Last Updated: February 2016
Pennsylvania's electric and gas utilities spent about $360.8 million on low-income rate assistance during 2014. Called Customer Assistance Programs (CAPs), these programs are part of the state's package of universal service programs and were mandated under the state's utility restructuring laws dating back to 1996, although rate assistance programs for most utilities predate restructuring laws.
CAPs provide a percentage-of-bill plan or a percentage-of-income payment plan, wherein low-income customers' utility payments are based upon their incomes and/or utility bills. Some programs include arrearage forgiveness; others provide flat rate discounts or bill credits. CAP customers must meet income limits, generally at or below 150 percent of federal poverty guidelines (FPG) and be "payment-troubled," meaning they have made a payment agreement with their utility.
Electric CAP spending for 2014 totaled $238.2 million for 282,669 customers enrolled in electric utility programs. CAP spending for gas utility programs was $122.7 million for 164,543 customers in 2014.
Total CAP spending is from the seven largest electric companies, the seven largest gas companies and one combination utility. The spending totals include CAP credits (the difference between the total bill and the amount the customer is asked to pay under the utility's plan), arrearage forgiveness and administrative costs. There is no uniform CAP or arrearage forgiveness program, rather each company develops its own program based on a needs assessment, and the programs are subject to approval from the Pennsylvania Public Utilities Commission (PUC).
CAP customers may have different payment plans based on their type of heating, changes in rates, and distribution of income levels among program participants. Arrearage forgiveness programs vary by the length of time over which forgiveness occurs, length of time a customer is enrolled in the CAP, how often forgiveness occurs (monthly or yearly) and the amount of arrearages customers have upon enrollment.
In 2014, average annual household incomes of electric and natural gas customers enrolled in CAPs were less than $14,304 and $11,964 respectively. The majority of these households have incomes from employment, disability benefits or pension benefits.
Each year the PUC publishes a report on the performance of the universal service programs of each of the state's major electric and gas distribution companies. Seven smaller utilities also operate a variety of universal service programs, but their expenditure and enrollment figures are not available in the report.
Low-income energy efficiency is provided through the Low-Income Usage Reduction Program (LIURP), which was mandated by a 1987 PUC order, renewed in 1992 through 1996, and continued under the universal service provisions of restructuring legislation. Pre-restructuring funding levels were established at about 2/10 of one percent of each utility's total revenues; post-restructuring levels have been established in restructuring filings. For electric utilities, total spending has tripled from $10.2 million in 1996 to $30.4 million in 2014. LIURP includes an education component that addresses energy savings and regular bill payment behavior and provides application assistance.
Conservation programs funded by gas utility ratepayers totaled about $7.4 million in 1998 and $18.2 million in 2014. From 1999 through 2001, the PUC and major gas utilities agreed on enrollment levels for gas universal service programs as part of restructuring filings. LIURP funds are included in utility rates as part of the distribution cost passed on to all residential customers. The current LIURP funding levels were set for three years in the company's most recent universal service plans, which are filed and approved every three years. Each utility is required to develop a funding level based upon a needs assessment, which is based on census and utility data.
LIURP is targeted to customers with annual incomes at or below 150 percent of FPG. However, companies are permitted to spend up to 20 percent of their annual LIURP budgets on customers with incomes between 150 percent and 200 percent of FPG. The program prioritizes the highest energy users that offer the greatest opportunities for bill reductions. Generally, electric companies target customers with annual usage of at least 6,000 kWhs, and gas companies target those with annual usage of at least 120 Mcfs. When feasible, it targets customers with payment problems or arrearages. The program is available to both homeowners and renters and serves all housing types, including single family homes, mobile homes, and small and large multi-family residences.
The utilities administer the program, subject to PUC oversight, using both non-profit and for-profit contractors. Examples of program measures include: air infiltration measures using the blower door air sealing techniques, all types of insulation such as attic and sidewall; heating system treatments and replacements, water heating tank and pipe wraps, water heater replacements, compact fluorescent lighting, refrigerator replacement, water bed replacement with a form-fitted foam mattress, incidental repairs (not home rehabilitation), and conservation education.
The following chart shows electric and gas utility CAP and LIURP enrollment and funding levels for 1996 (pre-restructuring) and for the last three years.
