TX Low-Income Discount to End After Troubled History

July 26, 2013 — The Texas legislature has taken action to end a System Benefits Charge (SBC) that, since 2002, has funded, among other things, a low-income electric bill discount called LITE-UP Texas. However, the discount's history has been troubled, and its funding was usually much less than supporters had envisioned.

For the past several years, nearly one million households received a 10 percent electric discount during the summer months. As a result of House Bill 7, the Public Service Commission must stop collecting the SBC as of Sept. 1, 2013. The bill also stipulates that eligible low-income customers will receive a discounted rate up to 82 percent in September 2013 and in May through August of 2014. The discount decreases to 15 percent for two more program years to deplete the fund.

As the 2013 legislature debated what to do with the SBC, some lawmakers wanted to end it, while others wanted to see the money used for its intended purpose. Ultimately, the legislature passed House Bill 7, which some lawmakers called a massive tax cut, and others decried it as breaking a promise.

When Texas deregulated its electric markets in 1999, the legislature created the SBC in statute. All electric customers paid a surcharge of $0.65 per megawatt hour that went into the System Benefit Fund to provide, among other things, low-income rate assistance and energy efficiency. As a result, the LITE-UP Texas program began in 2002 to distribute 10 percent discounts to qualified customers on their electrical bills. Eligibility was set at 125 percent of federal poverty guidelines, with people receiving Medicaid and SNAP automatically enrolled.

The discount's percentage ranged over time between 10 percent and 17 percent. However, sometimes there were no discounts, as the legislature raided the fund to balance the state's budget. For instance, lawmakers took all of the funding ($427 million) in 2005 and shifted it to the general fund. Between 2002 and 2013, the fund's balance ballooned from $50 million to $851 million. Initially, low-income energy efficiency was provided through the fund, but that was short-lived.

Texas-based and national low-income advocates condemned the destruction of the SBC, pointing to the eventual elimination of an important source of low-income rate assistance and energy efficiency. Some mentioned unintended consequences as well.

"In this 11th-hour budget deal, there was no consideration of how such a humongous discount would affect the Texas LIHEAP program," stated Texas Legal Services Center's Randy Chapman, "nor the anti-conservation message that it sends customers who have little incentive to conserve during summer peaking months."

For more background on the Texas System Benefit Fund, see this article on the Clearinghouse website.

Sources: Media reports, Texas Legislature, Clearinghouse website, Texas Legal Services Center