Addressing Energy Unaffordability: Action Steps Available to Florida Municipal Electric Utilities

Presentation By:Roger D. Colton

Fisher, Sheehan & ColtonBelmont, MA 02478

(web site) www.fsconline.com

July 2008

Where do we start?Understanding Home Energy Burdens

Home energy burden =Home energy bill / Household income

• Total shelter burdens affordable at 30% of income.• Utility costs should be no more than 20% of shelter costs. • Utility costs affordable at 6% of income

(20% x 30% = 6%).

Florida Home Energy Affordability Gap:Where have we been/where are we going?

Home energy is a crippling financial burden for low-income households in Florida

• 2004 Home Energy Affordability Gap: $949,871,431• 2007 Home Energy Affordability Gap: $1,783,319,527• Growth in Affordability Gap (2004 - 2007): $853,448,096

Every dollar found in the Home Energy Affordability Gapis a dollar not available for housing, food, or medical care.

Unaffordable energy: Why do we care?Multi-aspect, interdependent consequences

• Housing impacts• Public health impacts • Public safety impacts• Hunger and nutrition impacts• Education impacts• Business competitiveness impacts• Utility impacts

The Need for a Toolkit Approach

“When your only tool is a hammer,you tend to see every problem as a nail.”

Tool #1:The Earned Income Tax Credit

• What is it:– Country’s primary anti-poverty program.– Refundable tax credit (cash back).– Average refund: around $2,000.– 3-year retroactive refund application.

• Why should a utility care:– 1/3 used to pay for past-due utility bills.– Only 50 - 80% of eligible claim.– Potential for innovative utility/CBO role.– Receipt at time of winter heating bills

Earned Income Tax Credit:What can be done

• Mass utility outreach campaigns (NJ)• “Gap filler” outreach campaign

– Part-time workers– Women-workers– Hispanic workers

• VITA campaign• Targeted outreach• Call center recorded message

Tool #2:PHA Utility Allowances

• Tenant-paid utilities (public/assisted housing)• Covers all utilities (electricity, heating/cooling,

water/sewer)• Covers (theoretically) 100% of bill• Year-round -- not seasonal• Regular update (if enforced)

– Annual OR 10% change.• Public housing tenants <50% FPL

Tool #3: Energy Star and Affordable Housing Development

• Low-Income Housing Tax Credits (LIHTC)• Home Investment Partnership Program• Community Development Block Grant• State Housing Trust• Local affordable zoning bylaws

Energy Star building:Why doesn’t everyone do it?

“Split Incentives”• Incentive exists if owner/developer are identical.

– If owner/developer/resident are not the same then no/incentive is said to be “split.”

• Developer alone – no incentive unless competing developer is offering Energy Star homes.

• Lender –no incentive.• Buyer – often not involved in building decisions.

Impacts on affordable housing

• Impacts of energy on affordable housing:– Reduce the “affordable sales price” of single family homes.– Freeze some lower income households out of the market

altogether.– Force lower income households into less expensive homes. – Increase the risk of default by consumers.

• Other Advantages::– Adds value.

– Higher debt load for developer or a buyer.

– Increased discretionary income for a tenant or owner/resident.

Tool #4:Rate Affordability Programs

• Different levels of complexity– Philadelphia Gas Works: CRP– Citizens Gas and Coke Utility: USP– Belmont (MA) low-income discount

• Essential Program Elements – Rate affordability– Arrearage forgiveness– Crisis assistance– Energy efficiency

Rate Affordability Assistance

• Rate Affordability needs to:– Be burden-based– Address payment-troubles– Recognize the “paid but unaffordable” bill– Be tariff-based assistance

• Arrearage forgiveness needs to:– Be affordability-based– Administratively practicable– Allow for customer contribution xxx

Rate Affordability Assistance

• Crisis Assistance needs to:– Be shutoff free if agreed payments made– Recognize economic fragility– A “reasonable amount” set aside.

