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State PBF/USF History, Legislation, Implementation

Colorado
Last Updated: November 2016
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Rate Assistance

In mid-2012, Colorado's regulated utilities began implementing programs to provide energy assistance to low-income natural gas and electric customers. After the passage of rules by the Colorado Public Utilities Commission (CPUC), multiple companies decided to offer percentage of income payment plans (PIPPs). These include the state's largest energy provider, Xcel Energy, along with others including Black Hills Energy, Colorado Natural Gas, and SourceGas.

There is variation between the PIPPs offered by utilities. Xcel Energy's PIPP makes sure that enrolled households pay no more than 3 percent of their households' income on energy costs. Meanwhile, SourceGas uses a sliding percentage scale based on a household's relationship to federal poverty guidelines (FPG). Monthly bills for households at or below 75 percent of the poverty level are figured at two percent of the household's income. Those above 75 percent and below 125 percent are determined using 2.5 percent of income. Households over 125 percent and at or below 185 percent have their bills determined using 3 percent.

In October 2011, the CPUC adopted rules requiring utilities to implement rate assistance programs for low-income customers. Ratepayer surcharges, subject to CPUC approval, fund these offerings. Effective December 2011, the CPUC's rules for natural gas and electric utilities require that programs contain arrearage forgiveness. The rules recommend these policies reduce pre-program balances to zero over 24 months.

During the 2015-2106 program year, these programs provided over $8.4 million in benefits to low-income customers. The state's largest energy provider, Xcel Energy, spent over $6.8 million during the program year and served about 24,000 households. With smaller numbers of customers, other utilities spent much less. For instance, Colorado Natural Gas spent just over $29,600 on both its bill assistance and arrearage forgiveness programs, which served 146 households.

Black Hills petitioned the CPUC in late May 2014 to allow the company to use the 150 percent of FPG for the 2014-2015 program year. According to the CPUC's rules, eligibility for energy assistance programs was supposed to be 185 percent of federal poverty guidelines by the third year. Black Hills requested the action in order to align its Black Hills Energy Assistance Program (BHEAP) eligibility with that of Colorado LIHEAP, which uses 150 percent. The utility said it relied on Colorado LIHEAP to verify its customers' income eligibility. It also stated it did not have the personnel or systems to collect the additional information to determine eligibility up to 185 percent of FPG. Using outside resources, Black Hills said, would be "a significant expense to the program." The CPUC accepted the utility's proposal to set eligibility at 150 percent for the 2014-2015 program year. The other utilities followed suit and kept their maximum eligibility levels at 150 percent to mirror Colorado LIHEAP.

History

For years, Colorado legislators, utility companies, and advocates talked about raising money for low-income assistance through a monthly surcharge on ratepayers. In January 2003, a consortium came together and drafted a bill to raise $10 million in ratepayer funds.

The resulting legislation took the form of House Bill 1225 during the 2004 Colorado General Assembly. Dubbed the "Low-Income Energy Assistance Act," the bill's legislative declaration stated it was in the best interest of low-income citizens for all utilities to collect a monthly surcharge to fund low-income assistance programs.

HB 1225 included a provision requiring the CPUC to set up a mechanism for customers to opt out of paying the surcharge and required utilities to let customers know multiple times about that option. The bill had surcharge funds going to Energy Outreach Colorado (EOC), the largest non-profit energy assistance agency in the state, to administer to low-income customers.

The bill had a rocky journey through the Colorado General Assembly. A persistent battle focused on whether customers should "opt out" or "opt in" to the surcharge. Estimates stated that changing to an "opt in" structure would decrease revenue from $10 million per year to $1 million. Despite this decreased funding level, the Colorado House changed HB 1225 to "opt in." However, the Senate passed a version of the bill changing it back to the original "opt out." When HB 1225 came back to the House, representatives narrowly approved it by a 33-31 vote. The bill then went to Governor Bill Owens, who vetoed it, saying he opposed "opt out" programs.

