Overview of Utility Ratepayer-Funded Programs

Utility ratepayer-funded programs that provide bill payment assistance or energy efficiency services to low-income customers have been around at least since the 1980s.

Many of the existing ratepayer programs were expanded and new ones were created during the 1990s, when over half of the states passed or considered some form of restructuring or deregulation of their electric and natural gas utilities with an overall goal of fostering competition among providers of electricity and natural gas.

As a result of state restructuring activity, 22 states were able to either expand their existing utility ratepayer-funded low-income energy programs or to create new funding sources and new programs. This included two states (Wisconsin and Vermont) that did not restructure or deregulate; however, they did pass comprehensive energy legislation that included low-income energy funding.

During the same period, other states (Arizona, Minnesota, Oklahoma, and Washington) that did not pursue restructuring continued to operate, and sometimes expand, the low-income energy programs they had negotiated with utilities through rate cases and other proceedings. More recently, several states have created new low-income energy programs — Indiana, Colorado, Vermont.

This section provide san overview of all states with significant ratepayer-funded energy assistance and energy efficiency programs, regardless of how they originated.

In the 22 states that went through the restructuring process, the low-income energy programs, as well as energy programs for other customer classes, are funded through charges assessed on electric and/or natural gas consumers. States variously refer to these charges as a public goods surcharge, system benefits charge, societal benefits charge, public benefits fee, universal service fee, universal energy charge, meters charge, etc.

Some states impose the charge or fee only on electric bills, and, thus, provide only electric assistance programs. Some impose the charges on electric and gas customers and provide programs for both types of customers. Most states provide both rate assistance and energy efficiency programs for low-income households, with rate assistance generally receiving the largest amount. The charges may be assessed on all customers, a mix of residential, commercial and industrial, or only residential. In some states, the funds are administered by a state agency, typically the state LIHEAP/weatherization agency, with oversight by the regulatory commission. In other states, utilities administer the programs with regulatory commission oversight.

In most of the non-restructured states, the utilities administer their own programs; negotiate changes from time to time with their regulatory agencies; and partner with LIHEAP and local administering agencies to ensure the programs reach eligible households.

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