Last updated: August 2016
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In 2004, the Indiana Utility Regulatory Commission (IURC) first approved (Cause 42722 and Cause 42590) rate assistance programs for low-income customers of NIPSCO, Vectren, and Citizens Energy.
Since the 2004 decision, Vectren and Citizens have run similar Universal Service Programs (USP). In both, low-income customers are automatically enrolled through the Indiana LIHEAP process, and customers get a discount based on LIHEAP's eligibility tiers. Qualified Vectren customers receive discounts on their bills between December and May of 15 percent to 32 percent, while Citizens offers discounts of 10 percent to 25 percent during the same months. Both utilities also offer crisis programs for low-income customers not eligible for LIHEAP. In 2014, the utilities gave out about $4.4 million through their USP discount and crisis programs to over 45,000 households.
Initially, NIPSCO created the "Winter Warmth Program," which focused on helping low-income households restore service or avoid disconnection. However, in 2010, the utility changed (Cause 43894) Winter Warmth to its current Customer Assistance for Residential Energy (CARE) program. NIPSCO patterned CARE after the USPs run by Vectren and Citizens. Like the USPs, CARE customers enroll through LIHEAP and receive tiered discounts from 11 percent to 26 percent. NIPSCO also offers a "hardship" program through which low-income customers can receive assistance if they aren't eligible for LIHEAP. In 2014, NIPSCO gave out about $2.65 million in CARE discounts to about 32,000 households. The hardship program served over 1,000 households with over $206,000.
Since November 2009 (Order 43669), Vectren, NIPSCO, and Citizens have funded at least 25 percent of their low-income assistance programs (not including administrative costs). The remaining 75 percent comes from surcharges on all ratepayers.
All three utilities rely heavily on Indiana LIHEAP. They use LIHEAP to screen, qualify, and enroll their customers. As LIHEAP funding declined at the national level, the three utilities offered to supplement the Indiana program in 2012. In October 2011, NIPSCO, Vectren, and Citizens asked the IURC to consider modifying their programs. The utilities wanted to create a separate account for each service territory to be distributed by the Indiana Housing and Community Development Authority, the LIHEAP grantee, during the 2012 heating season.
The proposed funds, called the "Supplemental LIHEAP Fund," sought to replace the projected reduction in 2012 federal LIHEAP funding. The utilities proposed this measure because they worried that community action agencies, on which they relied to qualify and enroll customers into their respective programs, could shut down due to less federal funding. They also explained what a federal spending reduction would mean for the average benefits received by low-income households.
Citizens proposed giving $1.05 million, comprised of some ratepayer funds and some company money, to the supplemental fund. NIPSCO proposed contributing about $1.3 million, with $1 million coming from a Tennessee Gas Pipeline refund and $300,000 leftover from the Winter Warmth Program. Vectren proposed contributing about $1.58 million to the supplemental fund, with ratepayer funds the majority of the contribution and a smaller portion coming from shareholder dollars.
In December 2011, the IURC issued its ruling (Cause 44094). While it recognized the impact that a reduction in LIHEAP funding would have on both low-income customers and community action agencies, the commission was uncomfortable with ratepayer funds subsidizing both a federal program and administrative costs for local agencies. Instead of approving the LIHEAP Supplemental Fund, the IURC authorized the three utilities to continue operating their USPs and use any remaining funds from the previous heating season to create the largest benefit they could. Doing this, the IURC said, would make sure that customers weren't subsidizing a federal program, and that non-participating customers wouldn't be paying a higher rate than last year. The commission also said using remaining funds would help low-income customers receive at least the same amount of discount they did the previous year.
Roger Colton, a principal with Fisher Sheehan and Colton Public Finance and Economics, documented the need for low-income rate assistance in a June 2008 study. He stated, "The problem of unaffordable home energy bills in Indiana is massive." Colton said the need was growing and public and private resources were not keeping up. In fact, he concluded that current resources were "grossly inefficient to address this affordability gap." In 2005, about 485,000 households lived at or below 150 percent of federal poverty guidelines, but Indiana LIHEAP served fewer than 145,000 households. In his report, Colton reviewed the programs run by NIPSCO, Vectren, and Citizens, all of which had been running for about four years.
In 2004, the IURC first approved (Cause 42722) NIPSCO's "Winter Warmth Program." The program focused on customers that needed to restore service or faced termination of service for not paying their bills. Automatic enrollment happened through LIHEAP. Low-income customers could also qualify through local agencies if they experienced a "hardship," a designation over which the local agency developed criteria. NIPSCO required security deposits by customers, and it required anyone eligible for Winter Warmth to pay a minimum of $50 before receiving any benefits. The company told the IURC it wasn't asking for a USP like Vectren and Citizens, because it believed a USP would be more expensive for non-assisted customers. During the first year, Winter Warmth helped 10,500 households, and it distributed about $10.8 million during its first two years.
In the first year of its USP, Vectren served 23,900 households and provided $8.9 million in discounts. With LIHEAP benefits factored in, customers received up to a 50 percent reduction in their bills. By 2009, almost 31,000 customers received approximately $5.12 million in discounts through the USP.
