Last Updated: November 2016
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Minnesota Statute 216B.16 (Subdivisions 14 and 15) requires both natural gas and electric utilities that are investor-owned to provide rate assistance to low-income customers. The statute defines low-income as customers receiving LIHEAP benefits.
The 2014 Minnesota Legislature amended the part of the statute dealing with low-income electric discounts to set a base level of funding at $8 million for public utilities with more than 200,000 residential customers. It requires that amount to increase at the same percentage as any future rate increases on residential customers. The amended statute also requires that elderly and disabled low-income customers receive a $15 discount each billing period. The legislature removed from the statute a section that had required a 50 percent discount for low-income customers on the first 400 kilowatt hours consumed during a billing period. These changes to the statute went into effect on Oct. 1, 2014.
The natural gas section of the statute includes a provision saying programs must decrease or eliminate arrears. It also states that the programs must lower the percentage of income that participating low-income households devote to energy bills, and that the Minnesota Public Utilities Commission (PUC) can require utilities to file program evaluations and reports to help measure the effectiveness of the gas affordability programs.
In 2015, utilities provided almost $29.5 million in rate assistance to about 120,133 low-income households. Program size varied depending on the size of the utility. Xcel Energy ran the biggest programs, spending over $11.4 million on rate assistance for over 72,200 households when the totals for its electric and natural gas programs were combined.
The utilities offering Gas Affordability Programs (GAPs) generally also provide some form of arrearage forgiveness. Most of the programs retire a customer's outstanding balance over a period of 12 or 24 months.
In 1994, the Minnesota Legislature passed Senate File 1706. It required electric utilities with over 200,000 residential customers to provide a 50 percent rate discount to low-income customers on the first 300 kilowatt hours consumed during a billing period. The legislation defined low-income as a customer receiving LIHEAP. In 2010, the Minnesota Legislature made the 50 percent discount apply to the first 400 kilowatt hours.
Between 1994 and 2010, other significant changes were made to the electric statute. Xcel Energy joined forces with low-income advocates and asked the 2004 legislature to allow more flexibility and to provide larger discounts to customers with the highest energy burden. The legislature passed Senate File 1753 in that vein. In addition to giving more flexibility to program design, the legislation made sure that customers who were at least 62 years old and/or had disabilities would receive, at a minimum, the same benefits as under the original 1994 law.
Following passage of the 2004 Senate File, Xcel Energy modified its low-income electric program. It now contains a Discount Program meeting the current statute's requirements by providing a flat rate monthly discount of $15. The utility also implemented the "PowerON Program," which targets households with poor payment histories, high electric consumption, or disconnected service. An affordable payment plan is offered to these households; they are referred to conservation initiatives; and they can have part of their arrears forgiven. The PUC approved (Docket M-04-1956) the program in April 2005.
Minnesota Power's "Customer Affordability of Residential Electricity" (CARE) program is newer. As part of a 2009 rate case, the PUC ordered (Docket GR-09-1151) the utility to create a program modeled after Xcel's to address the needs of low-income, high-usage residential customers. In September 2011, the PUC authorized (Docket M-11-409) CARE to begin. CARE is available to LIHEAP recipients that agree to participate in the company's conservation program and be on a monthly budget plan. Qualified customers receive discounts up to 37 percent depending on usage and receive a discount on the company's monthly service charge.
Significant changes to the statute regarding natural gas low-income assistance programs occurred during the 2007 Minnesota Legislature. Lawmakers passed Senate File 2096, which required the PUC to consider the ability of customers to pay when deciding rate cases. The legislation also said the PUC could establish "affordability programs" for low-income customers receiving LIHEAP. The legislation required the programs to decrease or eliminate customer arrears.
In response, six natural gas utilities created "Gas Affordability Programs." These GAPs vary greatly in size. Utilities like Xcel Energy and CenterPoint Energy serve thousands of households with programs that provide millions of dollars in discounts to qualified customers. On the other end, Greater Minnesota Gas runs a very small GAP, serving less than 20 households.
While size may vary, there are similarities amongst most of the GAPs. Most offer bill credits by calculating the difference between the company's estimate of the customer's annual bill and a percentage of the customer's household income. This percentage ranges from four to six percent depending on the GAP. As required by law, the GAPs address arrearages with most retiring a customer's outstanding balances over a 12 or 24 month period.
