**LOW INCOME CONSUMER UTILITY ISSUES:**

**A NATIONAL PERSPECTIVE**

**Jerrold Oppenheim, Esq.** **Theo MacGregor**

> **MacGregor Energy Consultancy**

**57 Middle Street**

**+Gloucester, Mass. 01930**

**Phone: 978-283-0897**

**FAX: 978-283-0957**

**JerroldOpp@tgic.net**

**TheoMacG@tgic.net**

**October 2000**

**TABLE OF CONTENTS**

**INTRODUCTION [1](#introduction)**

SUMMARY [2](#summary)

ENERGY BURDEN [4](#energy-burden)

COST-EFFECTIVENESS AND BENEFITS TO UTILITIES AND NON-PARTICIPANTS
[6](#cost-effectiveness-and-benefits-to-utilities-and-non-participants)

AFFORDABILITY [11](#affordability)

Discounts [11](#discounts)

Income-Based Programs [14](#income-based-programs)

Arrearage Management [15](#arrearage-management)

ELIGIBILITY [18](#eligibility)

CUSTOMER PROTECTIONS THAT ENHANCE ABILITY TO PAY
[20](#customer-protections-that-enhance-ability-to-pay)

Credit and collection [20](#credit-and-collection)

Rates [21](#rates)

Other protections that affect payment
[21](#other-protections-that-affect-payment)

EFFICIENCY AND WEATHERIZATION [22](#efficiency-and-weatherization)

Purpose and Issues [22](#purpose-and-issues)

Program Design [22](#program-design)

Appliance Management Program [24](#appliance-management-program)

Efficiency Measures [24](#efficiency-measures)

Single Family Homes [24](#single-family-homes)

Multi-family Dwellings [25](#multi-family-dwellings)

New Construction or Renovation [25](#new-construction-or-renovation)

Fuel-Blind Weatherization [26](#fuel-blind-weatherization)

Service Delivery [27](#service-delivery)

EDUCATION [28](#education)

OUTREACH [30](#outreach)

EVALUATION [32](#evaluation)

CONCLUSION [34](#conclusion)

ATTACHMENTS [35](#attachments)

1\. Energy Assurance Programs By State (Appendix B to NCLC, Access to
Utility Services, 1998 Supplement)
[35](#energy-assurance-programs-by-state-appendix-b-to-nclc-access-to-utility-services-1998-supplement)

2\. Massachusetts utility low-income efficiency program design
[35](#massachusetts-utility-low-income-efficiency-program-design)

3\. Connecticut utility low-income efficiency program designs
[35](#connecticut-utility-low-income-efficiency-program-designs)

4\. Howat and Oppenheim, \"Analysis of Low-Income Benefits in
Determining Cost-Effectiveness of Energy Efficiency Programs\"
[35](#howat-and-oppenheim-analysis-of-low-income-benefits-in-determining-cost-effectiveness-of-energy-efficiency-programs)

5\. Summary of Low-Income Assistance Programs
[35](#summary-of-low-income-assistance-programs)

# INTRODUCTION

This report has been prepared to provide low-income advocates and other
stakeholders information on the energy burden faced by low-income
customers and programs designed to alleviate that burden in various
states. The report describes programs designed to lower payments, manage
arrearages, weatherize and provide other energy efficiency measures,
educate consumers, increase outreach to the target population, and
evaluate the programs. It discusses the costs and benefits of the
various options \-- to the degree this information is available \-- and
describes attempts to quantify benefits that have heretofore not been
quantified.

The purpose of this report is to enable the low-income advocates and
others to assess the options and design program most suitable for the
citizens of their states or jurisdictions. It is not the authors\'
intent to recommend a particular course of action but, based on our
broad experience in the field, to provide the information necessary for
others to do so. We would be happy to answer any questions or provide
further documentation on any of the material presented herein.

The original edition of this report was prepared for the Utah Committee
on Consumer Services, pursuant to a contract with the National Consumer
Law Center (NCLC), to provide information to the Utah Low-Income Task
Force established by the Utah Public Service Commission. Attachment 1 is
drawn from NCLC's 1998 Supplement to its [Access to Utility
Services]{.underline}; NCLC plans to update this list in 2001, and it
will be available then from NCLC.[^1] This report has been updated by
the authors for this edition.

# SUMMARY

This report provides a survey of assistance programs that public utility
commissions have approved in most states to assist the low-income
customers of utilities within their states. Surveys find that there is
no single model of low-income assistance; rather, each state has adopted
a program that meets its particular circumstances. However, while the
details of programs vary considerably, they all fall within four broad
categories:

-   Affordability programs, which provide direct assistance in paying
    energy bills;[^2]

-   Consumer protections, such as collection practices and installment
    billing requirements, which make it easier to pay energy bills on
    time;

-   Education programs, which teach consumers about prudent energy use
    and counsel them about budgeting; and

-   Efficiency and weatherization programs, which make investments to
    help consumers control their energy bills by reducing their need for
    energy.

    Programs usually include more than one of these components. All
    programs also include outreach and evaluation components.

    This report describes these options, the advantages and
    disadvantages of each, and the economic and other benefits of
    utility assistance programs for low-income customers. Low-income
    programs help participants by lowering the fraction of their incomes
    devoted to energy bills (the energy burden) from a very high level.
    In the United States, the median household devotes only 3.8 percent
    of its income to electricity while a family depending on a
    minimum-wage earner must devote 12.1 percent to energy while facing
    housing cost increases all over the nation. Low-income families
    unable to keep up with these pressures find themselves forced to go
    without power at times, to move, or to forgo other necessities such
    as food or medicine in order to pay their electricity bills.

    Low-income assistance programs also benefit non-participants. The
    primary economic benefit to non-participants is reduced collection
    expenses that all customers would otherwise have to shoulder. Thus
    low-income programs reduce such utility costs as:

-   arrearage carrying costs;

-   termination and reconnection costs;

-   costs of collection notices, termination notices, collection calls,
    and related activities;

-   administrative and regulatory costs of disputed bills and other
    complaints;

-   costs of establishing and administering payment plans; and
    uncollectibles and bad debt.

    In addition, low-income programs reduce taxpayer costs for such
    functions as homeless shelters. These economic benefits have been
    demonstrated in utility-sponsored evaluations of programs that
    reduce low-income energy bills through such measures as efficiency
    investments, education, counseling, and/or arrearage management.

    Programs that provide only direct assistance have been adopted
    primarily for non-economic (*i.e.*, equity) reasons and have
    therefore not been studied from this economic point of view.
    Economic principles, however, dictate that bill reductions from any
    cause will result in the enumerated savings. The studies that have
    been done show that expanded direct assistance programs that include
    efficiency, education, counseling, and/or arrearage management are
    economically cost-effective.

    In addition, customer surveys have shown that a substantial majority
    of electricity customers favor programs that assist low-income
    customers. Assistance programs thus provide non-economic benefits to
    non-participants in the form of increased societal equity.

# ENERGY BURDEN {#energy-burden .unnumbered}

One of the most difficult burdens faced by low-income citizens is the
insufficiency of income to cover all basic necessities. Every day,
low-income people must choose between heating and feeding their
children, between electricity and medicine. One reason for this income
gap is the fraction of income demanded by modern utility bills \-- the
energy burden.

As detailed in the update of a 1989 study compiled by the National
Consumer Law Center (NCLC) in 1993, the energy burden (the amount that a
household spends on all forms of energy as a percent of total income) is
much higher for low-income families than it is for most families.[^3]
Whereas the energy burden for families with median incomes across the
United States is approximately four percent, for low-income families, it
ranges between 12 and 26 percent, depending on the source of income
(*e.g.*, Supplemental Security Income (SSI), minimum wage, transitional
assistance). For example, for single elderly poor and disabled people
living on SSI, the burden was over 19 percent on average, over 25
percent in some states. In general, a family earning the median income
had at least ten times more income to live on (and in some states, over
20 times as much) as did a family receiving welfare assistance.[^4]
Studies have also shown that, on average nationally, roughly 64 percent
of the energy burden for low-income customers goes toward
electricity.[^5] In some areas of the country with rapidly rising
housing costs, as the percentage of income spent on energy remains the
same, but housing costs rise, there is even less to spend on the other
basic necessities of life, such as food and medical care \-- the costs
of which are also rising faster than incomes. These trends are
exacerbated by the decline in income support benefits due to so-called
"welfare reform".

