Last Updated: February 2016
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Texas' restructuring legislation authorized a system benefits charge (SBC), a nonbypassable fee of up to 65 cents per megawatt hour, to fund, among other things, low-income rate assistance and energy efficiency.
As a result, a low-income electric discount program called LITE-UP Texas began in January 2002. It provided eligible households with a 10 percent electric bill discount that was increased to 17 percent in May 2002 — a discount that lasted less than three years. The 17 percent discount was reinstated in 2007 and continued through September of 2010. However, in 2011 the Public Utility Commission of Texas (PUC) reduced the electric bill discount to 10 percent. The 10 percent electric discount, approved through August 2013, was applied to bills May-August.
Since 2002, lawmakers have allowed the system benefit charge to accumulate, and funds for the low-income discount ballooned from $50 million to $851 million in 2012.
Beginning September 1, 2013, as a result of HB 7, the SBC will no longer be collected. In order to reduce the system benefit fund balance, the discount increased up to 82 percent of the customer's electric usage. The discount was applied to customers’ bills September 2013 and then May through August 2014. Starting September 1, 2014, the discount was reduced to 15 percent and was applied to customers' bills through August 2015. The discount increased to 31 percent for September 2015 through August 2016.
The LITE-UP program was projected to end after August 2016. However, enrollment numbers had been lower than expected and the PUC estimated that, at the end of 2016, there would be a balance of $247 million. Legislation passed that extended the period over which the balance of the LITE UP Texas system benefit fund was to be eliminated. However, the Lite-Up fund had been depleted and electric discounts ended as of August 31, 2016.
In FY 2013, 877,277 households received $74 million in discounts. In FY 2014, discounts totaling over $392 million were provided to 735,865 households.
The restructuring law stipulated that SBC funding would be used to continue weatherization programs that had previously been funded through utility rates and for educating customers about electric deregulation.
Effective June 2011, SB 1434 amended the Utilities Code by changing funding for targeted low-income programs from the base floor of 2003 funding levels to 10 percent of the utility's overall energy efficiency budget. The legislation also allowed that unobligated funds for these programs could be reallocated after July of each year to hard-to-reach programs to ensure that those funds were spent for the purpose of providing low-income customers with access to energy efficiency. In 2014, utilities provided over $13.7 million in weatherization measures to 3,190 low-income households.
Utilities spend several million dollars yearly on existing weatherization programs, known as the Hard-to-Reach Programs, available to households with incomes up to 200 percent of federal poverty guidelines. Each utility meets at least five percent of its savings goal for each year through programs targeted to this customer class. Administered by the utilities and implemented by private contractors that receive incentives for measures installed, the programs offer free, low-cost weatherization and energy-efficiency improvements. Utilities have been offering these programs since 2002, as mandated by the 1999 restructuring legislation. In 2014, utilities spent over $11.8 million on Hard-to-Reach Programs for 13,404 households.
Despite enrolling nearly 800,000 households at its peak and being considered a national model for its automatic enrollment system, the LITE UP discount faced trouble early on.
After only a year and a half, the Texas legislature began raiding the SBC to shore up the state general fund. The first raid, in the spring of 2003, took $183 million in SBC funds. That meant less funding for the discount, and it went back down to 10 percent. The funding reduction, along with stricter eligibility rules effective in April of 2004, resulted in enrollment plummeting to about 350,000. The legislature also changed the language of the original 1999 deregulation law to allow it to transfer the SBC funds into general revenue funds.
The next blow came when the 2005 legislature shifted all SBC funds — about $427 million for the biennium — to the state general fund. As a result, nearly 400,000 low-income Texans lost their discount as of August 31, 2005.
In June 2007, the Texas legislature appropriated $30 million from the SBC for a summer discount (July through October) of about 12 percent, and $170 million for a summer (May through August) discount of 17 percent for the next two years.
In 2011, the electric bill discount was reduced from 17 percent to 10 percent and, after HB4, was signed in June 2011, over $86 million was raided from the system benefit fund and transferred to the state general fund.
The rate discount was not the only casualty of the legislature; low-income energy efficiency programs also took a hit. Funds for energy efficiency were also raided in 2003 when SBC funding was eliminated and some $21 million that had been designated for weatherization was shifted to the state general fund.
The 2005 legislature attempted to restore some funding for weatherization by passing SB 712, which required that SBC funds for low-income weatherization that were zeroed out in 2003 be restored by individual utilities as part of their energy efficiency plans.
As of August 2006, as part of a stipulation with the Texas PUC and advocates, utilities have committed to developing weatherization services that are coordinated with the Texas Department of Housing and Community Affairs (TDHCA), the federal weatherization grantee.
Utility Energy Efficiency Plans & Reports, regulatory filings
2015 Scope of Competition in Electric Markets in Texas, Public Utility Commission of Texas