• Energy Efficiency needs to:– Be integrated with rate affordability.– Minimize lost opportunities program-wide.– Minimize lost opportunities per each household.

Tool #5:Milwaukee’s Heat Response Plan• Tied to three “Heat Action Thresholds”

– Heat Health Outlook– Heat Health Watch– Heat Health Warning

(issued by National Weather Service)

Milwaukee’s Heat Response Plan:Component #1 of 2

• Identify “at-risk” persons.– Elderly, disabled, chronically ill, mentally ill, obese.– Create “Extreme Weather Registry”

• Assignment to buddy.• Community check-ins.

• Consumer education– Raise public awareness of heat index to same level as public

awareness of wind chill.– What to do in extreme hot weather.

Milwaukee’s Heat Response Plan:Component #2 of 2

• Access to cooling.– Home cooling for immobile.– “Congregate cooling facilities”– Extended hour congregate facilities– Emergency cooling facilities (buses, etc.)

• Heat-related assistance– Where are congregate cooling facilities located?– What in-home cooling measures can be used?– Where can immediate medical attention be obtained?

Heat Response Plans:Role of the Low-Income Energy Community

• Advocate for Heat Response Plan creation.• Locate Extreme Weather Registry.• Coordinate “congregate cooling facilities.”• Education regarding extreme heat.• Outreach for and about Extreme Heat

Registry.

For more information:

http://www.fsconline.comNews

Library

For more information:

roger@fsconline.com

The Parable of the Olive TreesOnce upon a time, a mansion owner called his gardener in and asked him to plant 100 olive trees. The gardener was aghast. “But sir,” the gardener said, “those trees will not bear fruit for 50 years.” Nodding in agreement, the mansion owner responded: “Yes. That is why I would like you to plant them today.”

Additional Action steps #1:Creatively seek new funding.

• Accept alternatives to cash security deposits (PGW).– Financial alternatives (e.g., guarantees)– Behavior alternatives (e.g., budget billing, financial literacy training)

• Replace cash deposits with guarantees– Use cash deposit as financial resource to pay bills.

• Seek state legislation on escheated rate refunds/utility deposits/patronage dividends (AZ, CO).

• Commit utility refunds to arrearage forgiveness (pipeline refunds, excess usage charges, etc.) (MO).

Additional Action Steps #2:Eliminate wasteful energy usage

• Adopt special “energy efficient” utility allowances for Section 8 housing meeting Energy Star standards as incentive for owners to upgrade their properties.

• Provide technical assistance to promote ESCOs in PHAs/large landlords.

Additional Action Steps #3:End the “war on the poor”

• Eliminate late fees on low-income customers.• Eliminate late fees on paid-up DPAs.• Eliminate one-strike-you’re-out deferred payment

arrangement (DPA) policies.• Eliminate barriers to entering budget billing.• Sharpen the trigger for issuing shutoff notices

– Don’t send notices that utilities do not intend to follow-up on.

Additional Action Steps #4:Enforce regulatory consumer protection requirements.

• Enforce consideration of ability-to-pay in structuring deferred payment plans for arrears.

– Absolute income– Discretionary income– Fragility of income– Seasonality of income (income, expenses)– Ability to meet exigencies

• Enforce consideration of all regulatory factors in structuring deferred payment plans for arrears.

– Time arrears outstanding.– Reason for arrears.– Ability to pay.

Additional Action Steps #5:Creatively seek new funding.

• Accept alternatives to cash security deposits (PGW).– Financial alternatives (e.g., guarantees)– Behavior alternatives (e.g., budget billing, financial literacy training)

• Replace cash deposits with guarantees– Use cash deposit as financial resource to pay bills.

• Commit utility refunds to arrearage forgiveness (pipeline refunds, excess usage charges, etc.) (MO).

• Use direct load control technology as means of delivering low-income assistance (MD).