customers choose to sign up for the program and pay $6 more per month for the service. The benefits to Brunswick Electric are high customer satisfaction and reduced write-offs.

Florida Power & Light (FPL) started a prepay meter pilot program in May 2001. The optional program currently has 52 "credit challenged" participants and will expand to 800 by December 2001. Because the technology is expensive, the flat rate charged to participants is slightly higher than the normal tiered residential rate. It is expected that participants will more than recover the rate difference in savings as a result of no deposit, late payment or reconnection fees.

Florida does not have a shutoff moratorium, but the technology does exist to apply shutoff restrictions for a moratorium. In that case, arrears would accumulate during the restriction and would be applied to the account. Thirty percent of each payment goes toward reducing arrears. FPL views the program as a customer satisfaction tool.

Europe
In Great Britain in 1999, about three million households obtained electricity through prepayment meters. On average, customers in Great Britain pay about 7 percent more for energy purchased through prepay meters. London Electricity (LE) in Britain has 14 percent of their customers on prepay meters. About 25 percent of participating households self-disconnected for less than 10 hours at a time. LE also reported high customer satisfaction.

Electricité de France (EDF) experimented with prepay meters in the past and due to self-disconnect and associated health and safety issues the meters are available only to customers who are not payment troubled. However, EDF plans to implement a 'card service' program by 2003 for 500,000 to one million payment-troubled customers.

Advocates’ Concerns
Advocates are troubled that low-income customers should have to choose between paying for food and other necessities or applying credit to their payment card. And, they cite consumer protection issues that need to be addressed such as shutoff protections for pre-pay meter users under a moratoria, the right to dispute a bill, health and safety issues, or medical conditions.

Restructuring Overview
Texas Will Begin Collecting $100m
For Low-Income Energy in 2002

Texas legislation (HB 1902) passed in May sets funding levels and priorities for a system benefits charge fee (SBCF) authorized in 1999 restructuring legislation. It will fund a low-income rate discount and low-income energy efficiency, a consumer education program, and provide funds to schools for lost tax revenue as a result of restructuring.

The original legislation did not set funding levels or priorities for the four program components. HB 1902 did so by designating a 10 percent low-income electricity discount as top priority, customer education programs second, targeted energy efficiency programs for low-income electric customers third, and the school funding loss mechanism last.

The systems benefit fund will be financed by a nonbypassable fee of 65 cents per megawatt hour beginning January 1, 2002. Subsequent appropriations legislation set the SBC fund for 2002 at $144.6 million, with $97 million allocated for the low-income discount, $7 million for the targeted energy efficiency, $12 million for customer education and $27 million for the school fund. For 2003, the fund will increase to $161 million with $135 million for the discount and $10 million for energy efficiency.

A rule adopted in December 2000 by the Texas Public Utilities Commission (PUC) set guidelines for how the low-income discount and energy efficiency programs would work.

Eligible for the discount would be electric customers whose household income is less than 125 percent of federal poverty guidelines, or who receive Food Stamps from the Texas Department of Human Services (TDHS), or Medicaid, an estimated 1.2 million households. Food Stamp or medical assistance recipients will be automatically enrolled in the discount; others will be enrolled through a self-certification process.

Enrollment will be accomplished by electronic data exchanges and interface among the TDHS, the Low Income Discount Administrator (LIDA), an entity to be chosen during 2001 by the PUC; and ERCOT, the agency that maintains electric utility data on behalf of participating utilities.

The LIDA’s responsibilities will be to establish and maintain the automatic enrollment and self-certification systems. Its duties will include: developing a protocol to define the automatic enrollment process and the respective duties of the participating entities sharing data, processing the self-certification applications, maintaining a toll-free number for inquiries, conducting outreach and distributing self- certification applications.

The Targeted Energy Efficiency Program provided for in the restructuring law will be administered by the Texas Department of Housing and Community Affairs (TDHCA), the LIHEAP and weatherization grantee. The program will cover the cost of measures that reduce electric energy use. Eligible are electric customers who meet the income guidelines of the Texas LIHEAP and WAP.

Existing programs to fund low-income weatherization services under contracts between individual utilities and TDHCA will continue until utilities enter the competitive market. Texas utilities now fund about $10 million in low-income weatherization.