A number of studies make the connection between the inability to pay
utility bills and homelessness, as well as the connection between the
loss of central heat and increased heart disease, between malnutrition
and the heating season, and between utility shut-offs and children being
placed in foster care.[^6] Heat stroke is a significant danger to a
frail, elderly person. A sickly low-income child is put at risk by a
system that requires a parent to choose between nutrition and
electricity for refrigeration.

The high energy burden faced by low-income customers has led many to
fall behind on their utility bill payments, often resulting in high
levels of arrearages, collection actions by the utility, payment
negotiations, service terminations, and reconnections \-- all costly to
the utility and all other customers. In order to alleviate this high
energy burden on low-income consumers, and to save substantial costs to
other customers, many states have instituted programs to make energy
more affordable. In most cases, other customers of the utilities have
supported these programs, once they have been informed of the costs and
benefits of them \-- both to the customers who benefit directly and to
all other customers because of reduced utility costs. For example, in
South Texas, when asked their level of support for the principle of
keeping electricity affordable to all on a scale of 1 to 10, where 10 is
the highest level of support, commercial and industrial (C/I)
electricity customers supported the principle at a level of 8.3.
Residential customers supported it at a level of 8.5. Support also ran
high for providing a special discounted rate and energy management
programs for low-income customers: 7.4 for C/I customers; 8.0 for
residential.[^7]

If a state determines that the energy burden borne by a percentage of
its citizens requires action by the state through utility discount
and/or energy conservation programs, the state should articulate a clear
policy rationale and goal for the program. The goal of universal,
reliable service at affordable rates recognizes that energy is a basic
necessity, and that low-income customers are rightfully entitled to this
necessity. This policy recognizes also that benefits accrue to all
customers and to society as a whole when the poorest members of society
have access to affordable energy. Once the policy rationale has been
articulated and goals for the programs set, funding should be assured at
a level that will support the programs for as long as they are
necessary. We describe on the following pages the cost-effectiveness of
programs designed to lower the energy burden faced by low-income
customers, some program designs that have been instituted in other
states, and results in those states where they have been evaluated.

# COST-EFFECTIVENESS AND BENEFITS TO UTILITIES AND NON-PARTICIPANTS {#cost-effectiveness-and-benefits-to-utilities-and-non-participants .unnumbered}

While many states have instituted payment assistance and energy
efficiency programs to help lower the energy burden faced by the most
vulnerable citizens, most cost-effectiveness analysis has been conducted
on efficiency programs alone, or on combined efficiency and assistance
programs. However, the economic principle is the same: if you lower the
amount a low-income customer must spend for energy, that customer will
be better able to pay the energy bill, thereby saving all other
customers the utility costs enumerated above.

Howat and Oppenheim surveyed the considerable amount of research that
has been conducted to identify and quantify the non-energy benefits of
low-income payment assistance and efficiency programs.[^8] Where
possible, their paper computes those non-energy benefits as a function
of the value of energy saved. The result is justification for an
\"adder\" that can be used in cost-benefit calculations. Eleven
Massachusetts gas and electric utilities, together with nine other
parties, filed that paper in 1999 as part of a package justifying a
cost-benefit calculation that adds together all the benefits that energy
efficiency programs create. These benefits, in addition to energy
savings, include low-income-specific benefits such as:

-   benefits to the utility and to non-participant ratepayers, including
    arrearage reduction and reduced costs of collection, termination,
    and reconnection;

-   benefits to taxpayers, including reduced costs of fire and health
    departments, homeless shelters, and Medicaid funds, as well as
    increased property values that generate real estate taxes;

-   benefits to low-income families, including less frequent moving
    costs, fewer utility disconnections, and improved health; and

-   the benefits to society of an increase in equity.[^9]

    The 11 utilities agreed that these non-energy low-income benefits
    amounted in value to at least 50 percent of the energy
    benefits.[^10] The 11 Massachusetts utilities that agreed to the 50
    percent "adder" also agreed that environmental and economic
    development benefits[^11] amount in value to an additional 25
    percent of the energy benefits, for a total benefit from low-income
    efficiency programs of 1.75 times the energy savings.[^12]

    In their latest efficiency plan filings, the major Massachusetts
    electric companies computed benefit:cost ratios (BCRs) of their
    low-income programs[^13] \-- relying on only some of the benefits
    set out in the Howat and Oppenheim paper -- of as much as 2.8. [^14]
    This means that the utilities found the dollar value of the benefits
    of their low-income efficiency efforts were as much as nearly triple
    the cost of those programs.

    There is little doubt that even assistance programs alone provide
    similar benefits to non-participants by making it more possible for
    low-income customers to pay their bills. Research that has been
    conducted on assistance and efficiency programs indicates that they
    both have a proven effect on payment-related costs that would
    otherwise be paid through rates by all other customers. For example,
    a Pacific Gas & Electric study found reduced carrying costs on
    arrearages of \$4 to \$63 per weatherized household, or up to 8.8
    percent of program cost.[^15] Another 2.1 percent or more is saved
    on utilities\' administrative costs of collection, including
    termination and reconnection.[^16] Introduction of an efficiency
    program in Colorado brought a drop in arrearages of 26 percent and
    in uncollectibles of 18 percent. The latter represented 8.5 percent
    of program costs.[^17] These savings to all ratepayers can thus
    alone amount to almost 20 percent of program costs before any energy
    or other savings are counted.

    The Ohio Department of Development\'s Office of Energy Efficiency
    contracted with five independent evaluators between 1996 and 1998 to
    thoroughly analyze Ohio\'s weatherization program. These analyses
    found that the program not only reduced energy consumption and
    corresponding bills, but it also had a positive effect on payment
    behavior, customer health and safety, environmental impacts, and the
    state\'s economy.[^18] For example, disconnections were cut 38
    percent, collection actions ten percent.[^19] Similarly,
    Pennsylvania\'s low-income efficiency programs led to an increase in
    the proportion of bills paid by as much as 38 percent.[^20] An
    efficiency program in Kentucky reduced shut-off notices, and
    shut-offs, by 23 percent; late payments by 15 percent; and
    non-payments by eight percent.[^21] At Boston Gas, 76 percent of
    participating efficiency customers had trouble paying their bills
    \-- 60 percent of those payment-troubled customers found it easier
    to pay their bills after participating in the efficiency program,
    with half (30 percent) now able to pay their entire bill.[^22] On
    average, consumption savings from this program are 16 percent.[^23]

    Adding an education component to the delivery of energy efficiency
    services to low-income customers can increase energy savings and,
    therefore, the cost-effectiveness of the program. A study conducted
    by the Alliance to Save Energy of a program implemented by the
    Niagara Mohawk Power Company found the following results:

    Customers who received education along with energy efficiency
    services showed energy savings greater than 25 percent of their
    usage in the first year after the installation of efficiency
    measures, and over 20 percent three years later. These results were
    compared to those found for a group that had received only the
    energy efficiency services: 16 and less than 13 percent of usage
    after one and three years, respectively.

    Thus, providing education in the optimal use of appliances and other
    energy end uses (including lighting and water heating) added between
    7 and 9 percent to the total energy savings achieved.

    A study performed by the American Council for an Energy Efficient
    Economy (ACEEE) confirmed that education was a valuable component of
    energy efficiency programs, both for the customers and for the
    implementing contractors. The value of education in low-income
    programs was verified in a 1990 study cited in the ACEEE research
    which evaluated programs in Pennsylvania, Ohio, Michigan, and
    Washington.[^24]

    Evaluations of assistance programs show similar results. Columbia
    Gas of Pennsylvania operates a percentage-of-income based (PIPP)
    assistance program together with arrearage management and
    efficiency. Participants\' arrearages fell 18 percent, disputes by
    61 percent, new payment agreements by 53 percent, and cancellation
    of payment plans by 69 percent.[^25] At Louisville Gas & Electric, a
    PIPP and weatherization program led to a 39 percent drop in shut-off
    notices and a shut-off rate that decreased 84 percent.[^26] When
    Niagara Mohawk Power Corp. negotiated low-income payment plans with
    a realistic view of the payments low incomes can support, cash
    coverage of bills by program participants rose 12 percent; customers
    with the worst previous payment records had the best improvement: 36
    percent.[^27] An Equitable Gas Company PIPP and weatherization
    program in Pennsylvania led to missed payments dropping by more than
    two-thirds and low-income bill payments rising from 50 percent to
    63-to-69 percent, an increase in collections of at least 26
    percent.[^28]

    In addition, taxpayer-supported expenditures are saved by reductions
    in low-income consumer demands for such services as medical
    care,[^29] fire calls due to the use of dangerous alternative heat
    sources,[^30] and homeless shelters.[^31] Further, by contributing
    to housing maintenance and helping to prevent housing abandonment
    and homelessness, efficiency and assistance programs contribute to
    the maintenance of a community\'s real estate tax base.

