Delegate Plum, members of the joint committee, my name is David Rubinstein, and I thank you for the opportunity to address important consumer issues today regarding the needs of consumers in electric utility restructuring. My comments go the needs for universal service, and the requirement that such service be affordable for all electric customers.

I. Universal Service. Electricity service is essential to the health and well-being of all residents of the commonwealth. Affordable electric service should be available to all consumers on reasonable terms and conditions. The commonwealth should insure the universal service and energy conservation policies, activities, and services are appropriately funded and available throughout the commonwealth. The restructuring of the existing electricity system should not undermine the public necessity that electricity bills for low-income residents should remain as affordable as possible. It should the policy of the State to ensure adequate provision of financial assistance and to continue existing levels of financial assistance for low-income households and meet future increases in need caused by economic exigencies.

In addition, most needs to financial assistance should be funded by a Universal Service Fund, funded by the electric companies through the rates and services charged other customers. Each restructuring plan shall include proposed programs to provide universal service for all customers; proposed programs and recovery mechanisms to promote energy conservation and demand-side management.

At least 20 percent of the amount expended for residential demand-side management programs by each distribution company in any year on comprehensive low-income residential demand-side management and education programs. The low-income residential demand-side management and education programs should be implemented through the low-income weatherization and fuel assistance program network and coordinated with all gas distribution companies in the commonwealth.

The Commission should require that distribution companies provide discounted rates for low income customers. The cost of such discounts should be included in the rates charged to all customers of a distribution company. Each distribution company should guarantee payment to the generation supplier for all power sold to low-income customers at discounted rates. Eligibility for the discount rates established 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 per cent of the federal poverty level

The Commission will then need to study the level of funding needed to provide for that level of assistance to Virginia customers. Rates will be then supplemented with a surcharge to pay for the additional services to at risk customers.

Each distribution company should conduct substantial outreach efforts and should report to the Commission, at least annually, as to its outreach activities and results. Outreach may include establishing an automated program of matching customer accounts with lists of recipients of said means-tested public benefits programs and based on the results of said matching program, to presumptively offer a low-income discount rate to eligible customers so identified. In addition, further outreach and community education efforts should be conducted by the Commission and not for profit groups to best ensure that the information sent to consumers is fair and accurate.

The Commission will need to evaluate the effects of electricity restructuring on the affordability of electric power for low-income customers on a periodic basis to determine if the Universal Service fund is sufficient, or if the levels of assistance to customers are satisfactory.

II. Affordable Rates: Tracking Bills as a Percentage of Household Income. 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, the average Virginia AFDC family pays up to 25% of their income for electricity and heat.¹ 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 AFDC families were five times as likely to suffer a disconnection of service than nonpoor families.²

1. Why do we need an Affordability Measurement? If a strong commitment to universal service is meaningful, the Commission's rules must require that Distribution Companies monitor bill affordability and be required to take steps to prevent low-income customers from becoming road kill on the road to a more competitive electric industry.

The burden on low-income customers to pay their electric bill is significantly higher than their middle class neighbors. A commitment to universal service and affordable rates should require a service provider to take action when its tracking data shows that annual bills for a sample of low-income customers (reflecting the major categories of federal poverty guidelines used above) have exceeded a reasonable percentage of their income.

2. How can an Affordability Measurement be designed? The implementation of this proposal can be done without significant administrative costs. For example, most utilities today conduct extensive surveys of residential customers to obtain marketing data on appliance penetration, opinions about the service quality and reliability, 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, age. The Distribution Company can then locate the respondents in their billing computer and compare their billing and usage data with the three federal poverty guideline categories.³ 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.

3. What is the proper definition of "affordability"? The impact of average bills on low-income customers ranges from 3.67% to 27%, depending on income and usage (electric heat). A reasonable goal would be to insulate non-electric heat low-income customers from paying more than 6% of their income for electricity and electric heat customers from paying more than 10% of their income. This approach would target additional assistance to the very low income (below 50% of poverty) at all usage levels.

4. What should happen if the Index shows that bills are unaffordable? One of the benefits of an Affordability Index is that the response can be specifically tailored to the programs and needs of each service provider. Furthermore, the response does not require extensive regulatory oversight, a virtue that has singular advantages in an environment that seeks to increase competitive pressure and decrease regulatory oversight. In general, the obligation of the service provider should be to take whatever steps are necessary to reduce the burden on the affected customer group to the required percentage of income target within a reasonable period of time. In most cases, the required response will not mandate a full-scale Percentage of Income Payment Plan. The degree of flexibility should reflect the presence or absence of existing low-income rate discount programs, and other financial assistance programs. For example, a service provider might take one or more of the following steps:

A. Target a higher discount for customers with income below 50% of poverty;

B. Step up the delivery of community-based programs in low-income neighborhoods;

C. Successfully lobby the Legislature to increase taxpayer-funded energy financial assistance programs;

D. Design a new low-income program that better targets assistance to those with the greatest need; and

E. Step up the marketing of existing low-income assistance programs if the data indicates that the current program penetration rate is too low.

III. Environmental Regulation. Low-income customers believe that the electricity market must be environmentally responsible. With respect to specifics, the Low-Income Consumers refer to the comments of others more knowledgeable in the field. However, Low-Income Consumers do propose that energy efficiency programs targeted to low-income consumers be included as part of the Universal Service commitment of the Department, and funded along with rate discounts and similar affordability supports through the separate Universal Service Trust Fund.

Safety Net Service. The provision of safety net or default service for those customers who have been financially disconnected or refused service by an retail energy supplier will be needed. This service is likely to require extensive regulation by the Commission and will contain a high percentage of low-income customers. This service should probably be required to be established after a periodic bid. The Commission should regulate the conditions under which safety net service can be physically disconnected . Regulations should prohibit the distribution company from providing a degraded service to these customers, i.e., service limiters or prepayment meters.

IV. Disconnection for Nonpayment. Currently, there is a so-called informal agreement between the major electric companies and the State Corporation Commission regarding winter disconnections for non-payment of the bill. While this agreement is largely effective, there have been some reported cases where winter disconnections have occurred.

In a possibly deregulated environment, there will be a stronger need for the Commission to provide for winter disconnection bans by regulation. In a competitive environment, the incentives will be to terminate every non-profitable account. The social costs of such as policy would be almost unthinkable as low income consumers and their families, the elderly and infirm, may go without heat and electricity in the coldest months. In order to assure that this result does not occur, strong winter disconnection bans must be in force.

There should also be some rules to limit summer disconnections in the hottest Virginian weather for the elderly and infirm. Summers are providing consumers with a higher energy burden than the winter months in some parts of the Commonwealth. And the summer months can be as dangerous for those at risk as the winter months.

¹Saunders, Margot and Spade, Maggie, Energy and the Poor--The Crisis Continues, National Consumer Law Center, 1995.

²"Beyond Poverty, Extended Measures of Well-Being: 1992", U.S. Bureau of the Census, U.S. Department of Commerce, P70-50RV, November, 1995.

³This approach assumes that the Distribution Company will bill for the energy portion of the bill (as a result of the billing and collection contract with retail energy providers) and will, therefore, have access to the total bill amount issued to the customer. Even if retail energy suppliers seek to bill customers directly, the distribution company can be required to complete the survey and obtain sample data from energy providers, which presumably will be available in a competitive market.