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MI to Adopt Surcharge for Low-Income Rate Assistance

July 12, 2013 — Earlier this month, Michigan Governor Rick Snyder signed Public Act 95 into law, which allows the Public Service Commission (PSC) to approve a surcharge on electric customers to fund low-income energy assistance. The Act creates a replacement for a previous ratepayer-funded program the Michigan Court of Appeals struck down in 2011.

The PSC announced on July 11 that it was proposing a monthly surcharge of $0.91 on all electric customer classes. Participating utilities would deposit the money collected through the surcharge in the Low-Income Energy Assistance Fund (LIEAF) housed in the Michigan Treasury. The PSC is taking comments on the proposal through July 24. The PSC plans to finalize the amount of the surcharge by July 31, so it will be in place for the state's next fiscal year.

Public Act 95 allows the PSC to adopt a surcharge for all electric utilities, including municipals and cooperatives. However, it also allows these utilities to opt out of collecting the surcharge. Eight utilities have already notified the PSC that they will not be participating, while two companies have filed notice that they will collect the surcharge.

Public Act 95 stated the surcharge could not be more than $1.00 per month, and it caps the amount that can be raised annually for LIEAF at $50 million. The Department of Human Services will distribute LIEAF according to the Public Act 615 of 2012. That Act states that 70 percent of the fund must be distributed to households with incomes at or below 150 percent of federal poverty guidelines during the "crisis season" of November through May every year.

LIEAF will replace the Low-Income Energy Efficiency Fund. Started in 2002 and funded through ratepayer surcharges, the efficiency fund provided energy assistance and energy efficiency to low-income customers, as well as energy efficiency programs for all customer classes. From 2002 through 2010, the PSC distributed about $664 million in grants from the fund, with over $452 million of that targeted to low-income energy assistance.

In 2011, the Michigan Court of Appeals ruled the PSC was acting outside its statutory powers both in administering the efficiency fund and in approving utilities collecting ratepayer funds for it. Until the passage of Public Act 95, the legislature had appropriated public funds for low-income energy assistance on a year-by-year basis since the ruling. For more background, please see this article on the Clearinghouse website.

During the 2012 session, Michigan lawmakers successfully created LIEAF. However, a companion bill, SB 1134, which would have created a funding mechanism through an annual surcharge, failed. The legislature ended up appropriating about $60 million in public money to provide energy assistance for FY 2013. The passage of Public Act 95 established a consistent ratepayer funding mechanism for LIEAF.

Sources: Michigan Public Service Commission, Michigan Legislature, LIHEAP Clearinghouse