    In these ways, low-income assistance and efficiency programs have
    been found to virtually pay for themselves. As the Equitable Gas
    evaluation explained:

    Equitable\'s Energy Assistance Program (EAP) is probably best viewed
    as a business product. While it is true that EAP offers significant
    benefits to customers who meet its conditions, it is not a benefit
    program\.... EAP is a practical arrangement designed to be mutually
    beneficial to the participant, to Equitable, and to other
    customers\....

    The pricing model which underlies EAP is a variant of the kind of
    negotiated rate which many utilities set for a large industrial
    customer which might leave the system. This is, in fact, the
    precedent for pricing which does not fully cover costs, but yet
    \[does cover marginal costs and make a contribution to fixed
    costs\].[^32]

    Three years ago, Brooklyn Union Gas added home study courses and
    individualized customer services to its efficiency, heating system
    repair, and arrearage management programs. Courses include ongoing
    lessons in budgeting and energy management. Individualized services
    include payment plans, referrals and advocacy to obtain assistance,
    and individual follow-up. Payments from three-year participants are
    fifty percent higher than at the start of the program. In fact, in
    three years this group of customers has changed from 100 percent
    payment-troubled to 60 percent with no collection activity
    whatsoever and 80 percent with only one reminder per year (the
    Company\'s average). The cumulative benefit in receivables in three
    years has been \$14.4 million at a cost of about \$3 million.[^33]

# AFFORDABILITY {#affordability .unnumbered}

## Discounts {#discounts .unnumbered}

No two states have implemented utility bill discounts in exactly the
same way; there are even great variations within a single state among
different utility companies. Each state or utility has assessed the
needs and circumstances of its customers, the number of affected
customers, the effect on other customers, and the political will to
provide relief before designing the chosen program. Some programs apply
to only electric or gas companies; others apply to both. Some states
have had discount programs in place for many years (Massachusetts for at
least 20 years) and others have instituted them with electric industry
restructuring (Texas codified statewide discounts in 1999).

While there are many variations in the details, there are three basic
types of discount programs:[^34]

-   Fixed percent of bill;

-   Fixed dollar discounts; and

-   Discounts that vary with usage

    The fixed percent of bill design has resulted in discounts ranging
    from seven to 40 percent, depending on the state and utility company
    (*e.g.*, California\'s is 15 percent; Massachusetts discounts range
    to close to 40 percent for electricity and up to 40 percent for
    gas). One way some states have structured the discount is to waive
    the tax on energy, which is by nature a fixed percent of the bill.
    In a small number of states, the discounts apply only during the
    costliest part of the year (*e.g.*, West Virginia provides a 20
    percent discount in the winter months).

    Other states provide a fixed dollar discount, most typically by
    waiving the customer charge for low-income customers (*e.g.*,
    Alabama, \$7.65 per month; Mississippi, \$8.65, New York customer
    charge frozen at \$5.00 while for other customers it rises to
    \$10.00). Others provide a fixed credit amount that has been
    determined in a rate case to be sufficient to the state\'s purposes
    (*e.g.*, New Jersey, up to \$18.75 per month).[^35]

    A percentage discount may also vary with a customer\'s usage, as in
    the original California Lifeline rate. This could take the form of a
    discount that applies only to a lifeline block \-- *i.e.*, the
    minimum amount of electricity deemed to be necessary to sustain life
    in today\'s society. Usage beyond this amount is priced at the
    regular residential rate. Thus, for example, usage up to 500
    kilowatthours (kWh) per month in Minnesota is discounted 50 percent.
    In the District of Columbia, a 28 percent discount is applied to the
    first 400 kWh per month. Alternatively, the discount could decline,
    but still exist, as usage increases. Thus in Arizona the discount is
    30 percent for usage at or below 400 kWh per month, 20 percent on
    usage between 401 and 800 kWh, 10 percent on usage between 801 and
    1200 kWh, and there is a \$10 credit for higher usage.

    Another rate that results in a discount that varies with usage is
    the inverted block rate, adopted in California and other states at
    various times. In an inverted block rate, blocks of kWh consumption
    are established such that greater levels of consumption are charged
    higher unit costs.

    The most obvious virtue of the fixed percentage and fixed dollar
    discounts is that they are simple for the utility to administer and
    for customers to understand. On the other hand, a discount that
    varies with usage is preferred by some because it encourages
    conservation \-- or at least does not encourage consumption. (A
    fixed dollar discount shares this effect to some extent since the
    percentage discount declines as consumption increases.) However,
    these effects are probably very small, if not zero, because the
    elasticity of low-income demand is very small; *i.e.*, low-income
    consumers have so little income relative to their needs that
    decreasing the price of one necessity tends to result in larger
    consumption of another scarce necessity rather than an increase in
    discretionary consumption.[^36]

    Different discount strategies tend to target different sectors of
    the low-income population. Thus a fixed dollar discount, and
    discounts that vary directly with usage, tend to benefit most those
    electricity customers with the lowest incomes, to the extent that
    electricity consumption is correlated with income.[^37] Fixed
    percentage discounts better reach low-income households with high
    consumption that is not within their control, such as those with
    electric heat, large families, or exceptionally wasteful
    landlord-provided appliances.

    Discounts that vary seasonally recognize the sharp differences in
    consumption that exist in certain climates and are thus designed to
    contribute to simplifying low-income budgeting. They are not
    appropriate where an energy utility use does not vary greatly by
    season (*e.g.*, electricity in New England, where there is little
    low-income electric heat).

    There is probably little difference among all these discount
    strategies in the predictability of their financial impact on all
    other customers since the number of low-income customers and their
    consumption tend to be similarly stable. The least predictable
    variable is usually the penetration of the rate; *i.e.*, how
    successful outreach efforts will be. This depends on such variables
    as the penetration of a state\'s federally-funded Low Income Home
    Energy Assistance Program (LIHEAP), the penetration of other benefit
    programs, the fraction of low-income consumers in master-metered
    buildings or group living situations (group homes, nursing homes,
    and the like), the nature of the low-income population, the nature
    and extent of outreach efforts, and the presence of income
    self-declaration or automatic sign-up mechanisms.

    Because the costs of discount programs are small relative to
    rates,[^38] they are usually recovered on a per-kWh basis.[^39]
    Generally, rates are established on the basis of a predicted cost
    based on historical experience and other known parameters, and are
    reviewed periodically as part of general rate cases. Costs are
    usually recovered from all customers, on the principles that all
    customers benefit from the consequent cost reductions and that all
    customers share the social obligation to assist low-income families.

## Income-Based Programs {#income-based-programs .unnumbered}

A type of payment program that is increasing in use is the percentage of
income payment plan (PIPP). This type of program takes the energy burden
of low-income customers strictly into account and structures a payment
program such that the burden faced by these customers will be no higher
than a predetermined percentage of their income. The percentage chosen
varies by state and may bear a direct relationship to the burden borne
by customers of average income in the state (*e.g.*, it could be
designed so that the energy burden for low-income customers is no more
than twice the burden for other residential customers).

As with discount programs, PIPP programs vary widely depending on the
state and/or utility company. The percentage of income also varies with
whether the utility is used for heat. Some utilities use income brackets
to determine the percentage; others use income brackets and level of
consumption; still others apply a fixed percentage for all eligible
customers. Attachment 1 is an appendix to the NCLC report \"Access to
Utility Service/1998 Supplement\" that summarizes the variations of both
discount and PIPP program designs that had been adopted by various
states by the date of the publication. In general, the range is four
percent to 15 percent of income, as illustrated by these examples:

Pennsylvania PIPPs vary by utility, but Columbia Gas and Duquesne Light
are typical. In each plan, the fraction of income paid depends on the
level of poverty (expressed as a percent of the Federal Poverty Level,
or FPL). Duquesne offers both a PIPP and a percent-of-the-bill discount
option, which also varies with income. Thus:

FPL Columbia PIPP Duquesne PIPP or Discount

0-50% 5% 5% 50%

51-100% 7% 7% 30%

101-150% 9% 9% 20%

Columbia forgives a quarter of an arrearage for every 12 months of
successful participation; Duquesne forgives one-twelfth each three
months.

