Pennsylvania Office of Consumer Advocate



Pennsylvania Office of Consumer Advocate
555 Walnut Street
5th Floor Forum Place
Harrisburg, PA 17101-1923

Phone: 717-783-5048 or toll free 800-684-6560
Fax: 717-783-7152



Pennsylvania House of Representatives
Consumer Affairs Committee
Public Hearing - June 14, 2001
Testimony of Irwin A. Popowsky
Consumer Advocate

I want to thank Chairman Wogan, Democratic Chair McCall and the other members of the Committee for inviting me to speak on House Bill 1433. I believe that this legislation is an important step for Pennsylvania in meeting the on-going needs of low income households for affordable basic energy service.

As the Committee members know, affordable energy service is critical to the health and welfare of Pennsylvania's consumers. The Pennsylvania General Assembly had the foresight to recognize, through its landmark electric and gas restructuring Acts, that affordable electricity and natural gas service for all consumers, including low-income consumers, must be an essential part of any successful energy restructuring plan. As I testified during the hearings leading to those Acts, Pennsylvania will have accomplished very little if we offer new services and choices to some customers while leaving low-income customers literally out in the cold. I am pleased to say that in each of the electric and gas restructuring proceedings, our Office presented substantial testimony from leading national experts regarding the need for enhanced electric and gas universal service assistance in the form of rate discounts and cost-effective conservation programs for low-income consumers. The Public Utility Commission, either through settlements we entered with many of the affected utilities or at the end of litigation, adopted many of our proposals. Because of the prior actions of this General Assembly, the PUC, and many of the people who have testified here today, I believe that Pennsylvania has become one of the nation's leaders in developing rate assistance and efficiency programs that have made energy more affordable for low income households.

But more needs to be done. Our existing public and utility programs necessarily limit eligibility and funding. The result is that many residents of Pennsylvania still struggle to pay their energy bills each month. This struggle can be particularly difficult for those whose incomes fall just above the eligibility for LIHEAP. Senior citizens on fixed incomes and the working poor make up many of these households. They do not qualify for the federal LIHEAP assistance or for utility CAP programs. Throughout the winter, these households are faced with medical, shelter and food costs which exceed their ability to pay. The result is often that they fall behind in their energy bills. A reflection of this can be seen in recent statistics showing overdue accounts for major gas distribution companies more than doubled from April 2000 to April 2001. Especially for the consumers targeted by this legislation, there are few places to turn for help in paying these arrearages.

H.B. 1433 takes an important step toward helping these households. I strongly support this effort to provide additional funding. For this bill, the proposal is to tie the funding to the Hardship Program contributions that have been made by utility shareholders, ratepayers and employees. For the past two years, (1998-99 and 1999-2000) these contributions for the electric and gas industry have averaged just over $5 million. The proposed $3 million appropriation would greatly add to these contributions. As a measure of the extent of need related to the bill, it is my understanding that Census information reveals that about 10% of Pennsylvania's residents live between 150% and 200% of the poverty level. I recognize that the General Assembly has many difficult competing needs in determining the appropriate use of state funding. But I respectfully urge you to consider, in a cold-weather state such as Pennsylvania, how much more work needs to be done even if this bill becomes law.

In addition to expressing my support for this bill, I would like to take this opportunity to identify several specific issues in the bill that I urge you to address before moving forward.

First, I want to endorse a proposed amendment from Chairman Wogan which the Committee staff has provided to me. This inserts a definition of "Eligible Household" which establishes eligibility for households with incomes too high to qualify for LIHEAP but not above 200% of the federal poverty level. This recognizes two important facts. That households and not customers are the critical focus for eligibility. Also, that variations in income eligibility levels for LIHEAP make an absolute lower income level inappropriate for setting eligibility.

Section 4(b): Section 4(b) states that the money will only be released when the statewide heating degree days during the heating season are 10% above the average for the past 10 years. It is my understanding that this has happened only occasionally in the past 20 years. Moreover, even when degree days do not exceed the average by more than 10%, the kind of increases in the unit price of gas we saw in the past year can wreak havoc on customer bills. Also, statewide results often fail to reveal sharply colder weather which occurs only in some parts of the Commonwealth. Finally, the heating season in Pennsylvania stretches from November through March. This creates a situation in which results for the heating season will not be available until April 1, at which time the decision to disburse funds can be made. However, Section 6(1) requires that disbursement of funds is required no later than April 1.

I respectfully request that there be no trigger points and that these funds be available each year as necessary for the benefit of these customers. A program that goes into effect only occasionally might not fully accomplish the goals of the bill. A program that is unlikely to take effect might not encourage additional matching giving by consumers and utilities. Indeed, based only on heating degree days, funds would not have been allocated in a winter like the one just past even though natural gas bills increased by up to 30%.

If you believe that a trigger point is needed, I recommend that you tie this to the average percentage increase in customer bills. This would occur either with gas price increases or when total customer bills shoot up due to unusually cold weather. Further, if a trigger point is required, I suggest that the language in this legislation recognize that regional bill cost increases will justify release of funds even though this may not be required on a statewide basis.

Section 4(c): Section 4(c) sets a limitation on the matching funds and provides that a utility or company may receive no more than $300,000 annually in matching funds. I do not disagree with a limitation, but the limitation proposed could result in funds not being fully expended in a given year even though there is substantial unmet need.

I suggest that you provide that any monies not distributed by the funds be reallocated to those hardship funds which have already demonstrated need in excess of the initial $300,000 ceiling.

Section 6(1): This section addresses the timing for the distribution of the matching funds. The bill calls for the funds to be remitted no later than April 1. It is important to note that the Commission's winter termination moratorium expires on April 1 and terminations may begin on that day. A disbursement of funds as late as April 1, or even the last week in March, may not give sufficient time for the customer to receive the funds and avoid a termination. A termination, and subsequent fee for restoration of service, could add to the burden of the low income household.

I recommend that there be more feasible coordination of the disbursement of funds to prevent confusion or delay in disbursing funds.

I have also identified one item that may prove to be a useful addition to the bill:

Administrative Costs: The bill does not discuss whether any of the matching funds can be utilized for program administration costs. I believe that this should be permitted, especially because the target group of consumers, not participating in any other low income programs, will require substantial intake processing. Nevertheless, funds used to defray administration costs, such as verification of customer income, should be capped.

In closing, I want to express my appreciation to you for giving your attention to this important legislation. I would be glad to continue to work with you and the sponsors of this legislation on these important matters.




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