In 2007, the Colorado Assembly boosted the CPUC's authority when it came to low-income programs. Senate Bill 22 amended Colorado statute to allow the CPUC to approve rates that give a "reasonable preference or advantage to low-income customers." It further stated that such rates were not discriminatory or prejudicial to other ratepayers. The bill passed both chambers easily, and the governor signed it into law.

SB 22 addressed an important limitation on the CPUC previously imposed by the courts. In 1979, the Colorado Supreme Court issued its ruling in Mountain States Legal Foundation v. Public Utilities Commission. The court found that the CPUC couldn't order utilities to implement a discounted rate for low-income elderly and low-income disabled people. Saying such rates were discriminatory and unjust, the court held that the CPUC's authority was limited by the Colorado General Assembly. SB 22 amended the Colorado statute cited by the court in Mountain States.

In September 2008, the CPUC opened Docket No. 08I-420EG to specifically look at using rate design to provide assistance to low-income customers. In a February 2009 decision (Decision C09-0172), the commission determined that official rulemaking was the appropriate next step and opened Docket 11R-110EG. The CPUC specifically examined percent-of-income payment plans (PIPPs), arrearage forgiveness, and weatherization programs.

EOC was the main low-income energy advocate involved in the rulemaking process. In its comments to the CPUC, EOC stressed the energy burden faced by low-income people and the sacrifices they made to try and pay their utility bills. EOC also pointed out that the draft rules made it appear that arrearage forgiveness wasn't mandatory. The group believed strongly that arrearage forgiveness was critical to a program participant's long-term success in paying for utility service.

Despite the 2007 General Assembly's action, numerous utilities questioned the PUC's authority. Black Hills Energy claimed Colorado statute did not authorize the CPUC to mandate that utilities implement low-income energy assistance programs, citing the Mountain States ruling. While Black Hills acknowledged the 2007 Colorado Assembly had given the CPUC more power, it claimed the commission could only approve low-income programs if a utility decided to offer them. Colorado Natural Gas, Xcel Energy, SourceGas, and Atmos Energy all used similar language in CPUC filings.

Disagreeing with the utilities, an administrative law judge ruled that, when the Colorado Assembly passed SB 22, it gave the CPUC the authority to require low-income programs. The judge also declared that low-income programs were in the public interest and should be adopted.

The ruling acknowledged that advocates supported requiring all utilities to adopt PIPPs. However, the judge agreed with utilities that different companies had different customer bases. Therefore, he said the CPUC rules should provide flexibility when it came to designing programs.

The final CPUC rules didn't require utilities to offer PIPPs and did allow for flexibility in design, except for the specific requirements listed for the "Safe Harbor" option. For these programs, the commission required these policies to only be available to LIHEAP participants, be structured as a PIPP, and include arrearage forgiveness. The rules also featured an increasing threshold of eligibility over three years, from 125 percent of the federal poverty level in year one to 185 percent for the third year. Similarly, the CPUC set a cap on the amount of the surcharge for each year, from $0.25 per month in the first year to $0.32 per month in the third.

Xcel Energy's Pilot Program

Referenced throughout the CPUC's deliberations on rate assistance was Xcel Energy's Pilot Energy Assistance Program (PEAP). The company started operating the pilot in 2009.

Xcel Energy filed an interim evaluation of PEAP in September 2010. The report evaluated the two systems the company used to deliver low-income benefits. Some customers took service through a fixed credit PIPP. Through this program, Xcel Energy calculated the bill credit necessary to reduce the customer's projected annual natural gas bill to no more than three percent of income. Additionally, PIPP participants received bill credits designed to payoff pre-existing arrears.

The alternative program found customers receiving reductions to their bills through a tiered discount system, which ranged from 15 percent to 25 percent of a customer's bill. The tiered discount was available for customers whose bills as a percentage of income were less than the three percent PIPP threshold. There were roughly 4,000 participants in each program.

The PIPP component provided greater affordability benefits than did the tiered discount rate. The PIPP resulted in bills that were roughly two-thirds of what a bill would've been at the standard residential rate. The tiered discount bill program resulted in bills that were about 85 percent of what a bill would've been at the standard residential rate.