Pennsylvania Universal Service Funding History Prior to Restructuring Electric 1996 2012 2013 2014 CAP Enrollment 45,707 309,570 291,693 282,669 CAP Funding $26,000,000 $234,413,568 <$228,654,842 $238,152,520 LIURP Enrollment 21,134 21,542 21,551 LIURP Funding $10,200,000 $26,522,512 $27,117,980 $30,374,261 Natural Gas 1998 2012 2013 2014 CAP Enrollment 54,646 175,015 161,924 164,543 CAP Funding $20,600,000 $105,264,609 $118,957,657 $122,693,962 LIURP Enrollment 4,514 5,156 5,163 LIURP Funding $7,385,659 $15,968,587 $19,623,356 $18,245,610 Total 2012 2013 2014 CAP Enrollment 465,380 453,617 447,212 CAP Funding $339,678,117 $347,612,499 $360,846,482 LIURP Enrollment 25,648 26,398 26,674 LIURP Funding $42,491,099 $46,741,336 $48,619,871
Pennsylvania defines universal service programs as those designed to help ensure that all customers have access to utility service no matter what their income. In addition to CAPs and LIURP, Customer Assistance and Referral Evaluation Services (CARES) provides referrals and case management to payment-troubled customers and Hardship Funds, also known as fuel funds, include shareholder and voluntary ratepayer contributions. CAPs are by far the largest of the universal service programs.
Both the electric and the gas restructuring legislation, passed in 1996 and 1999, respectively, required regulated utilities to continue their existing low-income rate assistance and energy efficiency programs and consumer protection provisions beyond restructuring.
The CAPs must follow the universal service guidelines set forth in the relevant state statute, 52 Pa. Code, subchapters 54.71 through 58.15 .
Electric CAPs: Regarding low-income programs, Pennsylvania's restructuring law states that "the Commonwealth must, at a minimum, continue the protections, policies, and services that now assist customers who are low-income to afford electric service." It also states that "electric distribution companies should continue to be the provider of last resort in order to ensure the availability of universal electric service in this Commonwealth unless another provider of last resort is approved by the Commission."
The costs of universal service and energy conservation services are recovered by non-bypassable, competitively neutral distribution service charges, according to the law. Electric cooperatives are also required to continue their universal service and energy conservation programs, using the same funding mechanism.
Electric restructuring plans filed by eight major electric utilities went into effect January 1, 1999. Each subsequent year, through 2011, the plans have usually resulted in considerable gains in low-income program funding and enrollments. Spending for CAPs in 2012 and 2013 has declined.
The PUC addressed the question of who will administer the low-income programs early on. In July 1997, the PUC issued a Final Order establishing Guidelines for Universal Service and Energy Conservation Programs. The PUC Order stated that utilities themselves should continue to administer their programs, relying on community-based organizations. Currently, some utilities use community action agencies and community-based organizations to administer their programs locally.
The programs are closely coordinated with the state's LIHEAP. Application for LIHEAP benefits, LIHEAP eligibility or receipt of LIHEAP is required to participate in most CAPs.
The Order stated that the "universal service funding mechanism should be collected by the electric distribution company (EDC) as a non-bypassable distribution charge, paid by all customers. Universal service and LIHEAP benefits should be assigned to the EDC."
The Order also stated that each restructuring filing must include a needs assessment to "ensure that programs are well directed to meet the greatest need in the community for affordable energy. The needs assessment should examine the market for an acceptance of universal service programming in the territory." Utilities must file universal service plans, subject to PUC approval, every three years.
Gas CAPs: According to reports filed with the Pennsylvania PUC and the state LIHEAP office under the leveraging incentive program, gas rate assistance programs (also known as CAPs) amounted to about $20 million in 1998. Funding levels were not established in the filings; rather, utilities must spend what is necessary to meet the enrollment levels.
Gas CAP funding and enrollment have increased over the years, with the exception of 2012 and 2013. As is the case with electric utilities, gas programs must follow the guidelines of the Pennsylvania statute and the programs are closely coordinated with LIHEAP.
The totals in the table include the low-income expenditures and enrollments of the municipal utility Philadelphia Gas Works (PGW.) Under the 1999 gas restructuring law, PGW was placed under the jurisdiction of the PUC, effective July 2000. Prior to that, it was under the jurisdiction of the Philadelphia Gas Commission; it was not required to file a restructuring plan and its low-income programs did not fall under the state's universal service guidelines. PGW's restructuring plan was approved by the PUC in April 2003, and it went into effect in September 2003. During 2014, its CAP served over 64,500 customers at a cost of about $71 million.
In addition to the above-mentioned assistance, PGW has for many years provided a 20 percent rate discount to seniors aged 65 and over of all income levels, amounting to about $20 million per year and serving 80,000 households. In its restructuring plan, PGW said it would phase out the program, keeping it in place for currently enrolled customers, but adding no new customers after September 1, 2003.
For more information:
Utilities' universal service program plans are filed on the PUC website (bottom of page).
Report on 2014 Universal Service Programs and Collections Performance of the Pennsylvania Electric and Gas Distribution Companies