Good morning, Mr. Chairman and members of the Task Force. I'm Rob Goldsmith and I'm here to speak on behalf of the Virginia Council Against Poverty. VACAP appreciates the default provider provisions and the consumer protection and education language contained in SB1269 as passed last session. I am here today to urge the addition of low-income energy assistance programs to the Restructuring Act.
Last year I made presentations in support of low-income assistance programs before this body constituted as the SJR 91 Subcommittee. The major points I made then continue to hold true. However, the context in which I make them today has changed somewhat.
Low-income residents are the Commonwealth’s most vulnerable users of electricity. These are the elderly and disabled, as well as working poor families struggling to remain self-sufficient and independent of government assistance. Energy costs are a tremendous burden on these low-income families, and the fluctuations in costs which they may experience in a deregulated environment will prove even more burdensome.
A recent national study by the Salvation Army has linked inability to pay utility bills to such negative outcomes as:
As you may recall, no state-funded programs to assist low-income consumers currently exist. The Virginia Department of Social Services provides utility payment assistance to low-income Virginia families through the federal Low-Income Home Energy Assistance Program (LIHEAP). In Program Year 97-98, the program provided fuel assistance to 218,732 people in 91,293 households. This represents about 20% of the income eligible population of slightly more than 1 million Virginians with incomes at or below 150% of the federal poverty guidelines.
Approximately $15 million per year in federal funding provides fuel assistance to needy Virginia families. Federal LIHEAP funding is not guaranteed. Federal funds have declined dramatically in the past and may well continue to do so. Right now, Labor-HHS (which funds LIHEAP) remains the only appropriations bill which has not even been marked up. Congress has already raided the bill to fund additions to a number of other appropriations bill. If the reductions already taken are applied across the board, programs funded by this bill, which include LIHEAP, will be cut 12-20%.
In addition, the $792 billion tax cut passed by Congress less than 2 weeks ago is expected to have drastic impact on domestic programs. The analysis of the tax cut done by the federal Office of Management and Budget anticipates that programs such as LIHEAP will experience annual cuts over the next 10 years and by FY 2009 will be funded at half of their current levels.
I present all this to you as evidence that the landscape is changing. Federal support for low-income energy assistance (and other programs) is eroding. The fact that the vast majority of states are creating utility assistance programs with the advent of utility industry restructuring may well lead to the demise of the LIHEAP program. The federal government may determine that there is no longer a need for the program.
Virginia cannot continue to rely on assistance supplied by the federal government, supplemented with a minimal amount of voluntary assistance provided by utilities, community organizations and faith-based groups. Other states are using the restructuring of the electric utility industry to develop stable, permanent energy assistance programs for their low-income residents who are increasingly unable to afford the cost of energy. You and I do not consider energy to be a tremendous expense. According to the U. S. Department of Energy, the cost of energy makes up about 3 - 5% of the budget for an average household. Low-income families pay, on national average, approximately 14% of their household income for energy; poor families that heat with electricity may spend up to 40% of their monthly income in winter on electricity.
Of the 21 states that have passed legislation to restructure the electric utility industry, the majority have recognized that electricity is essential to the health and well-being of everyone and have taken steps to ensure that electric bills for low-income people remain as affordable as possible. Nineteen of the 21 states have included provisions for low-income utility assistance programs as a part of their restructuring legislation. I urge Virginia to join this mainstream, to act responsibly to make provisions for ensuring that low-income Virginians maintain access to electricity.
Prior to the last session of the General Assembly, VACAP, with the assistance of Roger Colton, an attorney and economist who specializes in energy issues, presented a proposal for a low-income energy assistance program, which included both cost estimations and suggestions for program design. I respectfully resubmit this information for your consideration. I have also included a summary of the action related to low-income assistance that has been taken by other states.
VACAP will be pleased to continue to work with the Legislative Transition Task Force to answer questions and provide additional information on this issue.