Residential Energy Efficiency News
Fall 2003

As state legislatures across the country wrestle with record budget deficits, faltering economies, and political gridlock, legislators have begun eying funds earmarked for residential energy efficiency, conservation and/or low-income programs as general revenue sources.

Most states that passed energy deregulation legislation over the past decade included provisions funding such programs, particularly for low-income households. The idea was that these programs would help residential utility customers adjust to any adverse effects of a competitive energy market by providing services – ranging from bill payment assistance to home weatherization – formerly provided by regulated utilities. Most of the programs are paid for by system benefit funds (SBF), collected as small monthly fees on ratepayers’ electric and/or gas bills.

The deregulation and conservation laws that established the system benefit funds mandate their use for specific programs, such as energy efficiency and low-income energy assistance. However, legislators in five states – Connecticut, Massachusetts, Texas, Wisconsin and Virginia – have rewritten portions of the statutes to allow them to raid the funds, in effect creating a tax on ratepayers to help balance state budgets. In a fifth state – New Jersey – the governor shifted the funds as part of a budget process.

Connecticut
Connecticut’s 1998 restructuring law actually created two funds – 1) a systems benefit charge, which generates about $41 million annually and is used by utilities to decommission aging power plants, including a nuclear plant, pay taxes to towns affected by sales of utility properties, provide displaced worker protection, and for other utility revenue purposes, and, to a lesser extent, cover some of their expenses in operating low-income energy-assistance programs and complying with the state’s consumer protection statutes; and 2) a Conservation and Load Management (C&LM) fund for energy efficiency programs, funded by another charge on all electricity sold by the state's two IOUs. In 2002, this amounted to a total state funding level of about $86 million. The fund has been used for programs affecting all customer classes and includes load management programs, economic development, efficiency programs, market transformation efforts, and research and development of new technologies that might improve energy efficiency in businesses and households.

So far, SBC monies are being used for their assigned purposes. However, in February 2003, the legislature authorized collection of $1 million a month from the C&LM fund through July 2005 for use as general funds. In August 2003, the legislature again authorized use of the C&LM fund for state general funds in a bonding scheme that is expected to leave approximately $48 million a year in the C&LM for conservation and load management for the next several years (about 55 percent of previous funding levels).

According to Shirley Bergert, director of the Public Benefits Task Force of Connecticut Legal Services, all of the conservation programs will be cut back substantially because of the C&LM raid, and the state’s two big utilities – Connecticut Light and Power and United Illuminating – have already begun reducing their energy efficiency staffs.

Massachusetts
A unique agreement among the Governor’s office, legislative leaders and the Massachusetts Technology Collaborative (MTC) has turned a raid on the state’s Renewable Energy Trust Fund into a guarantee of state power purchases from renewable energy sources.

Early in this year’s legislature session, Governor Miles Romney proposed using $17 million from the fund to help balance the FY 2003 budget. After negotiations among the Governor’s staff, legislators and MTC staff, the legislature passed a law allowing the state to use the $17 million for this year’s budget, but also requiring it to come up with a detailed plan to purchase $17 million in power from renewable sources, probably beginning in 2005.

The MTC receives money from the Renewable Energy Trust Fund to encourage development of alternative energy sources and uses in the state and to help alternative sources sell the power they produce. "Basically, it means we now have a guaranteed customer for renewable energy purchases," said Chris Kealey, communications director for MTC.

New Jersey
As a result of budget juggling, funding for a long-standing rate assistance program for seniors was transferred from state coffers to utility ratepayers.

New Jersey’s governor, in setting next year’s state budget, shifted funding for the Lifeline Credit and Tenants Assistance program from state casino revenues to a surcharge on utility bills beginning August 1.

As a result, on August 1, New Jersey ratepayers took over funding of the $72 million Lifeline credit program, as well as a $33 million Universal Service Fund that finances a new statewide low-income assistance program. 

Lifeline, funded at about $72 million yearly, provides an annual energy bill credit of $225 to some 319,000 low-income seniors.

Texas
Texas has lost a portion of its low-income electric-bill discount and $21.4 million in state weatherization funds over the next two years because of a legislative raid on the state’s system benefit fund (SBF), created when electric utility deregulation went into effect in January 2002.

More than 500,000 low-income electric customers in areas of Texas with retail competition have been receiving a 17 percent discount on their electric bills, a program funded by the SBF.

In 2002, the SBF generated $144.6 million. Of that, $97 million was allocated for the discount, $7 million for low-income energy efficiency, $12 million for customer education, and $27 million for the school fund.

Facing a $9.9 billion deficit, the 2003 legislature began looking at the SBF as a source of general revenue. Early in the session, the House Appropriations Committee recommended that the SBF be used to raise the discount to 20 percent and to fully fund the state weatherization program. However, the Senate Finance Committee rewrote the proposal. That committee’s recommendation eliminated the electric discount altogether, along with weatherization and consumer education, according to Carol Biedrzycki of the Texas Ratepayers Organization to Save Energy. She said that after lobbying by low-income advocates, the Finance Committee decided to keep the discount but lower it from 17 to 10 percent, leaving weatherization and customer education with nothing. In the Budget Conference Committee, attempts to restore the weatherization funding failed, although customer education recovered $750,000 a year (compared with $12 million in FY 2002).

The Conference Committee recommendation was approved by the Legislature, along with another provision that changed the language of the original 1999 deregulation law to allow it to transfer the SBF funds into general revenue funds. The changes become effective on September 1.

Biedrzycki said that low-income advocates plan to ask the Texas Public Utility Commission to reinstate the lost weatherization programs, which would have provided $21.4 million over the next two years for low-income energy efficiency programs.

Wisconsin
Wisconsin’s legislature has passed a bill that raids Wisconsin’s fund for energy conservation and low-income energy assistance of $47 million. Money collected from Wisconsin electricity customers for energy conservation – for programs such as discounts on energy-efficient appliances and light bulbs – will instead be used to help balance the state budget during the next two years.

The $47 million funding cut was to the state’s Focus on Energy program. The funding cut represents more than one-third of the two-year budget for the program. The Legislature enacted $20 million in cuts, deepening a $27 million cut proposed by the governor.

"This is as though the state effectively imposed a 38 percent tax on energy conservation," said Michael Vickerman, head of Renew Wisconsin, a renewable-energy advocacy group

It is still unclear how the state Department of Administration, which implements the program, will implement the cuts.

We Energies of Milwaukee collects $50.5 million a year for energy efficiency programs as well as for low-income heating assistance programs. Of that, $17 million comes from a maximum surcharge of $1.84 on a residential customer's monthly electric bill.

Virginia
Virginia legislators have taken more than $6 million from a fund set up by the state’s Corporation Commission to educate consumers about electric restructuring and how to make choices in a competitive electric market. That money, which was transferred to the state’s general fund, is collected from utility users.