The percentage of household income used in GAPs has been a source of debate. In August 2009, the PUC announced it was looking into the percentage issue. It stated that companies were using different percentages, and some calculations of household income included LIHEAP benefits. The PUC asked utilities and other interested parties to submit comments on both how household income was calculated and the percentages used to determine GAP discounts. It specifically asked whether the PUC should standardize the process throughout the system.
Energy CENTS Coalition urged the PUC to adopt a lower percentage, saying the GAPs weren't working as effectively as intended because the credits received at six percent were too small. Xcel Energy said it had experienced significant turnover in its program due to participants' inability to consistently make the required monthly payment. The utility felt that dropping to four percent would assist in retaining GAP customers, because participants would receive a larger credit.
After reviewing the comments, the PUC declined to mandate changing the percentage or to decide whether LIHEAP benefits should count as household income. Since the GAPs were relatively new, it decided there was not enough data to reach firm conclusions. It left the decision up to the individual utilities, but, over the years, many of them altered the percentage they used. The PUC has granted requests from Xcel Energy, Interstate Power and Light (now MERC), CenterPoint Energy, and Great Plains Natural Gas to lower the percentages they used from six to four percent.
The statutory GAP requirements have challenged smaller utilities. In October 2008, the PUC notified (Docket CI-08-1175) Greater Minnesota Gas that the company was on the verge of being found in violation of state statute. The utility responded by saying it had communicated to the PUC in February 2008 that it was exploring "implementation of a GAP that complies with the statutory framework, while adequately reflecting the Company's smaller size." The utility eventually proposed a GAP that the PUC approved.
Because of its small size (about 4,800 residential customers), Greater Minnesota Gas (GMG) asked the PUC to terminate its affordability program in an October 2014 filing. The utility claimed that administration of the programs was "burdensome and not cost effective." Both the Minnesota Department of Commerce and the Minnesota Attorney General opposed discontinuing the Gas Affordability Program, with the Commerce Department recommending the utility examine using a third party to administer the program. In a November 2014 ruling, the PUC stated that GMG should explore how its GAP could operate more effectively and efficiently, instead of terminating it. Therefore, the PUC ordered the utility to extend its pilot GAP for another year and inform the PUC of any changes it makes to how it solicits participation by low-income customers and/or administers the program. GMG revised its GAP and the new program was instituted in 2016 with a nonprofit third-party administrator.
Minnesota Statute 216B.241 (Subdivision 7) requires both natural gas and electric utilities to provide low-income energy efficiency programs. Both municipal gas and electric utilities must spend at least 0.2 percent of their gross operating revenue from residential customers on low-income programs. Legislation passed in 2013 raised the minimum low-income spending requirement for investor-owned natural gas utilities from 0.2 percent to 0.4 percent of their most recent three-year average gross operating revenue from residential customers.
In 2015, investor-owned utilities spent over $8.9 million on programs for low-income energy efficiency for about 17,600 households. The largest low-income programs were those by Xcel Energy and CenterPoint Energy, which served almost 50 percent of the total households. Some of the programs include replacing water heaters, furnaces, and other appliances, in addition to more traditional weatherization measures.
The 2007 Minnesota Legislature added the requirement for low-income efficiency programs to the existing "Energy Improvement Project" statute through Senate File 145.
The low-income programs became part of the "Conservation Improvement Program" (CIP) plans that utilities file with the Minnesota Department of Commerce's Division of Energy Resources (DER). Investor-owned utilities submit their plans every three years, and the DER reviews and approves them. The DER oversees more than $200 million for over 180 utilities that are required to participate in the CIP. To fund the programs, utilities levy some form of a "Conservation Cost Recovery Adjustment" surcharge on customers.
For More Information
Utility Reviews of Rate Assistance Programs, search for the following dockets on the Public Utilities Commission website :
- CenterPoint Energy, Docket No. G-008/M-16-266, June 1, 2016
- Greater Minnesota Gas, Docket No. G-022/M-16-233, March 17, 2016
- Minnesota Energy Resources Corporation, Docket No. G-011/M-16-273, March 31, 2016
- Minnesota Power, Docket No. E-015/M-11-409, April 20,2016
- Great Plains Natural Gas, Docket No. G-004/M-16-275, June1,2016
- Xcel Energy, Docket No. G-002/M-16-272, March 31, 2016
Utility Stakeholder Report, Review of Gas Affordability Programs, June 1, 2011
Minnesota Department of Commerce's Division of Energy Resource, Conservation Improvement Program website