In February 2012, Xcel Energy filed the final evaluation of PEAP. The report found that PEAP's levelized billing made a considerable difference in the reduction of volatility in the monthly bills for long-time participants. It also found that PEAP participants made payments that were lower, and more consistent, than their LIHEAP counterparts.

The report recommended that PEAP be continued, since it was cost efficient and met the goals articulated for the program. Numerous utilities incorporated the lessons learned from PEAP when designing their low-income assistance programs.

Energy Efficiency

In March 2008, the CPUC adopted (Decision C08-0248) its Demand Side Management(DSM) rules for natural gas utilities. The PUC's rules require companies to specify whether they will provide services directly to customers, or if they will do it indirectly by financially supporting programs through the State of Colorado. The natural gas rules ordered utilities to implement DSM programs by January 1, 2009.

On the electric side, the CPUC didn't adopt a specific section of new rules for DSM. While there are references to DSM throughout the electric rules, there is not a specific section as there is for gas utilities. Instead, the CPUC relied on Colorado statute 40-3.2.104 which related to utilities providing electrical service. The statute specified that utilities needed to develop and implement DSM programs that allowed all customer classes to participate. It also required companies to consider how DSM programs would impact low-income customers.

DSM programs are funded by a CPUC-approved monthly surcharge on customers. Many Colorado utilities decided to enter into agreements with the Colorado Energy Office, the federal Weatherization Assistance Program grantee, and/or non-profits like EOC or community action agencies. In these instances, the funds generated by monthly surcharges are given to these other entities to provide services to the utility's low-income customers.

Some utilities partnered up on DSM programming. Atmos Energy, SourceGas, and Colorado Natural Gas combined to form Partners in Energy Savings. The Partners had to shut down all their offerings in October 2011 when their programs ran out of money. According to Partners, the utilities had offered a "very generous" weatherization rebate to their customers to "jumpstart and promote" their DSM programs when they started in 2009. This led to the program running out of money and its closure.

The Partners re-launched their DSM programs in 2012 with some modifications to try to keep the previous problems from recurring. For 2013, Atmos Energy reported that it exceeded its projected energy savings in its low-income program. The Partners contract with EOC to administer their low-income DSM programs. In CPUC filings, the collaborative said this works well, because EOC has established relationships with a variety of organizations that perform low-income weatherization.

Xcel Energy, which partners with the Governor's Energy Office and EOC, reported spending over $5 million on about 16,690 participants in all of its low-income DSM programs during 2015, which comprised the majority of low-income energy efficiency spending by utilities. The other utilities contributed about $365,000 for approximately 953 households.

History

In 2007, the Colorado General Assembly passed House Bill 1037, which directed all investor-owned utilities to implement DSM programs. The bill stated that DSM measures were in the public interest, because they would save money for consumers and protect the state's environment.

HB 1307 instructed both gas and electric utilities to make sure that low-income customers had access to DSM programs. It directed the CPUC to start rulemaking regarding DSM programs by September 2007. After being signed into law, HB 1307's DSM directives were codified in Colorado statute 40-3.2-103 for gas utilities and Colorado statute 40-3.2-104 for electric utilities. On June 27, 2007, the CPUC issued Decision No. C07-0562 opening Docket No 07I-251G to investigate issues associated with the new statutes.

In its initial comments to the CPUC on DSM rules for natural gas providers, EOC said HB 1037 would result in more surcharges appearing on customer bills. EOC stressed that the CPUC should make sure that its rules promoted cost-effective programs that would be accessible to low-income customers. Despite these concerns, the CPUC found that there were "not grounds for excluding low-income customers from DSM cost adjustments," so all customer classes pay them.

For More information

The Colorado Public Utility Commission's "E-Filing" database:
https://www.dora.state.co.us/pls/efi/EFI_Search_UI.search

Colorado Statutes: http://www.lexisnexis.com/hottopics/colorado/

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