Last Updated: December 2016
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Ohio operates the nation's largest and oldest Percentage of Income Payment Plan (PIPP) for low-income customers. Called "PIPP Plus," it makes customers' monthly payments more affordable on a year-round basis. Participating households that heat with gas pay six percent of their gross monthly income or $10 per month, whichever is greater, to both their electric and gas utilities. Those that heat only with electricity pay 10 percent of their gross monthly income or $10 as their monthly payment, whichever is greater.
Each month that participants make their payment in full and on time they receive a credit of 1/24th of their historic arrearages. Any difference between their payment amount and actual usage charges is also forgiven.
The program is funded by a rider on all customers of regulated utilities in the state. The electric portion of the PIPP is administered by the LIHEAP grantee, the Ohio Development Services Agency's (ODSA) Office of Community Assistance. The Office of Community Assistance files for revised electric rider rates annually to keep pace with the cost of the PIPP and changes in utility rates and enrollment. The gas portion of the PIPP is administered by the gas utilities with oversight from the Public Utilities Commission of Ohio (PUCO).
The average number of electric PIPP Plus customers for January - December 2015 was 386,491; payments totaled about $304 million. Gas PIPP Plus customers received about $28 million in payments.
Customers who become income ineligible for PIPP Plus, but are current on their PIPP Plus payment, are placed on "Graduate PIPP Plus." Electric and gas customers have slightly different rules, but the "graduate" programs are designed to provide customers with a 12-month transition from PIPP Plus to full payments. Customers generally pay an average of their most recent PIPP Plus amount and a budget billing amount calculated by their utility. Customers who make payments on-time and in-full will continue to receive credits toward their monthly bill balance and a 1/12th credit to their old debt.
There is also a program for customers who have a balance on their account with a former utility. Called Post PIPP Plus, this 12-month program allows former utility customers to earn an arrearage credit equal to 1/12th of their arrearages with every payment of 1/60th towards their arrearages.
While the majority of the electric rider revenues fund the PIPP, about $15 million is set aside each year for the low-income energy efficiency program and consumer education. For FY 2015, about $14 million was spent for the Electric Partnership Program (EPP) services to an estimated 15,938 households.
The EPP began in March 2002 and is targeted to high consumption, high arrears PIPP or PIPP-eligible households that are customers of the state's investor-owned electric utilities. Its goal is to reduce electric consumption by these households in order to reduce the growth of PIPP household arrears and, as a result, reduce the amount of money ratepayers pay to support the PIPP.
The EPP is composed of two types of programs: a baseload efficiency program and a weatherization program for those who heat with electricity and who have moderate to high usage.
The EPP provides in-home audits, appropriate electric baseload and thermal energy efficiency measures, and consumer education. The major baseload measures are replacement of inefficient refrigerators and freezers and installation of compact fluorescent light bulbs. Weatherization measures include insulation and heating system inspections. The program also addresses health and safety issues. The education component varies in intensity depending on the PIPP customer's electric consumption and other factors. Participants may receive in-home visits, attend workshops, or receive materials by mail.
According to the third impact evaluation of the EPP, completed in June 2006, the EPP produces substantial electricity savings in thousands of PIPP households each year. As to whether EPP has reduced PIPP costs, the evaluation noted that the $12.7 million in lifetime bill savings shown in the evaluation would reduce the cost of PIPP by an estimated $11.3 million and provide about $1.4 million in out-of-pocket savings to the participants.
ODSA administers the EPP, along with federal weatherization funding. It monitors monthly consumption, bill payment, and arrearage data from electric utilities for PIPP accounts. Households whose total energy burdens exceed a certain threshold are targeted for EPP and conservation education services.
In addition to the EPP, most of Ohio's gas utilities have weatherization programs, and several of the electric utilities have separate efficiency programs. In 2015, funding from these utilities amounted to $34.6 million. Most of these programs are operated in coordination with the federal Weatherization Assistance Program, and, as a result, many of the homes received comprehensive weatherization and other energy efficiency upgrades as needed.
First implemented in 1983, based on a PUCO order, Ohio's original PIPP required customers with incomes up to 150 percent of federal poverty guidelines to pay a percent of their monthly household incomes to the utility or utilities providing their primary and secondary heating service. There were several different PIPP plans, but the maximum PIPP payment was 15 percent of the household's income. If customers remained current on their PIPP payments, they could not be shut off at any time regardless of the amount of their arrears. The amount of the bill not covered by a combination of the customer's PIPP payment, the LIHEAP payment, and any other energy assistance the customer received, was recovered through riders or surcharges on gas and electricity bills.
The state's 1999 restructuring legislation created a Universal Service Fund (USF) to fund the electric PIPP, along with an energy efficiency and consumer education program for PIPP households. The law converted the electric PIPP rider to a universal service rider, assessed on customers of electric utilities. The gas PIPP rider remained unchanged for gas utilities, as did the gas portion of the PIPP. The gas PIPP rider is embedded in gas distribution charges, and the utilities collect for program costs as needed.
The legislation assigned administration of the electric PIPP, and the energy efficiency and consumer education programs, to the ODSA, then called Ohio Department of Development, with a goal of lowering program administration costs and providing a one-stop shop for program clients. (Prior to the restructuring law, Ohio's utilities administered their PIPPs and energy efficiency programs; gas utilities continue to administer their programs.) The ODSA, which had been involved in PIPP operations since the program's inception, began to administer the PIPP portion of the USF funds in October 2000.
In 2006, a PIPP reform working group began studying ways to improve the PIPP, and it finalized proposals for program changes during 2008 and 2009, with final rules for both programs approved by the PUCO in the latter year. The working group was comprised of staff from the ODSA, the PUCO, the Office of Consumer Counsel, and low-income advocacy and consumer groups.
The new PIPP was designed to improve the program as follows:
- Contain escalating costs while continuing to provide a valuable benefit. Costs of the electric PIPP had increased by 221 percent since 2001, from $47.7 million in 2001 to $153 million in 2010, and enrollment soared from 137,000 in 2001 to 288,630 in 2010.
- Increase payment frequency while reducing PIPP payment requirements.
- Align the gas and electric PIPPs. Under the original program, the gas PIPP payment was made year-round, while the electric PIPP payment was the PIPP amount or the actual bill, whichever was higher, for the non-winter months. Under the new program, the electric PIPP is year-round. Most participants, over the course of a year, pay less under PIPP Plus than they paid under the original program.
- Create a uniform arrearage-crediting program for accruing and past arrearages. If customers make their monthly PIPP payment on time, they receive a bill credit that is the difference, if any, between their monthly PIPP payment and their bill. Furthermore, for each timely payment, they receive a credit amounting to 1/24th of their historic arrearages. If the customer makes 24 consecutive payments, in full and on time, the entire debt is forgiven. The program was designed to keep low-income customers from falling deeper into debt; it was also expected to help control PIPP program costs by encouraging responsible payment behavior.
On November 1, 2010, the state began operating the reformed PIPP, renamed "PIPP Plus." ODSA records indicate that prior to PIPP Plus, only 33 percent of participants' electric bills were paid. In PY 2013, 48 percent of electric customers made PIPP Plus payments. Average arrearages for electric PIPP Plus customers have decreased from $1,018 in 2011 to $682 in 2013.
For more information
Information on current and proposed PIPP rules
Consumer information page of the Public Utilities Commission of Ohio