The SBF will be collected from Texas’ nine investor-owned utilities. Municipal and cooperative utilities will collect the SBF and offer the discount only if they open their service territories to retail choice. Municipals and cooperatives serve about 20 percent of Texas electric customers.

The 16^th National Low Income Energy Consortium Annual Conference, held last month in Cincinnati, devoted an entire conference track to low-income energy programs in other countries. Representatives from utilities and social organizations on five continents attended and presented at workshops, which were well attended and enthusiastically received, according to NLIEC chair Ron Elwood.

It was apparent from the international presentations that all countries represented have poor people who are unable to afford their energy bills. Furthermore, some countries are not completely electrified and millions of poor households do not have electricity. As in the U.S., many countries around the globe have implemented some form of utility competition..

Following is a snapshot of low-income program details and energy issues in other countries that presented:

Britain
Great Britain uses the term "fuel poverty" to refer to households who spend more than 10 percent of their income on energy. Speaker Sara Threlfall of London Electricity estimated that about 4.3 million households are fuel poor, including 6 percent of the population of London

About 40,000 deaths each winter are fuel-related, in most of these cases there are multiple factors of which no electricity is one of them she said. Sources of help for the low-income in need include, HelpCo, a charity that acts as a supplier, a government weatherization initiative called Warm Zones, also supported by London Electricity; and Fuel Direct, part of a government welfare program, through which eligible households get a fuel assistance benefit. Like several other utilities represented at the conference, both here and abroad, British utilities use pre-payment meters for payment- troubled households (see related article); some also allow payments by debit card, in which case customers get a discount.

The British electric system has been deregulated and the primary issue regarding low-income customers wishing to switch suppliers is the debt they have incurred. Currently, the prices for an incumbent utility are set at a level that will enable a competitor to come in at a lower price.

France
Bruno Vollaire, representing Electricité de France (EDF), said 10 percent of the country’s population lives in poverty, with over 1 million receiving 'insertion' payments equivalent to $400 per month for one person.

Under the country’s deregulation laws, customers have a right to utility service and there is a ‘social tariff" that functions like a systems benefits charge. EDF has a goal of no disconnections and uses the social tariff, service limiters, and prepayment meters to deal with payment-troubled customers.

Service limiters control customers’ consumption through a microswitch that disconnects a household’s power if usage is greater than 3000 watts; and reconnects it when usage falls below 3000 watts.

EDF has also instituted a new rate affordability program in which benefit levels are determined by housing type, location and elevation; season lived in, number in household, year of construction, type and placement of insulation, type of heating system, type of appliances, and whether the dwelling has a programmable thermostat. It has used pre-pay meters in the past, and is planning a new pre-payment program aimed at 500,000 to 1 million households, to be implemented by 2003.

South America (Argentina and Brazil)
Millions of low-income in these countries do not have electricity, let alone adequate housing. Many live in isolated rural areas or in city slum neighborhoods, which are "huge sites of misery" built illegally on hillsides with no safety conditions, according to Alain Pages of EDF, who presented a paper titled "Low Income Customer Electrification Programmes in Argentina and Brazil."

For example, Rio de Janeiro has 728 slums and 594 communities without electrification. However, many people illegally tap into overhead distribution lines, creating a danger to themselves as well as to the utility workers who try to disconnect them.

A pilot metering project that was undertaken to upgrade the electric system in two slum areas of Rio is considered a successful, although expensive, model that may be implemented in other areas. The metering technology allows detection of theft and shut-off of targeted households from the central office.

Additionally, the governments of these countries and a consortium of private companies are engaged in projects to electrify off-grid households with solar systems.

South Africa
Prior to 1998, 90 percent of blacks in South Africa were not connected to the grid, while all whites were connected, said Mac Mdingi, of PN Energy Services, South Africa.

Beginning with black representation at the end of apartheid, a project to electrify urban areas brought 2 million black households onto the grid by 1998. The electrification was done as a partnership with EDF, a private South African utility and the South African government.

Mdingi also noted that prepayment meters have long been used in South Africa; they date back to the era of white rule.

The Victorine Q. Adams Fuel Fund (VQAFF), formerly called the Baltimore Fuel Fund, Inc., is no stranger to being first. Established in 1978, it was the first fuel fund in the country and served as a model for others that followed.