Citizens initially offered tiered discounts from nine percent to 23 percent through its USP. During the program's first year, about 17,300 Citizens customers participated and received approximately $5.5 million in discounts. When combined with the LIHEAP benefit, its USP customers had a bill that was up to 32 percent lower than it would've been otherwise.
In 2006, Citizens proposed changing its tiers to a range of 10 percent to 25 percent. The company also proposed only offering the discounts during the winter heating season. It wanted to implement a "Keep the Heat On" program to help USP customers maintain or reconnect service following the heating season. However, other parties in the rate case ultimately reached a settlement agreement with Citizens that resulted in the company creating its crisis program, instead of its proposed "Keep the Heat." In November 2007, the IURC renewed (Cause 43078) the Citizens USP and endorsed the creation of crisis programs by both Citizens and Vectren.
The rate assistance programs by NIPSCO, Vectren, and Citizens have been frequently evaluated. Colton performed one such study in 2009. He categorized the USP programs by Vectren and Citizens Energy as "proactive basic rate affordability assistance" applied to low-income customers' bills. On the other hand, NIPSCO's Winter Warmth program was "reactive crisis assistance" for customers "facing a pending disconnection of services due to high arrears." Despite the different designs, Colton found all the programs were "effective at what they seek to do" and recommended they continue. NIPSCO eventually phased out Winter Warmth and created CARE, which was modeled after the USPs.
The IURC issued a decision (Cause 42693-Phase II) in December 2009 requiring electric utilities to achieve two percent annual energy savings through Demand-Side Management (DSM) within 10 years. The commission also determined that the utility-led model was not working. At the time, utilities created and independently operated their own DSM programs in their service areas. The IURC changed this by ordering jurisdictional utilities to contract with a single independent third party to jointly administer and implement core DSM programs. Among the core DSM programs ordered by the IURC was Low-Income Weatherization Program (LIWAP).
In the fall of 2011, five utilities and the Indiana Municipal Power Agency contracted with the Georgia-based Good Cents to administer core DSM programs in the form of Energizing Indiana. All of the participants in Energizing Indiana funded their part of the program through money collected by ratepayers. With the participating utilities, Energizing Indiana estimated it could cover 80 percent of the state's utility customers. The LIWAP it offered was is called "Income Qualified Weatherization." During its inaugural year in 2012, Energizing Indiana weatherized over 7,600 low-income homes. By 2014, that number had increased to over 8,000.
However, the Indiana General Assembly terminated Energizing Indiana Senate Bill 340. The new law eliminated the surcharge on households to pay for the efficiency offered by Energizing Indiana. Supporters of the new law stated the program was too expensive, especially for manufacturers and other big businesses. SB 340 initially only called for exempting businesses from paying the surcharge; however, the Indiana House amended it to eliminate the program. The amended bill passed both chambers easily. Many of the utilities that participated in Energizing Indiana are now operating their own low-income energy efficiency programs
In July 2004, the IURC initiated Phase I of an investigation (Cause 42693) to review issues associated with DSM programs. The IURC wanted to examine DSM effectiveness, along with evaluating whether the current utility-led DSM efforts or a statewide model made the most sense.
As part of the proceedings, Susan Stratton of Wisconsin's Energy Center submitted her Indiana DSM Investigation Report. It stated Indiana was in good position to move forward with a more consistent statewide program, instead of the utility-led model. It recommended the IURC establish an overall policy objective if it wanted to move to such a system.
In April 2008, IURC decided (Cause 42693 - Phase I Order) to initiate Phase II of its DSM investigation, which focused on developing the statewide policy objectives recommended by the Stratton report. The IURC stated the Stratton report confirmed the current DSM approach resulted in an "inconsistent patchwork of programs that exclude customers, geographically and by sector, from the benefits of energy efficiency services."
The IURC wanted Phase II to "result in the development of a critical path forward for the overall improvement of DSM programs in Indiana." While the commission didn't decide on an administration model, it stated it was in the "public interest" that a third-party administrator model be "carefully reviewed and considered." It limited the Phase II investigation to electric and steam utilities. The Phase II decision (Cause 42693-Phase II) ultimately led to the creation of Energizing Indiana.
Shortly before the Phase II decision, the IURC issued an order (Cause 43180) dealing with energy efficiency, decoupling, and natural gas. It stated that alternative rate designs not based on traditional volumetric designs offered solutions to declining gas usage and increased demand for energy efficiency.
This didn't mean a free pass for decoupling, as the IURC stated, "decoupling is not energy efficiency." The IURC said utilities wanting to employ decoupling had to include measurable energy efficiency programs, citing NIPSCO, Citizens, and Vectren as good examples. The commission said any decoupling mechanism proposed needed to be "fair and equitable to all customers" and should be thoroughly examined as part of a rate case.
For More Information
Roger Colton, Impact Evaluation of NIPSCO Winter Warmth Program, August 2005
Roger Colton, Home Energy Affordability in Indiana, June 2008
Roger Colton, An Outcome Evaluation of Indiana's Low-Income Rate Affordability Programs, August 2009
Susan Stratton, Indiana DSM Investigation Report, April 24, 2007