Last updated: September 2018
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Electric and natural gas investor-owned utilities in Massachusetts provided low-income utility rate discounts to approximately 280,000 households in 2016. According to information provided by the National Consumer Law Center, the savings to LIHEAP households totaled at least $118 million. The amount of the electric and gas discounts varies by utility, but ranges from 20 percent to 42 percent of the bill.
Utility customers whose income is at or below 60 percent of state median income, or not exceeding 200 percent of the federal poverty guideline, are eligible for the discount. Customers that receive one of a dozen means-tested programs such as LIHEAP, SNAP, public housing, Supplemental Security Income, Head Start, and Mass Health/Medicaid are automatically enrolled into the discounts through data exchanges between the Massachusetts Department of Transitional Assistance and the utilities (see the "History" section below for more information).
The natural gas discount is mandated by state regulation, while the electric discount is codified through the state's 1997 utility restructuring legislation.
Since 2007, Massachusetts utilities also have been offering arrearage management programs (AMPs) to their low-income customers that have overdue utility bill balances. In 2015, enrollees must agree to an affordable payment plan and, in return, they receive some forgiveness of their debt not to exceed $2,000.
At the end of 2016, more than 22,000 customers participated in their utility's AMP. Utilities offering AMPs forgave $19.4 million to participating households in 2016.
In 1979, the regulatory commission approved the state's first low-income discount rate in response to a voluntary proposal by Massachusetts Electric Company to provide "a reduced rate for certain elderly poor customers." The discount survived a legal challenge from an industrial customer that claimed it was discriminatory. The state Supreme Court ruled: "There can be no question that the department's jurisdiction over the entire rate structure includes the authority to approve a reduced rate for certain customers," and it went on to declare that "different treatment for different classes of customers, reasonably classified, is not unlawful discrimination."
Subsequently, other utilities in the state adopted low-income discount rates. By the mid-1990s almost every regulated gas and electric company offered a discount rate, although the amount discounted and the rules governing eligibility varied by company.
The 1997 restructuring legislation mandated that electric companies, all of which had discounts at that time, continue to offer those discounts. It said eligibility would be established upon verification of a low-income customer's receipt of certain means-tested public benefits or verification of eligibility for LIHEAP
The legislature also required utilities to conduct substantial outreach and to consider using automatic matching as a means to facilitate outreach and enrollment. The state's regulatory commission then promulgated similar rules for the gas utilities.
Periodically, regulatory and policy initiatives have impacted discount enrollment and funding levels, causing them to steadily increase. In most cases, the changes were instituted in response to energy price increases that led to investigations and subsequent rulings by the state's regulatory commission (formerly the Department of Transportation and Energy [DTE], now the Department of Public Utilities [DPU]). Sometimes spearheaded by a network of advocates, the most significant initiatives involved automatic enrollment, escalating energy prices, and arrearage management. These are chronicled below.
Automatic enrollment: In 2001 the DTE opened a proceeding (D.T.E. 01-106) to investigate increasing the penetration rate for the electric discount, as well as discounts for natural gas and telephone service. The DTE opened the investigation by noting "the chronic inability of low-income households to pay for essential gas, electricity and telephone services on their own and, therefore, the crucial role of discounted utility rates in helping these families to live with dignity." At the time, less than one-third of the estimated number of eligible households received electricity and natural gas bill discounts
In August 2003, after extensive meetings with stakeholders, the DTE issued an order establishing a process for automatic enrollment for the gas and electric discounts. The order stipulated the following:
- A Memorandum of Understanding between DTE and the state's Executive Office of Health and Human Services (EOHHS), which outlined changes that were to be made to EOHHS application forms for such means-tested benefit programs as SNAP, Head Start, Mass Health/Medicaid, etc. (EOHHS administers a range of health and human service programs through over a dozen departments within it, including the Department of Transitional Assistance [DTA], and it has a database of program beneficiaries).
- Applicants were asked to give their permission to release limited information to utility companies (name, address, a unique identifying number). This allows EOHHS to certify the EOHHS applicant/beneficiary as income eligible for utility discounts.
- Utilities were required to share information electronically with EOHHS to identify those EOHHS-served households that were income-eligible for the discounts. EOHHS would use its database to match the names on customer lists provided by utilities.
- The utilities were to presumptively place these income-eligible households on the appropriate discount rate within 60 days of learning that they
were income eligible. The utilities were to send notices to the households informing them that they had been placed on the discount rate and that they had the right to be removed from the discount upon request.
It took over a year for various issues related to implementation of the August 2003 order, including cost recovery by the utilities, to be resolved. On December 6, 2004, the DTE ordered all state electric and gas companies to share their customer lists within 30 days of the order date with the EOHHS so that automatic enrollment could begin. That agency is responsible for identifying eligible utility customers and then directing the utilities to automatically enroll them unless the customers opt out. An opt-out form may be placed on utility websites.
The DPU requires utilities to submit quarterly reports tracking the number of customers enrolled in the discounts through the computer match as well as by traditional means, such as the LIHEAP application process at community action agencies and through utilities. The number added through computer matching has increased every year.
Response to Escalating Prices: An order released September 15, 2008, by the DPU required utilities to file new low-income discount rates that restored the percentage value of those discounts to their level as of 1998.
The DPU and advocates had noted that, since the advent of restructuring, the actual value of the discounts had been eroding considerably due to higher commodity prices. Specifically, Massachusetts' residential natural gas prices had increased 64 percent between 2002 and 2007, and average electricity prices had jumped at least 52 percent.