Some electric utilities with a PIPP (Pennsylvania Electric Company,
Metropolitan Edison) distinguish between use for heat (9 percent, 10
percent, 15 percent of income) or non-heat usage (4 percent, 5 percent,
6 percent). The state-wide Ohio plan distinguishes between primary
heating service (10 percent of income) and secondary (5 percent). The
state-wide Ohio plan distinguishes between primary heating service (ten
percent of income) and secondary (five percent).

At Central Maine Power, a similar result is achieved by varying the
percentage of income with electricity usage, as follows:

Below 75% FPL Above 75% FPL

\<5000 kWh 6% 7.1%

5001-13,999 kWh ((\[usage minus 5000\]/9000)\*5%) + 6%

*e.g.*, 9500 kWh 8.5%

14,000 kWh+ 11% 12.1%

PIPP payments can be made directly by an agency from which a customer is
receiving other benefits (such as SSI or transitional assistance), but a
major issue for low-income customers (especially elderly customers) is
pride and control over their lives. By giving control to another entity,
the utility (or the state) would take away part of the motivation a
customer feels to pay his or her bills. It also undermines any financial
and energy education provided to the customer if the customer has no
control over whether the bill is paid. This type of education is a
critical component of enabling the customer to better manage energy use
and to budget the limited income available in the most effective way. In
fact, as described below under Arrearage Management, budget counseling
may be one of the most effective components of an overall arrearage
reduction strategy. As described above, PIPPs are often coupled with
Arrearage Management on the basis of a fractional forgiveness for each
month of successful participation in the PIPP.

PIPPs obviously require an additional commitment of administrative
resources, but by showing low-income customers that there is a practical
way for them to do what they want to do \-- pay their bills \-- PIPPs
have succeeded in reducing arrearages and consequent collection and
termination costs. Columbia Gas, for example, found reduced arrearages
and improved payments. West Penn Power also found reduced arrearages and
confirmed that participants paid more than their variable costs so they
contributed to fixed costs. Pennsylvania Power & Light found
improvements in payment frequency and decreased account management
costs. All studies found no increase in consumption.

## Arrearage Management {#arrearage-management .unnumbered}

A crucial component of many discount and PIPP programs is arrearage
forgiveness. While low-income customers do not constitute the customer
class with the majority of arrearages,[^40] low-income customers are
usually in arrears because they cannot afford to pay their bills \-- not
because they do not want to pay.[^41] Indeed, half of all customers fall
behind on utility bills because they do not have enough money due to
such causes as unemployment and medical bills.[^42] Thus, if the bills
are made more affordable, experience demonstrates that low-income
customers in general will pay more of their bill. As arrearages grow,
low-income customers are apt to become fearful of ever getting out from
under their debt; thus, increasing the late payment penalty,
disconnecting the customer and then charging a reconnection fee, or
setting a payment plan in place that requires more than the customer is
able to pay, are unlikely to generate much incremental revenue from the
low-income customer with a high arrearage. In fact, that customer is
likely to become discouraged and to stop making any payments at all.

Utility companies in various states have structured arrearage management
programs in different ways to meet the needs of their low-income
customers. As programs provide arrearage forgiveness coupled with other
discounts, energy conservation, education and budget counseling,
low-income customers with large arrearages are removed from the
collections rolls, and collection staff resources can be devoted to
going after those in arrears who have the money but have not paid their
bills for other reasons.

Arrearage management programs are based on the premise that, although
low-income customers cannot afford to pay the entire energy bill, they
can pay (and are willing to pay) something toward their bill each month.
The amount may be negotiated and based on what the customer agrees is
affordable, based on an analysis of income and expenses. In a program
instituted by the Niagara Mohawk Power Corporation (NMPC), customers
enrolling in its arrearage forgiveness program had to have a negative
cash flow to participate in the program; *i.e.*, their expenses
(including utility bills) were greater than their incomes.[^43] Payments
were negotiated based on percentage of income, and customers were
required to apply for LIHEAP and state crisis money. Several goals were
set for the program:

-   Increase the regularity of cash payments by participating customers;

-   Increase the total amount of cash payments by participating
    customers;

-   Increase the use of available assistance by participating customers;

-   Decrease the number of collections actions for participating
    customers;

-   Eliminate arrears for participating customers.[^44]

    According to the evaluation of the NMPC arrearage program, the
    program was successful in increasing both the number and amount of
    cash payments; it was not successful in increasing the use of
    available assistance payments; it did reduce the number of
    collections actions; and, for those who remained active in the
    program (despite limited follow-up by the company), arrearages were
    reduced by 50 percent. The evaluation concluded that, with greater
    support from the company and other improvements to the program
    design, more participants could have reduced arrearages and the
    program would have been cost-effective compared to the prior system
    of collections and disconnects.[^45]

    The Pennsylvania experience with arrearage forgiveness programs
    combined with PIPP programs is described above under "Income-Based
    Programs". The experience of Brooklyn (N.Y.) Union Gas is described
    below under "Education".

    Connecticut Light & Power Company, a subsidiary of Northeast
    Utilities (NU), has an arrearage management program called \"NU
    Start\" that is available to customers with incomes below 200
    percent of the federal poverty level. The customer\'s total
    arrearage is divided into 12 even amounts; a payment plan for
    current bills is worked out; the customer is given budget counseling
    and energy education; she is referred to the weatherization and
    energy conservation program for all applicable measures to be
    installed. For each month that the customer makes a payment
    according to the agreed-upon schedule, a month\'s worth of arrearage
    is forgiven. If a customer misses a payment due to unforeseen
    circumstances (like a medical emergency or other unforeseen event),
    he is allowed to begin again in the program with a new payment
    schedule; the arrearage is recalculated. The company has learned
    that this type of program is the most effective means of retaining
    customers and receiving some revenue from those who would otherwise
    have been disconnected for failure to pay.

    Clark Public Utilities Company in Vancouver, Washington, instituted
    a \"Guarantee of Service Plan\" in 1988 to assist low-income
    customers in paying their utility bills.[^46] The present plan
    requires customers to pay no more than nine percent of their income
    for electric service and includes an arrearage forgiveness
    component, as well as education and weatherization where applicable.
    The plan serves all customers with incomes up to 150 percent of the
    federal poverty level (some up to 175 percent), eliminates security
    deposits for participants, requires participation in energy
    assistance grant programs, exempts participants from late charges,
    and provides rewards in the form of \"Energy Savings Certificates\"
    for reduction in energy use.[^47] The results to date of this
    program are as follows:[^48]

-   Delinquency has been reduced from 74 percent to 18 percent;
    write-offs have dropped 36 per cent;

-   The average assistance grant has been reduced from \$230 to \$169;

-   The average customer contribution to revenue is \$55 per month,
    compared to \$22 per month prior to plan entry;

-   The average adjustment from pre-plan arrears is \$227, compared to a
    \$252 traditional average loss;

-   Disconnection of service to low-income customers is down 64
    percent;[^49] and

-   Direct annual utility benefits exceed costs by 11 percent; *i.e.*,
    the benefit cost ratio is 1.11.

# ELIGIBILITY {#eligibility .unnumbered}

Eligibility for payment assistance programs also varies by state. Some
are open to only elderly and/or disabled low-income customers, but most
are available to all customers for whom household income is less than a
certain percent of the federal poverty level (FPL). The standard is
typically 125 or 150 percent of the FPL,[^50] although the state of
Connecticut provides some payment assistance to customers with incomes
as high as 200 percent (although Connecticut does not provide price
discounts). The most typical criteria are probably 150 percent of FPL
(Arizona, California, Maine, Ohio, Pennsylvania, West Virginia,
Wisconsin) and receipt of (or eligibility to receive) LIHEAP
(Massachusetts, Minnesota, New York). Usually the level is set to match
the criterion of the state\'s LIHEAP. The obvious trade-off in setting
the same standard for both LIHEAP and utility programs is between cost
(or size of benefit) and the number of people helped. The details of
this trade-off vary widely by state, depending on such factors as the
relative wealth of the state, the relative size of the low-income
population, rate levels, and consumption levels.

We are aware of no assistance program that includes families who are not
direct customers of the utility, such as tenants in master-metered
buildings (which includes certain public housing buildings) or people in
nursing homes. Some utilities will extend their discount to group homes
that are on a residential rate.[^51] However, the principal means of
providing utility energy assistance to low-income families who are not
direct customers has been through efficiency programs, described below.
Buildings populated by more than a designated percentage of low-income
households (usually 50 percent) are provided means of controlling bills
by such measures as weatherization, education, and appliance
replacement.

