Thank you, Mr. Chairman, for the opportunity to testify today regarding the need for low income assistance programs as part of electric utility restructuring in Virginia. My comments today address mostly to the need for a universal service plan as an important part of the program.
Low income customers have important interests at stake in the decisions concerning electric utility restructuring. They struggle today to maintain electric services, for basic uses, such as lighting, hot water, refrigeration and heating. They are the least able to withstand the increases in residential rates that most commentators agree are the long term likely result of introducing greater market forces in electricity price setting.
They are the least able to fend for themselves in the cutthroat electron market, and to bargain for and receive decent, reasonable customer services. They are the least likely to be approached by power brokers seeking to build up a business of serving residential customers on a competitive basis. The minority members of the low income community are at risk of being redlined out of access to the same services available to the larger community, despite the proscriptions against such practice in the restructuring legislation.
We need to have in place a functioning and fully effective system of protections that ensures all customer, including the most vulnerable among us, affordable access to quality electricity services.
Recognizing these facts, virtually all states that have completed their electric restructuring plans have added funding for services to lower income electric residential customers. At least 12 states have state funded low income energy assistance programs as part of their electric restructuring plans. The benefits from these programs are divided between rate assistance to low income consumers, and weatherization programs. These program provide support in addition to the benefits provided under the federal LIHEAP and weatherization programs.
These states are: Wisconsin, California, Connecticut, Illinois, Maine, Massachusetts, Montana, New Hampshire, New York ,Oklahoma, Pennsylvania, and Rhode Island. In some of these states additional assistance is provided at the local level (such As New York City, for example).
Six of the states are still considering the final scope of their low income electric restructuring programs. For the other six states, the total benefits are as follows:
|
STATE |
RATE ASSISTANCE |
WEATHERIZATION |
TOTAL |
MILLS PER KWH |
|
Wisconsin |
35.9 |
31.9 |
67.8 |
1.1 |
|
California |
81.0 |
---- |
81.0 |
0.4 |
|
Maine |
6.1 |
0.5 |
6.6 |
0.5 |
|
Massachusetts |
36.0 |
10.0 |
46.0 |
1.0 |
|
Montana |
1.4 |
1.0 |
2.4 |
0.2 |
|
Rhode Island |
2.0 |
0.4 |
2.4 |
0.4 |
The law should require that distribution companies provide discounted rates for low income customers at the time retail choice takes effect in Virginia. The costs of such discounts should be included in the rates charged to all customers of a distribution company. Eligibility for the discount rates shall be established upon verification of a low income customer's receipt of any means tested public benefit, or verification of eligibility for the low income home energy assistance program, or its successor program, for which eligibility does not exceed 175 percent of the federal poverty level. A successful program for the assistance of such low income customers can be designed so that the average unit costs could be about 1 mil per kilowatt hour (1/10 of one cent per kilowatt hour). The goal should be that no low income customer should pay more than 6% of their income for electric utility usage per month.
The exact design of such a program could be established by the General Assembly over the next few years as the transition to a retail choice statewide program occurs. During that time, and thereafter, each distribution company should conduct substantial outreach efforts and should report of the Commission, at least annually, as to its outreach efforts and results. Outreach may include establishing an automated program of matching customer accounts with lists of recipients of said means tested public benefit programs, to presumptively offer a low income discount rate to eligible customers so identified.
The true measure of affordable electric service is whether the annual bills of customers at all income levels exceed a reasonable portion of their household income. Given an average grant of about $296 per month, a TANF family pays up to 30% of their income for energy and heat in an average month. According to a recent Census Bureau report, poor families were more than three times as likely as the nonpoor to have difficulty paying their gas, oil, or electricity bill in full during recent years. The poor were more than four times as likely to have their utilities cut off, while TANF families were five times as likely to suffer a disconnection of service than nonpoor families.
The burden of low income families to pay their electricity bill is significantly higher than their middle class neighbors. The implementation of this proposal can be done without significant administration costs. For example, most utilities today conduct extensive surveys of residential customers to obtain marketing data on appliance penetration, opinions on the quality and reliability of service, and to test various rate structures and new programs for customer understanding and acceptance. These surveys typically gather demographic data on the respondents: income, family, size, education, and age. The Distribution Company can then locate the respondents in their billing computer and compare their and usage data with the three federal poverty guideline categories. The survey may need to be altered slightly to assure statistical validity for the variety of income groups, but the marginal cost of this effort should be minor.
The design of this universal service program can also be based on surveys of local social services offices and other providers of services to low income customers, such as churches and other charities, such as providers of ENERGY SHARE. A program can be devised to best meet the needs of low income customer based on the demographics shown by this data.
We need to assure that the deregulation of retail electric services does not end like the deregulation of financial services, where the those in poor communities have greater difficulty finding affordable services, and where competition is not usually a reality. A universal service plan is needed in order to best insure that many lower income residents do not have to choose between paying their electric bill and paying their rent.