The escalating prices had prompted the DPU in February 2008 to open an investigation into expanding low-income consumer protections and assistance, including standards for arrearage management programs, the discount rates, service termination, and energy efficiency programs. Comments filed by the utilities, the Massachusetts Energy Directors Association, the Low-Income Weatherization and Fuel Assistance Network, and others almost unanimously supported the need to expand the discounts.
In a February 2010 order approving National Grid's low-income rate design, the DPU said other gas and electric companies should file revised rate design proposals for low-income customers that complied with the standard set by National Grid. Its revised discount was a flat 25 percent off the total bill compared to prior discounts that varied by consumption. According to the DPU, the revised model was beneficial, because the low-income discount would be uniform regardless of consumption or energy prices, thus eliminating the need for frequent adjustments and lessening confusion among customers. Companies were instructed to file revised tariffs, and, by the end of 2010, all companies had complied, proposing discounts in the 25 percent range.
Additionally, on November 6, 2008, the DPU ordered electric companies to increase the discount rate eligibility level to that of the state's LIHEAP program, which had been raised to 60 percent of state median income (SMI) from 200 percent of federal poverty guidelines as of November 1. According to Massachusetts state law, eligibility for the discounts must follow LIHEAP eligibility. The state had raised the LIHEAP income maximum, because its LIHEAP funding had nearly been doubled after Congress appropriated LIHEAP a record $5.1 billion nationally in September 2008.
Arrearage Management: In 2006, as a result of a new state law (Chapter 140, Section 17), the DPU directed each gas and electric company to establish an arrearage management program (AMP) targeted at their low-income customers with overdue utility bill balances.
Chapter 140 requires that each company offer all low-income consumers with an account in arrears a payment plan of no less than four months, with a down payment of no more than 25 percent of the total arrearage. The remaining arrears balance is divided into equal payments, and a company may seek approval from the DPU for a payment agreement of less than four months if good cause is shown.
Eligibility for an AMP is based upon a customer's "receipt of any means tested public benefit" or eligibility for LIHEAP. Each company's AMP must offer eligible low-income consumers affordable payment plans and must provide credits toward a customer's accumulated arrearage when the customer complies with the terms of the program. The AMPs have grown considerably since their initiation. In 2006 about 3,500 households participated, while in 2015 that number had grown to over 28,000 households.
Massachusetts' restructuring law established a low-income conservation fund through a 0.25 mills per kWh charge on every electric customer, while a conservation charge on natural gas customer's bills has funded gas low-income energy efficiency programs. In 2015, these programs spent over $73.8 million on measures for low-income households. The programs area operated in coordination with the LIHEAP and federal Weatherization Assistance Program (WAP) delivery network.
Massachusetts began approving low-income energy efficiency programs in the 1980s. These programs were formalized under the 1997 restructuring legislation which mandated that:
"The low-income residential demand-side management and education programs shall be implemented through the low-income weatherization and fuel assistance program network and shall be coordinated with all electric and gas distribution companies in the commonwealth with the objective of standardizing implementation."
The utility funds are combined with WAP funds to expand the number of jobs completed and the work performed in low-income dwellings. Typical measures include attic and/or wall insulation, blower door directed air sealing, heating system repairs and replacements and ventilation. Priority is given to high-use households, as well as to elderly households and those with young children. Because high usage is often the cause of high arrearages, the efficiency programs are well-coordinated with the arrearage management programs. Services are offered to customers with incomes at or below 60 percent of the state's median income.
In 2010, the program received additional funding through the Green Communities Act, a comprehensive energy reform bill passed in 2008.The Act required all electric and gas distribution companies and municipal aggregators to develop energy-efficiency plans that provide for the acquisition of all available energy efficiency and demand-reduction resources that are cost-effective or less expensive than supply. It also required that 10 percent of electric utility program funds and 20 percent of gas program funds be spent on comprehensive low-income energy efficiency and education programs.
In an order dated January 28, 2010, the DPU approved three-year energy efficiency plans with programs for all customer classes, including low income, by the state's natural gas utilities, and another order approved the electric utilities.
Per the plans, the electric programs included five sources of funding: 1) the above-mentioned mandatory 0.25 mills per kWh system benefits charge; (2) revenues from the forward capacity market administered by Independent System Operator-New England; (3) revenues from cap and trade auctions known as the Regional Greenhouse Gas Initiative (RGGI); (4) other funding sources; and (5) an energy efficiency surcharge to collect additional funds as needed. The gas utility programs continue to be funded by the conservation charge, which is now called the energy efficiency surcharge.
In addition to the WAP-coordinated programs which directly serve low-income clients, the utilities fund the Low Income Multi-Family Retrofit Program, which benefits the low income indirectly. It provides cost-effective energy efficiency improvements to multi-family buildings, including nonprofit and public housing authorities. The program is targeted to 1-4 unit residential buildings where at least 50 percent of the units are occupied by low-income residents earning at or below 60 percent of area median income. Eligible projects involve efficiency upgrades for buildings with currently high energy consumption, specifically for space heating, hot water, air sealing and insulation of building envelopes, lighting, and appliances. These programs were recognized as "exemplary" by the American Council for an Energy Efficient Economy's "Leaders of the Pack: ACEEE's Third National Review of Exemplary Energy Efficiency Programs" published in June of 2013.
During 2008, about $4 million in RGGI funds paid for heating system repairs and replacements for low-income households; in 2009 RGGI funds expanded existing utility energy-efficiency programs, including those for low-income. There were no RGGI funds for 2010 through 2012.
For More Information
National Consumer Law Center, Helping Low-Income Utility Customers Manage Overdue Bills Through Arrearage Management Programs, September 2013