Certification of income is rarely performed by utilities and is usually
performed by state agencies.[^52] One common strategy is to accept as
eligible all those who can demonstrate they are receiving benefits from
a program that uses an income screen that is no more generous than that
of the discount program. Typically, however, this type of screening will
miss some eligible customers for whom the program is intended. Some
eligible customers will have decided not to avail themselves of other
benefits. And some eligible customers may not be eligible for any other
benefits.[^53] A state or community agency can fill these gaps at
minimal cost. For example, Pennsylvania utilities use community action
agencies for outreach and intake.

Virtually all low-income discount programs are filed by the utilities as
permanent rates, although a few began as pilot programs (particularly
Percentage of Income Plans) and some started decades ago with a narrower
focus (for example, the Massachusetts and Texas discounts were
originally limited to SSI recipients and low-income elderly customers,
respectively). The rationale for a pilot program \-- to test a promising
but innovative idea to see if it works \-- probably no longer applies to
low-income discount programs.

# CUSTOMER PROTECTIONS THAT ENHANCE ABILITY TO PAY {#customer-protections-that-enhance-ability-to-pay .unnumbered}

States have adopted many protections that make it easier for customers
to pay their utility bills. In one form or another, these protections
are universal across the country, although details vary.[^54]

## Credit and collection {#credit-and-collection .unnumbered}

States regulate deposits, late charges, and reconnection fees, in some
cases prohibiting them. Where allowed, they are restricted. For example,
late charges and reconnection fees, if allowed, must generally be based
on cost (for late charges, this is rarely found to be higher than one
percent or 1.5 percent per month). Deposits, if allowed, are generally
limited in size and to those who cannot establish credit any other way.

In most states with long periods of extreme weather causing large
seasonal changes in utility service consumption for heating and/or
cooling, levelized billing plans are provided to make it possible for
customers to budget the same payment each month. A true-up adjustment is
made at least annually. Some states allow customers to choose the date
each month that they would prefer to have their bills come due, thus
letting customers align bill payment with revenue streams. Similarly,
many states provide for deferred payment arrangements of arrearages. As
described above, in some states these arrangements are coupled with
arrearage forgiveness and discount plans. In any event, the most
successful programs tailor the payments in some way to make it more
likely that the customer will be able to make the payments.

Most states recognize situations where the need to protect the most
vulnerable mandates that disconnection for nonpayment not be allowed.
Budget counseling and payment arrangements can be effective in making
payment possible in these difficult situations. The shut-off moratorium
conditions include:

-   extreme weather;

-   medical emergencies and serious medical conditions; and

-   presence of elderly people or infants in the home.

## Rates

In addition to the low-income-specific rate discounts discussed above,
some states have taken steps to reduce the energy burden on all
residential customers. In high-cost states, the overall rate level is an
obvious factor making it difficult for low-income families to pay their
bills. The legislatures in many such states have required rate cuts for
all customers as part of the restructuring of their electric industry.
Sometimes related to this is the large (and sometimes increasing)
discount in some states that industrial customers receive vis-a-vis
residential rates.[^55] In Connecticut, for example, this differential
has been frozen by statute.

## Other protections that affect payment

Most states require regular meter reading and many states restrict a
utility\'s right to back-bill when it has failed to read a meter for a
lengthy period of time. At a minimum, such states usually allow as much
time to pay the back bill as it took the utility to read the meter. In
addition, many states abate the bill on the theory that consumers could
have adjusted their usage had they only known what the bill was.

Most states, through both utility regulation and (at least arguably)
through unfair and deceptive trade practices statutes, require
disclosure to each customer of the most favorable rate available to him
or her.

In many states, upon the failure of a landlord to pay a utility bill,
tenants must be notified and given the opportunity to take over
responsibility for the service, adjusting their rent payments
accordingly.

In some states, customers with billing arrearages (or those who request
help in managing their budgets through levelized billing or other
mechanisms) are referred to other forms of assistance by the utility,
such as fuel assistance, telephone Lifeline rates, gas company
discounts, or even transitional assistance programs. Any form of
assistance that can lower the total household financial burden
contributes to the payment of utility bills.

# EFFICIENCY AND WEATHERIZATION

## Purpose and Issues

In addition to payment assistance and arrearage forgiveness programs,
the best way to lower bills for low-income customers is to provide them
with comprehensive weatherization, education, and energy efficiency
services. Besides lowering their bills, these types of programs enable
low-income customers to better manage their usage, making energy more
affordable and thus empowering them to take better control of their
finances. Several issues must be considered when these types of programs
are designed, a few of which are listed below:

1.  How should the program be designed? What measures should be
    included?

2.  Should a co-payment be required from the customers? (Usually this
    practice has been found to be self-defeating.)

-   Should the program be fuel-blind; *i.e.*, should the electric
    company provide weatherization services to customers who heat their
    homes with oil or gas?

-   Should services be delivered by the utility, by community service
    agencies with closer ties to the target population, or through an
    energy services company? Is there a trained, high quality, stable
    staff and infrastructure on which to build a program?

-   Should the eligibility level for efficiency programs be the same as
    for payment assistance programs, or can it be more generous?

-   Should services be offered to all eligible low-income households or
    just those with usage over a certain threshold? Should you begin
    with a threshold and lower it as the program matures?

## Program Design {#program-design .unnumbered}

The low-income population is a sector within the general residential
class with unique barriers to participation in energy efficiency
programs; thus, program designers must plan accordingly. It is equally
important to standardize a set of measures and auditing tools for the
chosen implementers in order to reduce training needs and speed
installation time. The Massachusetts low-income programs illustrate
these tenets. Attachment 2 is a summary of the Massachusetts low-income
utility efficiency programs as filed in their energy efficiency plans
and approved by the regulators.

In the early years of utility companies\' providing energy efficiency
services to low-income customers, the \"neighborhood blitz\" approach
was widely used. This approach entailed a team of installers going to a
particular neighborhood (after providing notice a week before) and
knocking on doors to install conservation measures. While there was some
success from this approach early on, targeted neighborhoods were soon
saturated with those households who would allow entry.[^56] Savings from
measures installed in the blitz were often small and difficult to
evaluate. There was no education provided, and no follow-up was
conducted.

For the past several years, the trend has been to provide customized
audits in previously scheduled visits, along with education,
refrigerator metering (to determine energy use for possible
replacement), and installation of all measures that can be installed at
the time, with appointments scheduled for any further work necessary
(such as ceiling, wall or floor insulation). A blower door test is
conducted to determine the need for insulation and/or air sealing.[^57]
In the Appliance Management Program described below, one team of
contractors can complete three comprehensive audits each day. The teams
are sent and managed by the local community action agencies who also
perform weatherization under the DOE program.[^58] In other words, the
efficiency program is \"piggy-backed\" onto a previously existing
network of experienced administrators to minimize costs and maximize
efficiencies. Indeed, an important feature of most successful programs
is to coordinate (piggyback) among all resources available to a
particular home, including electric and gas utilities, the U.S.
Department of Energy Weatherization Assistance Program (DOE WAP), and
state funds.[^59]

Massachusetts Electric Company runs a relatively aggressive low-income
base-load efficiency program (the Appliance Management Program or AMP)
that includes replacing refrigerators and that achieves an average
reduction in energy use of 15 percent.[^60] The U.S. DOE\'s 17-state
meta-evaluation of weatherization programs found a 23 percent reduction
in natural gas consumption, with a 34 percent reduction in consumption
of natural gas for space heating.[^61]

## Appliance Management Program {#appliance-management-program .unnumbered}

The AMP combines comprehensive energy education with weatherization and
energy conservation services to low-income customers. This program was
formed out of a partnership between Massachusetts Electric Company and
the local weatherization and fuel assistance network. It has been
expanded and is now implemented by all of the investor-owned electric
and most of the investor-owned gas companies in Massachusetts. The
program provides an audit, a detailed appliance survey with usage data,
detailed energy education about energy use and opportunities for saving
energy tailored to each household\'s practices. All cost-effective
efficiency measures are installed at no direct cost to the building
occupant, including insulation, lighting, new refrigerators, waterbed
replacement or insulation, and low-flow showerheads and faucet aerators.
In 1997 alone, average savings per participant were 1,386 kWh per year.
Most customers were very satisfied with the program; over 50 percent
said it helped them pay their bills on time; and 73 percent recognized
that it helped lower their electric bill. Furthermore, participants were
15 percent more likely to be very satisfied with their local utility
than were non-participants in the program.[^62] In the following year,
this differential rose to 19 percent (and 37 percent in neighboring
Rhode Island and New Hampshire).

