Last Updated: August 2016
California's low-income energy programs continue to provide assistance at unprecedented levels. The California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) provide help to low-income households in paying their utility bills. While all investor-owned utilities (IOUs) provide CARE, only the state's three largest electric IOUs offer FERA.
The spending on CARE continues to grow. At the beginning of 2001, the four largest utilities (San Diego Gas and Electric, Pacific Gas and Electric, Southern California Edison, and Southern California Gas Company) spent about $126 million on the program. By the end of 2014, it reached $1.29 billion in funding and served 4.5 million households. The $1.29 billion represents only the discount expenditures and does not include administration, outreach, or other expenses related to the program.
During 2014, the four largest utilities continued to report on how well they reached CARE-eligible households, and they cited penetration rates from 84 percent to 95 percent. The California Public Utilities Commission (CPUC) has consistently pushed the utilities to reach the 90 percent penetration level. It has directed the utilities to aggressively engage in outreach activities while also taking measures to make sure that only eligible households are taking part in the program.
The 90 percent goal came from the 2007 low-income energy program needs assessment, which found that about 10 percent of eligible households were either unwilling or unlikely to participate in CARE. Reasons for this, according to the report, include the difficulty, as well as excessive costs, in identifying and reaching certain customers. In addition, some customers have a very low energy burden and would not benefit greatly by participating in the program.
The CPUC approved FERA in 2004 as a way to provide an electric bill discount to low- and middle-income households of three or more people. While CARE eligibility is capped at 200 percent of the federal poverty level, FERA's goes up to 250 percent. Program participants save on their electric bills by having some of their usage billed at a lower rate. The program applies only to three electric utilities: Pacific Gas and Electric (PGE), Southern California Edison (SCE), and San Diego Gas and Electric (SDGE). The CPUC said it did not extend FERA to smaller electric utilities, because their upper tier rates weren't as high as those of the major utilities, therefore they didn't appear to have a comparable need for rate relief. During 2014, FERA served over 56,500 households, and the three utilities awarded about $10.9 million in discounts.
During 2013 and 2014, two issues—pre-paid service and changes to categorical eligibility—arose before the CPUC that could have impacted low-income households. Both SDGE and SCE proposed pre-paid utility service (for more information about pre-paid service, see this report) in 2013. Consumer advocates opposed the proposals, noting that low-income households would lose numerous protections related to the termination of utility services. The CPUC rejected SDGE's proposal in January 2014, and SCE withdrew its proposal in April 2014. In its Decision 14-01-002 in the SDGE case, the CPUC said the proposed pre-pay program was not in the public interest and that any future proposals should "ensure that there is an adequate means to provide notice to customers before their electric service is disconnected."
The other issue related to low-income households was a debate over categorical eligibility, a process that streamlines the application process for CARE and the Energy Savings Assistance Program (a statewide energy efficiency program discussed more below) by allowing people to qualify by already being enrolled in another assistance program. During 2013, Southern California Gas, SDGE, SCE, and PGE proposed changes to categorical eligibility, including eliminating eight of the 11 programs used to enroll customers in CARE and the Energy Savings Assistance Program (ESAP).
Another alternative proposed by utilities was to keep all 11 programs but require income documentation and post-enrollment verification measures. Consumer advocates claimed the study cited by the utilities as a reason to revamp categorical eligibility was "flawed." In April 2013, the PUC issued an Advice Letter rejecting any changes to categorical eligibility until the proposals went through a formal proceeding. In May 2014, an Administrative Law Judge issued a proposed decision that retained current categorical eligibility and self-certification standards for CARE and Energy Savings Assistance Program (ESAP) applicants.
Despite the turmoil caused by electric deregulation in California, low-income programs remained mostly intact, although they have been significantly expanded in response to the skyrocketing electric and natural gas rates the state has experienced periodically since 2000.