It was also the first fuel fund in the country to be sued by households who did not receive assistance, and it has been put on notice that it will be sued a second time. VQAFF Executive Director Carol Clements discussed both lawsuits in a "Hot Topics Roundtables" session at the National Fuel Funds Network’s (NFFN) 2001 Annual Conference held June 3 and 4 in Cincinnati.

According to Clements, the first lawsuit was filed against VQAFF in September 1999. The case went to Small Claims Court, where a judge ruled entirely in the client’s favor and deemed all expenses were to be paid by VQAFF, which had been represented by a pro bono attorney. Before the case could go to trial, however, the client died, which left the client’s mother to pursue it. The mother dropped the case when she found out VQAFF was a nonprofit charity.

The current, pending lawsuit is more complicated. It involves the tragic deaths of five family members on June 9, 2000. Clements said the deaths resulted from a fire caused by burning candles that ended up igniting the rented house. VQAFF received a letter, dated December 7, 2000, from a lawyer representing the two family members who are filing the suit.

The letter claims, "The fire resulted from the family’s inability to obtain electricity from BGE (Baltimore Gas & Electric, the local utility), the Crisis Center and Baltimore Fuel Fund." It further states, "These claims for negligence and gross negligence, and intentional wrongdoing include, but are not limited to, state and federal civil rights violations, and any and all other tort claims that may be discovered. The specific damages demanded total $5,000,000,000."

Clements and her lawyer think the $5 billion figure is a typographical error and was probably meant to be $5 million. She also thinks that the family is more likely to go after the utility because it disconnected the household’s power supply due to nonpayment of the bill.

VQAFF may be protected, she said, by the clients’ failure to follow the fund’s procedures that are required to obtain a once-a-year crisis assistance grant. In both cases, the applicants were told that they would be required to pay a portion of the bill – a good faith payment. But neither applicant ever made the payment or came back to complete the process, Clements explained.

The Crisis Center was named in the suit because it is an office within the City of Baltimore that carries out the operations portion of the fuel fund.

Another interesting twist in the case is whether Maryland’s state law allows nonprofit charities to be sued. Clements said she’s heard from a New Jersey fuel fund that state law prohibits lawsuits involving charities. Clements is researching Maryland's statute.

The lesson to all fuel funds, Clements said, is the need to put disclaimers on all printed materials. While she hasn’t worked out such a disclaimer yet, she said it would contain language holding the organization harmless and protecting it from liability in the event of disconnections, especially when a client fails to follow through on his/her obligation to pay a portion of the utility bill.

For more information, contact Carol Clements at: email Baltofuelf@aol.com or phone (410) 396-7043.

While most of the two dozen states that have passed restructuring legislation are in a transition to full restructuring of their energy markets, investigations have already begun to detail the impacts of restructuring on low-income households. Other reports have detailed the impact of energy price spikes and market volatility on these households.

For example, in Massachusetts, rate discounts enacted as a result of restructuring have been canceled out by escalating electricity supply costs. A report from New York indicates that that not enough time has elapsed for concrete impacts to be delineated, but continuing volatility and uncertainty of electric markets will make it difficult for low-income households to benefit from restructuring. In California, most of the adverse impacts are due to the natural gas price spikes that hit most of the country this past winter.

Massachusetts
The Massachusetts report is actually testimony on behalf of the state’s Low-Income Fuel Assistance and Weatherization Network by Jerry Oppenheim, consultant. Titled "The Energy Crisis of 2001," and released in January 2001, it notes the following:

Oppenheims’s paper also included a number of recommendations to the state on how to ensure energy affordability in the midst of volatile markets.

New York
A "midstream" report titled "Case Study of the Move to Retail Competition in the Electric Industry in NY State: Impact on Low-income, Multi-family Housing" was released in December 2000. The Association for Energy Affordability, a nonprofit that represents New York City’s weatherization agencies, prepared it.

Much of this report is background on low income weatherization efforts in the state that culminated in establishment of a system benefits fund for energy efficiency, as well of as an overview of the state’s restructuring developments, which, contrary to other states, have taken place at the utility commission rather than legislative level.