## Efficiency Measures {#efficiency-measures .unnumbered}

### Single Family Homes {#single-family-homes .unnumbered}

Measures included in utility energy efficiency programs vary by
cost-effectiveness. In general, it has been found that it is most
cost-effective to determine ahead of time and prescribe the measures
that will be installed in households.

Examples of heating, cooling, and domestic hot water measures that are
often included in energy efficiency programs for low-income customers:

-   attic, wall, and floor insulation;

-   pipe and duct insulation and sealing;

-   ventilation;

-   window, storm window, and door replacement;

-   clock thermostats;

-   other controls;

-   blower door-assisted air sealing;

-   hot water tank wraps;

-   low-flow showerheads and low-flow faucet aerators;

-   water heaters, including heat pump water heaters;

-   heating system tune-ups;

-   heating safety repairs and replacements; and

-   solar domestic hot water systems.

    Other measures that are installed to reduce electric use only
    include the following:

-   compact fluorescent lightbulbs (CFLs);

-   CFL torchieres to replace halogen torchieres;

-   dedicated table lamps that accommodate only CFLs;

-   energy efficient refrigerators;

-   water bed covers (or replacement mattresses); and

-   clothes washers (also appropriate in gas and water conservation
    programs).

### Multi-family Dwellings {#multi-family-dwellings .unnumbered}

For multi-family dwellings, other measures could include common area
lighting fixtures that accommodate only efficient fluorescents,
insulation, air sealing, motors, controls, and energy efficient clothes
washers. Issues that arise with multi-family dwellings might include the
question of contributions by landlords and the eligibility of the
building based on the percent of low-income tenants \-- most often, if
at least 50 percent of the tenants in a building are low-income, the
building is eligible for services under the program.

### New Construction or Renovation {#new-construction-or-renovation .unnumbered}

For a low-income new construction or rehabilitation program, many other
issues may arise that must be dealt with in order to implement a
successful program:

-   recognition that this is a difficult market to reach, with many
    barriers, but a true lost opportunity if not successful;

-   provision of design assistance, training, and education on energy
    efficient building practices and technologies to builders of
    low-income housing;

-   tenant or owner education on energy use and management;

-   measures to be installed in new or renovated buildings:

    \* building shell

    \* domestic hot water

    \* lighting and appliances

-   payments from the utility company need only cover the incremental
    cost of the efficient measures compared to the cost of standard
    measures and practices (although larger payments may be required to
    leverage investment in efficient new construction or rehabilitation
    projects);

-   assistance to builders in obtaining financing for more efficient
    housing;

-   coordination with community-based housing efforts such as Habitat
    for Humanity and community development corporations.

## Fuel-Blind Weatherization {#fuel-blind-weatherization .unnumbered}

For many years, when energy conservation was viewed primarily as a
lower-cost resource alternative to generating electricity, electric
utility companies did not offer measures that were mainly designed to
save resources other than electricity. The premise was that if all
ratepayers were paying for the programs through their electric rates,
the programs should save only electricity, so that the cost of the
electricity resource to all electricity ratepayers would be lowered. To
some degree, and in many states, this premise still holds, and electric
companies do not install weatherization measures that do not save
electricity. However, in some states (especially in places like the
northeast where many people heat with oil), regulators (and even some of
the electric companies) have recognized that unless low-income homes are
weatherized, regardless of the fuel used to heat them, poor people will
be less able to pay any utility bills -- including their electric bills.
In other words, by installing insulation and air sealing measures in
homes and making all energy bills more affordable, electric companies
and their other ratepayers benefit directly by lowering bad debt and
collection burdens. Society as a whole benefits by making housing safer
and more affordable for its poorest members. Where natural gas companies
implement energy efficiency programs and pay for gas-saving measures,
electric companies do not pay for weatherization of gas-heated homes but
do provide electricity-saving measures in those homes, such as energy
efficient lightbulbs and appliances.

Thus far, there have been few programs where electric companies have
actually paid for fuel switching -- *i.e.*, changing out an electric
heating or hot water heating system for a natural gas- or oil-fueled
system -- even though this would be the ultimate in saving electricity
in those end uses. Most Public Utility Commissions (PUCs) have
recognized that in ordering such an outcome, they would be implicitly
favoring one industry they regulate over another. However, in places
like Vermont, where an independent "efficiency utility" has been created
to implement the energy efficiency programs funded through utility
rates,[^63] fuel switching is among the measures evaluated during an
audit of a home. For Cape Cod, the Cape Light Compact has submitted an
energy efficiency plan to the PUC that would incorporate fuel switching
as an important component of its energy saving program.[^64] In both of
these cases, however, the electric utilities that are responsible for
collecting the revenue from ratepayers to fund the programs are not the
entities that would be administering the funds nor implementing the
programs; the implementing entities have a more favorable view toward
fuel-switching than do the electric utilities.

## Service Delivery {#service-delivery .unnumbered}

There has long been a debate about the most effective delivery system
for utility-funded low-income energy efficiency programs. In some
states, where the utility receives an incentive (or makes a profit) on
successful delivery of energy savings, the utility may want to provide
these services directly. In addition, in some states, the utilities have
extensive experience in the delivery of efficiency services and wish to
provide quality, effective service to their customers. In other states,
the community action agencies that provide DOE weatherization services
are the best equipped to expand their role and to deliver utility-funded
services as well. In our view, the most effective model developed thus
far is one where utilities work together with community agencies to
provide coordinated, comprehensive energy efficiency and education
services.[^65]

In some states, energy efficiency service delivery to the low-income
population is provided by third-party contractors -- sometimes as
sub-contractors to the community agencies or to the utilities.[^66]
Important factors to consider when determining the most effective model
for a particular state or service territory are that there be a
well-trained, highly qualified, stable staff and infrastructure to
deliver services, and that the chosen implementer be trusted by the
community. In addition, several states have chosen to implement
state-wide programs, so that consistent, comprehensive, well-coordinated
energy efficiency and education services are available to all low-income
citizens within the states, through coordinated, but decentralized,
delivery.[^67]

# EDUCATION {#education .unnumbered}

An important component of all of the payment assistance programs
described so far \-- whether discounts, PIPP, or arrearage forgiveness
\-- is education for affected customers. As stated earlier, most of the
low-income customers with difficulties paying their bills want to pay
but are unable to. Often, this inability has as much to do with lack of
knowledge about budgeting as it does with lack of income. Therefore,
providing budget and money management counseling along with payment
assistance can greatly increase the odds of having the bills paid.
Education is also an important component of weatherization and
efficiency programs, teaching consumers to control their utility bills
by wise usage. Indeed, as described in the cost-effectiveness section
above, education increases the impact of efficiency programs by seven to
nine percentage points.

Budget counseling has been provided at the same time as, and in
conjunction with, payment assistance or made a condition of arrearage
forgiveness. Sometimes, a utility company will have on staff community
relations people who can provide budget counseling as well as other
community interface activities such as outreach to human service
agencies. At other times, community service agency personnel are
contracted with to provide budget counseling as part of a comprehensive
weatherization and energy conservation package. It is probably most
effective to have both systems in place because not every customer who
needs payment assistance will be eligible for weatherization, and even
when they are, not every customer can be served immediately.

The most successful education materials are consistent, easy to use and
understand, clear, humorous, and useful. Obviously, to maximize their
value, they are provided in all of the major languages spoken in the
service territory. Utilities have put helpful hints on sticky notes,
refrigerator magnets, or other useful places to help reinforce the
messages.

Utilities conduct workshops for local community action or other service
agencies in order to disseminate consistent information. Since these
agencies are often known and trusted by members of the community, this
avenue is often the most effective avenue of communication to low-income
families.

Another educational service that utility companies provide to better
enable their low-income customers to pay their bills is information on
the Earned Income Tax Credit (EITC). Most people who are eligible for
the EITC do not even know about it and do not apply for it. Much like
fuel assistance, by making this information available, companies
increase their customers\' ability to pay their utility bills and build
goodwill for the company at the same time.

The most effective way to educate customers is as part of a
comprehensive weatherization and energy efficiency audit and
installation. The auditor is in the customer\'s home and can provide a
printout with customized usage data for that customer. These data can
show how much energy is used by each appliance and other use, including
lighting, heating, water heating and cooling. The auditor can explain
how to minimize usage and therefore save money on energy bills while
also providing counseling on the best way to budget and stretch the
energy dollars. The most successful education program is that designed
to motivate customers, and to help give them a sense of control over
their environment.