The CPUC and the 1996 deregulation legislation stipulated that low-income program funding continue at not less than 1996 authorized levels, but the CPUC added that this "does not preclude consideration of higher levels, as appropriate, in the future." CARE and ESAP have continued to grow since there is no cap on the amount of funding that can be spent on the programs.
Outside the large IOUs, other utilities, whether investor-owned or publicly-owned, must spend at least 2.85 percent of their 1994 revenues on public goods programs which must include: "services provided for low-income electricity customers, including but not limited to, targeted energy efficiency service and rate discounts." Low-income energy expenditures for the other utilities total at least $40 million yearly.
Like CARE, ESAP has been around for decades, and it provides energy-efficiency measures for low-income households. Also like the rate-assistance programs, ESAP funding and the number of households served continues to grow.
The four largest utilities spent about $390 million during 2014, compared to $56 million in 1996. The $390 million is for efficiency measures only and doesn't include administrative or other costs. ESAP services include attic insulation, energy efficient refrigerators, energy efficient furnaces, weather stripping, caulking, low-flow showerheads, water heater blankets and door and building envelope repairs which reduce air infiltration. More than 315,000 households received ESAP services during 2014.
In 2007, the state began a comprehensive, long-term, statewide energy efficiency planning process to achieve maximum energy savings across all major consumer groups and sectors in California. The CPUC directed the utilities to develop a single, statewide strategic plan for energy efficiency through 2020 and beyond. It also sought participation from a range of stakeholders.
In a decision issued in 2007, the commission set a new direction for ESAP, stating that, in addition to promoting the quality of life of eligible customers, it should serve as a "resource program," that is, it should save energy, help limit the need for new power plants, and help curb greenhouse gas emissions.
Under the commission's long-term vision for ESAP, as stated in Decision 07-12-051, utilities must provide all eligible ESAP customers the opportunity to participate in ESAP programs. All eligible households that wanted to participate were to receive cost-effective energy efficiency measures in their residences by 2020.
The decision directed the utilities to emphasize the following in their future programs: (1) treat ESAP as a resource program by focusing on energy savings, in addition to customers' quality of life, (2) propose substantial budget increases in order to provide ESAP measures for 25 percent of eligible and willing customers in the 2009-11 period, (3) emphasize long term and enduring savings, rather than quick fixes, and (4) focus ESAP programs on customers with high energy use, while continuing to serve all eligible low-income populations.
In September 2008, the CPUC adopted California's first Long Term Energy Efficiency Strategic Plan, which encompassed ESAP and other energy efficiency programs. In August 2012, the CPUC re-affirmed that it monitors both ESAP and CARE to make sure they deliver the benefits envisioned in the California Long-Term Energy Efficiency Strategic Plan. It also stated that ESAP, at its core, is an energy efficiency program dedicated to maximum energy savings, while also improving the quality of life for low-income households. The CPUC has recognized that, as the program continues, it becomes more difficult to identify and target homes that need to be treated, especially since ESAP has served more than a million homes since 2009.
Despite that challenge, the CPUC encouraged the utilities to take advantage of the program's momentum and use integration and leveraging to surpass the targeted goal of reaching one-third of the remaining eligible household during the 2012-2014 cycle. The Strategic Plan calls for 100 percent of eligible and willing households to have been served by 2020.
For More Information
In the years since restructuring was authorized in 1996 legislation, the low-income programs have been the subject of statewide debate and decision-making focusing on several key issues:
- A low-income needs assessment in order to meet the legislative mandate that the programs "be funded at not less than 1996 authorized levels based on an assessment of customer need,"
- Program outreach and participation levels.
These issues have been addressed several times through various CPUC orders and state legislation, and some are still ongoing. Some examples include:
- Needs Assessment for the Energy Savings Assistance and the California Alternate Rates for Energy Programs, 2013
- Phase I of Needs Assessment, 2002
- Phase II of Needs Assessment, 2007
- Phase II recommendations about targeting, enrollment, and other strategies for ESAP included in CPUC Decision 08-11-031
Other reports can also be found at the website for the Low Income Oversight Board, an advisory board to the commission.