Friday, June 27, 2008

PSC Approves Grid "Affordability" Program in Which HEAP Payments Do Not Reduce Current Winter Bills

The PSC approved National Grid’s proposed modifications to its AffordAbility Program in a June 23, 2008, Order, dismissing concerns raised by PULP regarding the application of federal Home Energy Assistance Program (“HEAP”) payments to old arrears. The AffordAbility Program provides assistance to a small number of low income residential consumers with arrears owed to the company who enter into a payment plan to make current payments and retire arrears. It is not a substitute for a broad based low income rate, which National Grid does not have. PULP has been part of a team reviewing the proposals, along with the Department of Public Service Staff and the NYS Consumer Protection Board (“CPB”). See National Grid Misses Point with its Low Income Program.

Under the original program, a low income customer with arrears was placed on a 12 month payment agreement. Under the terms of the agreement, the customer was responsible for paying a percentage of their total average monthly bill (95 percent for electric-only customers and 92.5 percent electric and gas customers). The remaining incremental bill amounts were deferred -- and added -- to the customer’s total arrears. Customers completing 12 monthly payments and who received a Regular HEAP grant, which was applied to their National Grid arrears, received forgiveness of 50 percent of their total arrears, up to $250.

Due to a 50 percent default rate, changes were needed. National Grid proposed that the program provide a monthly, instead of an annual, $20 arrears forgiveness credit, eliminate the portion of the deferral to participants’ arrears balances attributable to energy efficiency measures, and limit participation in the program to 24 months. All were approved as means to improve the benefits provided to low income consumers.

Other than the fact that successful participants in the program will see a $10 annual reduction in arrears forgiveness (from $250 to $240), the changes should improve the AffordAbility Program because of the monthly, rather than annual, arrears forgiveness benefits. That said, PULP raised concerns in its comments regarding the forced application of Regular HEAP benefit payments to a participant’s arrears that are the subject of the installment payment plan. The intent of the federal HEAP program is primarily to assist eligible households in meeting current household energy needs, not to retire a portion of arrears that may have accrued from past years and which are not immediately due.

The Commission disagreed stating:

it is the longstanding policy of the Commission that partial payments should be applied first towards arrears, and then to current charges. This policy was most recently revisited in the context of its order establishing the payment application method for consolidated bills.
Apparently, the Commission considers Regular HEAP benefits simply as “partial payments” with no special purpose. However, the case cited by the Commission in reaching this determination does not make this connection. In fact, the cited case involves Energy Service Company (“ESCO”) billing issues and found:

As we previously discussed regarding DPAs [deferred payment agreements], partial payments from customers receiving a single bill shall be credited by the ESCO and the distribution utility such that the customer’s risk of loss of service is minimized. As a general matter that will require payments to be first applied to past due amounts, including payments required under a DPA, and then to current charges. . . .(emphasis added)

The Commission provides no justification to connect this decision from 2003 and the current case. How can the application of a Regular HEAP payment to old arrears that are the subject of an installment payment plan minimize the customer’s risk of service loss if the customer has been making those payments and the only amount due is for current service plus the installment? In contrast, applying Regular HEAP payment to the current bill would provide immediate assistance in meeting energy needs for the current winter season, and would reduce the risk of nonpayment and termination of service.

It makes no sense for a utility to be allowed to apply a Regular HEAP benefit intended to keep a household warm this winter to charges for seasons past that are being gradually paid off through a payment plan.

When the Regular HEAP benefit has been used for old arrears, the customer's current need has not gone away. Customers are not granted additional payments unless they stop paying their bills and then qualify for Emergency HEAP -- under more stringent eligibility requirements -- to avert a termination or restore service after termination. See Needy Households Must Stop Paying Energy Provider to Obtain Supplemental HEAP Benefits.

Prices for energy are likely to be much higher in the coming winter season. See High Natural Gas Prices Signal Trouble Next Winter for Low Income Customers. Regular HEAP payments should play a role in reducing the added energy burden. For participants in the Grid "Affordability Program," their Regular HEAP payments will do nothing to defray higher bills for heat in the coming season.

The Commission did grant a request by CPB, whereby National Grid will now be required to provide quarterly reports to the PSC and interested parties, identifying the number of "Affordability Program" participants, the total amount of arrears forgiveness, and the default rate. This may prove to be a more exacting means of measuring whether the program is effective.

In all likelihood there will be a high default rate as "Affordability Program" participants fail to meet the higher bills, again stop paying them, and must resort to Emergency HEAP assistance, if eligible. Whatever the program default rate, it might be lower if the PSC had required Grid to apply Regular HEAP payments to defray bills for the current winter season.

Lou Manuta

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