In one case study, the Alliance to Save Energy found that, in a program
run by Niagara Mohawk Power Company, customers who received education
along with efficiency services showed savings in excess of 25 percent in
the first year and over 20 percent three years later, compared to a
group that had received only the efficiency services (16 and less than
13 percent, respectively).[^68] A study performed by the American
Council for an Energy Efficient Economy (ACEEE) confirmed that education
had proved to be a valuable component of energy efficiency programs,
both for the customers and for the contractors implementing the
programs.[^69] The value of education in low-income programs was
verified in a 1990 study cited in the ACEEE study which evaluated
programs in Pennsylvania, Ohio, Michigan and Washington.[^70] In a
pioneering program and study, Wisconsin Public Service Company found
that a cadre of Customer Assistance Advisors stabilized write-offs at
half the national average while reducing disconnections 80 percent, to
six percent of the national average.[^71]

Brooklyn Union Gas Company (now KeySpan) instituted a program in 1995
called \"On Track\" that provides education as well as more
comprehensive counseling services to 1500 payment-delinquent low-income
customers each year. Most of the customers receive telephone counseling,
money management advice, a video cassette recorder with instructional
videos, and a box to help them organize their bills. They are also
forgiven \$400 in arrearages. A small number \-- with the greatest debt
\-- are assigned a social worker. The program costs the company just
over \$1 million a year, but the company has found that it pays for
itself in reduced collections costs. Customers who receive this type of
help are grateful to the company and, therefore, more likely to pay
their utility bills first. Brooklyn Union thought it would take five
years for the program to become self-supporting but found that they were
making a profit after one-to-two years.[^72]

Four years ago, Brooklyn Union Gas added home study courses and
individualized customer services to its efficiency, heating system
repair, and arrearage management programs. Courses include ongoing
lessons in budgeting and energy management. Individualized services
include payment plans, referrals and advocacy to obtain assistance, and
individual follow-up. Payments from three-year participants are fifty
percent higher than at the start of the program \-- in three years this
group of customers has changed from 100 percent payment-troubled to 60
percent with no collection activity whatsoever and 80 percent with only
one reminder per year (the Company\'s average). The cumulative benefit
in receivables in three years has been \$14.4 million at a cost of about
\$3 million.[^73]

# OUTREACH {#outreach .unnumbered}

These program designs are effective only if extensive outreach efforts
are undertaken to enlist participants. There are various methods of
outreach available \-- some more effective than others, and some
effective only in combination with others. While utility companies all
use bill inserts to communicate with their customers, this method by
itself is not a very effective means of reaching the low-income
population; it may, however, have a place in combination with media
placements and other activities timed to coincide with the bill inserts.

Experience has shown that a more effective means of outreach is for the
company to conduct community meetings and workshops to publicize the
programs available to low-income customers. Meetings take place in
places of worship, community centers, offices of local community service
agencies, grange halls, and other places where the target population
congregates on a regular basis. Applications for particular programs are
made available at the time of the meetings, and a knowledgeable person
is present to help people fill them out.

Many fuel assistance providers make an automatic referral to the
company\'s payment assistance and energy efficiency programs when a
customer applies for the Low-Income Home Energy Assistance Program
(LIHEAP). This has proven to be a good time to capture many of those
most in need of assistance. Similarly, in many states, applicants for
public benefits are automatically referred for utility discounts. A
variant of this concept is to have customers automatically enrolled at
the time they apply for any other benefit program, with an opportunity
to decline; or providing a postage-paid post card for enrollment at the
time of application for another benefit program.

A very effective method of outreach to those already on public benefit
rolls, but one which has raised privacy concerns with some in the past,
is to do a computer match for recipients of all assistance benefits
programs \-- participation in which makes one eligible for the
company\'s payment, arrearage management, or efficiency programs \-- and
the company\'s customer list. The match generates a letter notifying the
customer that enrollment is automatic unless the customer returns the
notice, checking a box that says they do not want to participate. A
computer match program operated by a third party to alleviate privacy
concerns has been successful in New York State in signing up New York
Telephone customers for Lifeline service.[^74] A similar program,
without the \"negative check-off\" notice, has been operating
successfully at Eastern Edison Company (now part of Massachusetts
Electric Company) in southeastern Massachusetts.

Connecticut Light & Power Company instituted a new type of outreach
effort in the year 2000 that attempts to reach and serve customers who
have other competency issues in addition to their low incomes, such that
they are unable to take advantage of the energy efficiency and payment
assistance programs offered by the company. Service is provided by
Infoline, an information and referral resource that connects callers to
appropriate human service agencies and to the utility through a
toll-free telephone hot line, offers a simple screening tool for
caseworkers, and does follow-up to ensure that services have been
delivered and are effective. A complete description of this program
(Expanded Energy Care) and of the Weatherization Residential Assistance
Partnership (WRAP) can be found in Attachment 3.

Whatever the methods chosen (and there may be several used in
conjunction with one another), provisions for serving the customers who
respond must be in place. There is little more discouraging to a
struggling family than to be given some hope of pulling out of debt only
to be told that the resources are not available to fulfill the promises
made.

# EVALUATION {#evaluation .unnumbered}

Once any (or all) of the above-described payment assistance and energy
efficiency programs have been implemented, it is critical to assess
their effectiveness and value to the company, to the participants, to
non-participants, and to society as whole. Evaluation methods are
determined during the design of the programs, so that as the programs
are being implemented, results are being tracked to ensure that the
programs are meeting the goals that have been set for them.

Several types of evaluation are conducted for the kinds of programs
described in this paper. The first \-- and on-going \-- type is a
process evaluation, which evaluates program systems. A process
evaluation can make sure a program is on track and being implemented
effectively; that it is reaching its target population; that it is
delivering the services for which it has been designed. A process
evaluation can also identify areas of program implementation that need
improvement before they become entrenched, so that they can be modified
or eliminated. Some version of the process evaluation is undertaken
periodically to ensure continued effectiveness of the program.

A second type of evaluation critical to obtaining the continued support
of management, regulators, and customers who are footing the bill for
efficiency programs is the impact evaluation, which measures
quantitative results. There are several types of impact evaluations,
including billing analyses, savings estimates based on the kWh saved
from a particular measure times the number of measures installed,
metering, and others. Some are appropriate for specific measures and not
others; none is appropriate for all measures. The U.S. Department of
Energy has conducted a number of impact evaluations of its
weatherization programs which can be used as a basis on which to build
new, company-program-specific results.[^75]

Among the information options for evaluation are the following:

-   a computerized tracking system of all installations;

-   baseline assessment of current conditions;

-   telephone surveys for process evaluation; and

-   statistical billing analysis to measure consumption changes of
    participants and carefully selected controls.

    Care is taken not to spend more on evaluation than is necessary in
    order to estimate with some level of reliability the savings
    achieved from the expenditure of ratepayer funds. A good rule of
    thumb is that the value of the information attained should be higher
    than the cost to attain it. For most energy efficiency programs for
    low-income customers, no more than five percent of the budget is
    spent on evaluating them, with a general rule of thumb of two to
    three percent.

    For assistance payment and arrearage forgiveness programs, as
    mentioned above, companies set goals \-- such as a decrease in the
    value of arrearages or a decrease in the number of disconnects \--
    that can be measured at certain intervals (such as one year, two
    years, three years) and compared to those numbers before the start
    of the program. As the program matures, the goals may change, but
    they should continue to be measurable. While lowering the energy
    burden may be the primary goal, it may be easier to measure the
    types of decreases mentioned above in the short run. Over the long
    term, if a company\'s programs are successful, the average energy
    burden for its low-income customers should decrease.

    Among the criteria that are subject to evaluation are the following:

-   energy savings;

-   non-energy utility benefits;

-   societal benefits (including environmental, economic development,
    taxpayer);

-   low-income and program participant payments and arrearages;

-   low-income and program participant disconnections for non-payment
    and reconnections;

-   low-income and program participant health and safety factors,
    including homelessness, transiency;

-   program participation, reasons for participation and
    non-participation, characteristics of participants and
    non-participants;

-   low-income and program participant attitudes toward utility and
    weatherization network;

-   persistence of measures; and

-   low-income and program participant energy burden (probably a
    long-term study).

# CONCLUSION {#conclusion .unnumbered}

Many states have assistance payment and/or energy efficiency and
education programs for their customers living on low incomes, for whom
the energy burden is high. There is not one single model of program;
rather, each state has adopted a model that meets its own particular
circumstances. Programs include direct payment assistance, arrearage
management, customer protections, education, and energy efficiency and
weatherization.

