AARP

Comments of the AARP
before the
Legislative Transition Task Force
on Energy Assistance Programs for Low-lncome
Households under Electric Utility Restructuring

August 16, 1999

AARP is concerned for the residential consumer in the move towards competition in the electric utility industry. For everyone, electricity is a basic necessity of modern life. The cost of this necessity, however, can comprise a significant portion of an average consumer's personal expenditures. In fact energy costs can take up to as much as five percent of the median income household's monthly budget. Older Americans are particularly vulnerable to rapid increases in energy prices. Although older persons consume approximately the same amount of residential energy as non-elderly Americans, they devote a higher percentage of total spending to residential energy than younger consumers.

Among low-income older families, an average of 17.5 percent of their income is spent on residential energy Too often, low-income older persons are faced with the choice of raising their health and comfort by cutting back on energy expenditures or reducing spending for other basic necessities. Similar situations can exist for low-income families.

Last year, the Consumer, Environment and Education Task Force of the Joint Subcommittee Studying Restructuring of the Electric Utility Industry heard that Virginia has no statutory or regulatory programs furnishing energy assistance to low-income households throughout the Commonwealth. Current programs such as the Low-Income Home Energy Assistance Program (LIHEAP), Federal Emergency Management Assistance (FEMA), and other types of public emergency funding are basically seasonal (e.g., December to March), crisis-oriented, and fragmented There are a number of private voluntary programs, some operated by the incumbent utilities, churches, and private, non-profit organizations. Whereas all of these sources are helpful and appreciated, the basic question remains: Should the Commonwealth formally adopt legislation establishing energy assistance programs for low-income households?

In last year's discussion, the various stakeholder groups and organizations had varying opinions on this issue. However, a group representing a utility and several consumer labor and environmental organizations expressed support for statewide low-income energy assistance programs and for home weatherization and energy conservation programs designed to assist low-income citizens.

Senate Bill 1269 assigned the issue to this task force for further study. The bill also instructs the Task Force to "offer such recommendations as may be appropriate for legislative and administrative consideration in order to maintain the Commonwealth's position as a low-cost electricity market and ensuring that residential customers and small business customers benefit from competition."

AARP believes that a universal service policy should be established in statute stating that electricity service is essential to the health and well being of all residents of the Commonwealth and it is the policy of the Commonwealth of Virginia that electric service must be accessible and affordable.

Senate Bill 1269 addresses the access component of universal service through the "default service" provisions; that is, provided your bill is paid. The affordability component needs to be addressed not on a seasonal basis, but year-round for low-Income households In addition, there could be crises situations which would require assistance.

We all recognize certain basic needs for living, such as food, shelter, and clothing The Commonwealth currently recognizes that life-line telephone service as essential to the elderly and disabled. Is not electric service for certain basic functions just as important for health and safety? AARP believes that a definition for "basic service" should be in statute or have the State Corporation Commission develop a definition. Such definition should include, at a minimum, heating, cooking, lighting, heating hot water, and refrigeration. Assistance to eligible residential customers would be limited to the defined basic services.

AARP recognizes that the administrative details would be complex and there needs to be in-depth planning for implementation.

Some of the areas to be addressed:

1. Eligibility criteria - a number of current low-income assistance programs use federal poverty guidelines. The Food Stamp Program, Medicaid, housing assistance programs, and Supplemental Security Income all have eligibility guidelines that could be looked at for use in an electric service assistance program.

2. What would be the amount of assistance and how would it be provided? If a year-round program should be developed, AARP believes that the household should always pay some amount on their bill except possibly in a crisis situation. The assistance amount should not be a cash payment, but a credit on the bill for basic services.

3. Funding the program - Last year the organizations supporting low-income assistance programs suggested funding through nonbypassable wire charges to be paid by all consumers of electricity, Another method of funding could be a small charge per kilowatt hour levied on all suppliers of electricity on the amount of electricity sold to consumers in Virginia as a requirement of licensing. Though our friends at the State Corporation Commission probably will not like this option, perhaps a portion of the revenue from the "special regulatory tax rate" established in Senate Bill 1286 as part of the Electric Utility Consumption Tax could be used to establish a Universal Service Fund.

There are many other components of a low-income energy assistance program that would have to be worked out.

I have provided you with a document entitled "Summary of State Electric Restructuring Legislation: Universal Service Provisions." The document describes twenty state initiatives. Only Arkansas and Virginia, as of this date, have not adopted legislative policy to assure universal service Fifteen of the remaining eighteen states have adopted specific directives to assure universal services or have authorized their public utility commission to create a program and fund it by means of a nonbypassable wire charge.

AARP would suggest that, at a minimum, the Legislative Oversight Task Force should propose legislation to assure universal service and authorize the State Corporation Commission to create a program to assure the affordability and continuation of electric service for low-income households. The Task Force should also designate the funding mechanism for the program.

In addition, the Task Force should consider whether a universal service policy is for electric service only or should there be an "energy" universal service policy which would involve those households who use gas for basic services.

AARP appreciates the opportunity to speak to you today on this most vital subject.