Benefits

Weatherization, along with rate discounts and crisis payment assistance, is needed in order to ensure that, in a deregulated environment, electricity is affordable for low-income consumers. Energy conservation does reduce the cost of electricity--Oak Ridge National Laboratory did an evaluation of the Weatherization Assistance Program nationwide in 1989 and concluded that households that received weatherization assistance reduced their overall energy use significantly. A weatherized home heated with electricity used 12% less electricity overall, and 36% less electricity for heating. A weatherized home heated by gas used 13% less electricity overall. A 1996 update of this evaluation showed a savings of 80% more per home weatherized over the 1989 figures, due to new technologies used in the weatherization process.

According to the U. S. Department of Health and Human Services, the average low-income family spends 12% of its income on residential energy, compared to just 3% for the average U. S. family. Energy efficiency programs help low-income families reduce their demand for electricity, thereby reducing their energy costs and enabling them to use that income to meet other needs.

Energy efficiency programs also help the utilities, by reducing problems of nonpayment. Making electricity affordable to low-income consumers mean less money that the utilities will have to write off as bad debt, and a reduction of the amount they will spend on billing and collections.

In addition, weatherization and other energy efficiency programs that make electricity affordable reduces the amount of money that will be needed for crisis payment assistance. Weatherization measures are good for about 20 years, a fairly long-term benefit from the initial investment.

There are non-energy benefits, as well--environmental benefits from reduced use of fuel; employment of weatherization workers, taxes paid, unemployment benefits avoided; enhanced property values for homes, extended dwelling lifetimes, and decreases in home fires caused by faulty heating equipment.

Needs

There isn't enough weatherization money to go around as it is. Last session you passed HB1103 which increased the amount of LIHEAP money that could be spent for weatherization from 7.5% to 15%. But that's just robbing Peter to pay Paul--low-income people need fuel assistance and weatherization. The programs go hand in hand. And more money is needed even without deregulation.

Currently, weatherization funds are so limited that they must be targeted to the elderly and to households with small children--households that have the most health and safety issues. Waiting lists are long and it is not unusual for families to have waits of two years or more for services.

Admitting that there are great benefits from energy conservation programs, low-income people can't afford them without help. They don't have the extra money to invest in energy-saving devices. It doesn't matter that spending $100 now will save you $500 over the next 18 months, if you don't have the $100 to spend in the first place! In addition, low-income families tend disproportionately to be renters. They don't have the authority to make energy-saving home improvements, which would then become part of the landlord's property. And the landlord has no incentive to make improvements, since the energy savings would go to the tenants living in the house. And finally, low income families don't generally have substantial discretionary energy use--that is, they don't have a lot of things they can "turn off" in order to save electricity.

Programs

VACAP recommends two types of programs that would be a part of restructuring the electric utility industry. The first is Weatherization, at an increased funding level so that more families can be served. The second are other types of energy efficiency programs, such as replacement of inefficient refrigerators and water heaters, and conversion of lighting from incandescent to compact fluorescent bulbs. (The development of efficient lighting and electric motors is directly a result of the energy efficiency research and programs funded by utilities in a regulated environment. Deregulation, it is believed, may reduce/eliminate incentives for this technology research to continue.)

We recommend that weatherization be funded by a nonbypassable wires charge assessed at generation. As for the other energy efficiency programs, they could be funded in the same manner, or they could be funded by the utilities in return for incentives such as tax credits. In other states, utilities are funding what they call Piggyback Programs--these are the appliance and lighting replacement programs, and in some cases, additional weatherization programs. They are operated by the network of weatherization providers, in conjunction with state and federally-funded weatherization programs--so that they are more cost-effective that independent programs operated by the utility. Weatherization providers have a proven track record of excellence in efficient installations, as well as ties to the hard-to-reach low-income sector.

Conclusion

Utilities, their customers and society as a whole can achieve benefits of reduced electricity use. Energy conservation programs are an essential part of the package, as Virginia moves toward restructuring of the industry.