While conceding that restructuring is in a transition in New York and it’s too soon to cite impacts, the report predicts the following:

Overall, the report concluded that currently there is too much volatility and uncertainty in the New York electricity market for suppliers to serve or offer savings to the low-income. Furthermore, New York has not decided upon several key issues such as who will be the provider of last resort for customers who haven't chosen a supplier, and to what extent LIHEAP recipients and vendorized low-income public assistance customers should participate in the competitive market.

The paper was performed under a contract with Oak Ridge National Laboratory with funding from the Department of Energy’s Office of Building Technology Assistance. For more information, contact David Hepinstall at AEA, 219-279-3902, hepinstall@aeanyc.org.

A national report released May 3, "The Winter Behind, the Summer Ahead: Low-Income Energy Consumers Face a Harsh Spring," reviews the energy price increases faced by the poor this winter and predicts that energy hardships for the poor are not over. The report was prepared by Economic Opportunity Studies of Washington, DC, and is available on the website of the National Community Action Foundation.

An innovative concept that would create a new revenue source for low-income energy assistance began when Colorado Governor Bill Owens sent a letter to Vice President Cheney’s office. In his letter of February 7, 2001, Owens proposed the development of a natural gas royalty-in-kind (RIK) program that would allow the state to provide discounted RIK natural gas to its low-income residents.

Helping Owens to shape this plan is John Harpole, President of Mercator Energy, a natural gas services consulting company based in Denver, Colorado. Harpole stated that he is interested in seeing the concept reach fruition. "My true goal is to help author an efficient solution for low- and fixed-income individuals who have been and continue to be hurt by rising natural gas prices," he said in his recent testimony before Congress.

Jeff Ackermann of the Colorado Energy Assistance Fund (CEAF) reported on the RIK concept at a roundtable session during the National Fuel Funds Network’s 2001 Annual Conference held June 3-4 in Cincinnati. According to him, the original concept was to expand existing low-income energy assistance programs by taking a portion of royalties paid for all gas and oil produced on federal lands as in-kind natural gas and then transporting it through existing pipelines to utilities. In turn, the utilities would allocate that gas directly to pre-qualified low-income households in their service territories.

This concept was supported by KeySpan Corporation, the largest Gas Company in the Northeast and the fifth largest in the nation, which proposed the delivery of RIK natural gas to its 54,000 New York City low-income households already receiving a reduced rate on their basic service. Yet, the need is far greater than those being served. KeySpan’s Manager of Consumer Advocacy, Jim Jacob, said KeySpan has identified over 120,000 special needs households in three counties within New York City. In his June testimony supporting the RIK concept before Congress, Jacob said, "Studies we have conducted tell us that over 43 percent of our payment-troubled customers have incomes at or below 150 percent of the Federal poverty level."

However, Harpole testified that moving the gas through existing utility purchase contracts is not the only solution. He has formed a working group – comprised of natural gas producers, utilities, and marketers, all of whom embrace the concept, to further develop the program and bring it to fruition. To help explain the concept, this group has launched a website that should be available the latter part of July 2000.

Interestingly, the National Energy Policy Development Group recommended this concept be included in the National Energy Policy. Last month, the policy document that was released specifically recommends that steps be taken "...to mitigate impacts of high energy cost on low-income consumers," including "...directing the Secretaries of the Interior and Health and Human Services to propose legislation to bolster LIHEAP funding by using a portion of oil and gas royalty payments" and "...redirecting royalties above a set trigger price to LIHEAP, whenever crude oil and natural gas prices exceed that trigger price..."

This concept has bipartisan support. In March, Carol Maloney (Democrat -- New York) introduced H.R. 962, the "Low Income Energy Reinvestment Act." This bill seeks to amend the Mineral Leasing Act to make available for LIHEAP 5 percent of royalties received by the United States from onshore federal oil and gas development. Specifically, it calls for the amendment of "the Mineral Leasing Act to earmark for implementation of the Low-Income Home Energy Assistance Act of 1981 five percent of monies generated from sales, bonuses, royalties, and rentals of public lands (onshore Federal oil and natural gas revenues)." And, two other New York Democrats have introduced a similar bill in the Senate.

NFFN is also in support of the concept. CEAF’s Executive Director, Karen Brown, who is also NFFN chair, added this caveat, "We totally support the concept, as long as it doesn’t negatively impact LIHEAP. " Other advocates have expressed the caution that the royalties must be used to supplement, not supplant LIHEAP funding and that the program should remain intact.