The Pennsylvania Public Utility Commission, split along party lines, has voted to dramatically expand low-income utility assistance programs, making them more forgiving and more affordable for hundreds of thousands of Pennsylvanians.
The PUC’s action could significantly lower energy costs for the poorest families — a household with a $10,000 annual income could see a $1,000 decrease in electric and gas bills. But the new policy will shift the estimated $102 million cost of the expanded low-income subsidies to other customers, including, for the first time, commercial and industrial customers. Utility consumers in Philadelphia, the poorest large city in the country, will likely bear a significant part of the cost burden.
The commission’s staff in January estimated that an average residential customer who does not receive assistance would pay about $15 more a year. But the commission’s final policy actually went further than the staff recommendation for the most impoverished customers, and the costs are expected to be higher.
“Obviously, this is a big deal,” said PUC Vice Chairman David W. Sweet, who sponsored the measure along with Commissioner Andrew G. Place.
The two commissioners initiated the review of the PUC’s low-income assistance programs in March 2017 in a similar 3-2 split vote after noting that large numbers of customers still faced frequent shutoffs and mountainous utility debts despite subsidies. They were joined, as they were two years ago, by the PUC’s third Democrat, Chair Gladys Brown Dutrieuille.
Republicans John F. Coleman Jr. and Norman J. Kennard dissented, saying that the state’s low-income assistance programs were already generous, and that the new policy would expand the programs without sufficient cost containment.
“It is beyond the scope of the commission’s jurisdiction and authority to implement or otherwise convert public utility service into an entitlement program,” Coleman said in a statement.
The new policy will require gas and electric utilities to rewrite their Customer Assistance Programs (CAP) and present them to the commission for approval with the aim of implementing the new programs by Jan. 1, 2021. “We have a lot of work to do between now and then to try to understand the changes and how they are interrelated,” said Tanya McCloskey, the state’s acting consumer advocate.
In the new policy statement, the PUC lowered the limit that a low-income household should be required to pay for energy costs from 17% of income, set in 1992, to 10%. That would apply to customers whose households earn less than 150% of the federal poverty guideline.
In Pennsylvania, the federal poverty level is $25,750 for a family of four.
The commission went even further than what the PUC staff recommended for the most income-disadvantaged households. For customers whose household income is less than half the federal poverty guidelines, or less than $12,875 for a family of four, the cost of energy would be limited to 6% of household income.
“This action will have a particularly meaningful impact for the approximately 95,000 households with income from 0-50% of poverty enrolled in Pennsylvania utility CAPs, and all future households that would be income-eligible and in need of energy assistance,” Sweet and Place said in their motion.
Low-income advocates were ecstatic. “It is a huge and wonderful deal,” said Robert Ballenger, a lawyer with Community Legal Services, a Philadelphia nonprofit that represented two low-income customer advocacy groups before the PUC.
“This is going to allow low-income Philadelphians to maintain their service in a way that they couldn’t prior to these changes, because in fact the energy burdens were not realistic, they were too high, and the monthly bills were far beyond their ability to pay on an ongoing basis,” he said.
Pennsylvania Chamber of Business and Industry said the new requirement that requires commercial and industrial customers to share the cost of residential subsidies would “disadvantage” businesses.
“Energy-intensive manufacturing facilities are extremely sensitive to costs, especially given the state’s already burdensome tax, regulatory, and legal climate,” said Kevin Sunday, a chamber spokesperson. “A rider on industrial bills to finance universal service programs will further diminish the state’s competitiveness and ability in attracting new investment and retaining what hasn’t already been lost to geographies with better energy and labor climates.”
The expansion would mean at least a 30% increase in Pennsylvania customer assistance programs, which now cost about $333 million. But Kennard worried that if the economy declines, or if energy costs should increase, enrollment in the programs is likely to increase.
“Should the country go into a recession and the labor market deteriorate or should energy prices rise, CAP spending costs will be larger than estimated and uncontained," Kennard said in a statement.
Terrence J. Fitzpatrick, a former PUC member who now heads the Energy Association of Pennsylvania, a trade group of utilities, said he believes that elected officials will likely become involved in the debate now that the PUC to has decided to “tackle this social problem.”
“I think this is going to be an issue that gets the attention of the General Assembly. I think we’re going to have something of a debate over this, just because of the nature of what’s at stake here.”
The debate may spill over to local government in Philadelphia, as well.
Commissioner Sweet said that the burden of paying the subsidies falls inequitably across the state, depending upon concentrations of low-income populations, and that 500,000 customers of city-owned Philadelphia Gas Works would bear the greatest cost because of the city’s high poverty rate. PGW customers already pay on average $81.26 a year for customer assistance programs, seven times more than customers of National Fuel Gas in northwestern Pennsylvania.
In his written statement, Sweet said that the higher costs that PGW customers will pay under the PUC’s new policy are nearly equal to the $18 million that PGW now pays to the city as an annual fee, and the $1 million annual cost of the Philadelphia Gas Commission, whose duties were largely taken over by the PUC after the utility came under state jurisdiction nearly 20 years ago.
“I urge the city to forgo these payments and devote the money instead to a full-scale effort by PGW to significantly reduce the heating bills of its low-income residents,” said Sweet.