Studies have shown that these assistance and efficiency programs are
very cost-effective when benefits to the utility, low-income customers,
all other customers, and society are taken into account. They also
provide a degree of social equity and are broadly supported by
non-participating customers when all customer sectors pay for them.

To be successful, all of the programs require that outreach be done to
enroll the most needy of a state\'s citizens. Outreach efforts include
community meetings, utility bill inserts, media placements, and
automatic sign-ups or negative check-offs.

Finally, no matter which type of program is adopted, results need to be
evaluated and effectiveness assessed, although the amount spent on
evaluation should not outweigh the value of the information obtained.
Over the long term, if a utility company\'s programs are successful, the
average energy burden for low-income customers should decline.

# ATTACHMENTS {#attachments .unnumbered}

## 1. Energy Assurance Programs By State (Appendix B to NCLC, Access to Utility Services, 1998 Supplement) {#energy-assurance-programs-by-state-appendix-b-to-nclc-access-to-utility-services-1998-supplement .unnumbered}

## 2. Massachusetts utility low-income efficiency program design {#massachusetts-utility-low-income-efficiency-program-design .unnumbered}

## 3. Connecticut utility low-income efficiency program designs {#connecticut-utility-low-income-efficiency-program-designs .unnumbered}

## 4. Howat and Oppenheim, \"Analysis of Low-Income Benefits in Determining Cost-Effectiveness of Energy Efficiency Programs\" {#howat-and-oppenheim-analysis-of-low-income-benefits-in-determining-cost-effectiveness-of-energy-efficiency-programs .unnumbered}

## 5. Summary of Low-Income Assistance Programs {#summary-of-low-income-assistance-programs .unnumbered}

**Attachment 1**

##### Energy Assurance Programs By State {#energy-assurance-programs-by-state .unnumbered}

(Appendix B to NCLC, Access to Utility Services, 1998 Supplement)

**Attachment 2**

##### Massachusetts utility low-income energy efficiency program design {#massachusetts-utility-low-income-energy-efficiency-program-design .unnumbered}

NStar Companies

## IV. NSTAR LOW INCOME PROGRAMS Draft  {#iv.-nstar-low-income-programs-draft .unnumbered}

Prior to the implementation of the current low income programs, Boston
Edison, Commonwealth Electric and Cambridge Electric customers were
served under a number of different programs.

**[Boston Edison]{.underline}**

\* Public Housing Authority (PHA): targeted housing authorities outside
the City of Boston. Installed measures included lighting, HVAC, building
shell and water heating end-uses.

\* Boston Housing Authority (BHA): targeted public housing developments
managed by

this Authority within the city of Boston. The program installed only
energy efficient lighting fixtures.

\* Energy Conservation Service (ECS): has been in existence since 1980.
It provides home energy audits and follow-up services to all residents
of the state including low-income customers.

\* Energy Fitness: offered direct installation of lighting, electric hot
water measures and appliance efficiency measures primarily to elderly
and low-income customers. Electric hot water measures included tank and
pipe wraps. Low-flow shower heads and faucet aerators were also offered
as part of the program. Appliance efficiency measures included replacing
filters in air conditioners and cleaning refrigerator coils.

**[Commonwealth Electric and Cambridge Electric]{.underline}**

\* Green Saver IRM Program: Several multi-family low-income housing
facilities were treated through this program. Measures included indoor
and outdoor hard-wired lighting fixtures, refrigeration replacements and
customer education.

\* Energy Conservation Service: provides home energy audits and follow
up services to all residents of the state including low-income
customers.

### Boston Edison, Cambridge Electric and Commonwealth Electric {#boston-edison-cambridge-electric-and-commonwealth-electric .unnumbered}

Commonwealth Electric and Cambridge Electric began implementing their
low-income programs in 1997, while Boston Edison began implementing its
low-income program in 1998, pursuant to the Massachusetts Electric
Industry Restructuring Act. The low-income programs are designed to
ensure that the Companies fully coordinate delivery of energy efficiency
services to low-income customers with the appropriate community agencies
(WAPs) that deliver weatherization services for the Department of
Energy. The objective of all these services is to assist low-income
consumers in managing their electric use, and thereby reducing their
bills, while contributing to other key energy efficiency market
transformation objectives. Most products and services available are
common to all low-income programs. The Companies plan to continue to
provide specialized in-home services programs to low-income customers.
The low-income sector is served through three programs:

-   New Construction Program

-   Single Family Program

-   Multi--Family Program

    ***A. NEW CONSTRUCTION PROGRAM***

    **1. Background**

    There was no program specifically targeting low-income new
    construction prior to 1998 when the Companies began working with the
    Low-Income Energy Affordability Network (LEAN).

    *a) Market Barriers*

    Besides the barriers that exist to incorporating energy efficiency
    into any new construction, there are additional market barriers
    associated with the low-income new construction market:

-   Lack of information about efficiency;

-   Existing institutional and purchasing practices that do not lend
    themselves to life-cycle cost analyses;

-   Transaction costs;

-   Higher first costs;

-   Misplaced or split incentives; and

-   Product unavailability.

-   An additional barrier to the construction of energy efficient
    low-income housing is that it is economically difficult to construct
    any low-income housing.

***b) Market Intervention Strategies***

The Companies/Agencies plan to work with the builders of low-income
housing in order to address all of the barriers to energy efficient new
construction listed above. Specific activities include: providing
information and training in life-cycle costing; lowering the transaction
costs through incentives and rebates; showing how efficient construction
benefits both owners and tenants; attempting to identify mortgage
sources for Low-Income New Construction; making energy efficient
products available at lower prices through bulk purchasing and
incentives; and providing a standardized program across the state in
conjunction with the other utilities and with LEAN to minimize confusion
and maximize benefits.

1.  ***Market Indicators***

    The amount of new housing (whether single or multi-family) for
    low-income customers built to Energy Star standards will be the
    primary indicator of program success. Over time, changes in standard
    practice by builders of low-income housing toward more energy
    efficiency will be the primary indicator.

2.  ***Eligible Population, Market Penetration to Date, and Market
    Potential***

The following table presents Company-specific data for the Low-Income
New Construction Program and estimates for 2000- 2002 estimated
activity:

NStar Low-Income New Construction

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  TBD                     N/A                     TBD
  ----------------------- ----------------------- -----------------------

NStar planned participation in Low-Income New Construction:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  TBD                     TBD                     TBD
  ----------------------- ----------------------- -----------------------

**2. Program Design**

The Low-Income New Construction Program is designed to capture lost
opportunities when a customer with at least 50 percent low-income
tenants either does a major renovation or constructs a new building, or
when single family homes for low-income families are built by such
organizations as Habitat for Humanity. With the exception of a small
number of units developed by such organizations, low-income new
construction in the Companies' service territories is mostly
multi-family. The Companies work closely with LEAN on all aspects of
program design and implementation.

Additionally, the Companies are in touch with low-income housing
advocates such as the Massachusetts Housing Finance Agency (MHFA), the
Department of Housing and Community Development (DHCD), the Northeast
Energy Efficiency Council (NEEC), Habitat for Humanity, and others who
participate in Economic Development and program planning with the
Companies. The Companies will attempt to leverage private and public
funding sources in this effort.

***a) Marketing Plans***

In order to overcome the identified barriers and to promote the program,
the Companies' staff will build on the relationships they have developed
with Public Housing Authorities and the WAP Agencies, develop
relationships with contractors who work in low-income housing
construction, and perhaps with builders of manufactured housing. In
addition, CSG (the contractor implementing the Energy Star Homes
program) has a staff person working full time to develop housing
projects for the low-income community that will be built to Energy Star
standards.

***b) Customer Incentives/Rebates***

Incentives are provided at the same levels available in the regular
Energy Star Homes program: plans review, post construction inspection
and blower door test, and HERS certification to [Energy
Star]{.smallcaps} qualifying homes. In addition, ENERGY STAR appliances
are featured with the offer of a rebate of \$500.00 on the purchase of
an ENERGY STAR electric appliance package of any three different
qualifying products of refrigerators, dishwashers and room air
conditioners, or fixed rebates on any one of these three appliances.
Additional incentives, in the form of services, include an initial plans
review for new construction, an HVAC commissioning and duct sealing
service for furnaces, advice on lighting implementation and a HERS
rating upon completion of a building. Additional incentives targeted to
the low-income builder community may be developed in cooperation with
LEAN and the other utilities. Incentives for other projects such as
those of Housing and Urban Development or the Department of Housing and
Community Development will be developed on a customized basis, balancing
the objectives of (a) providing incentives that are cost-effective and
no more than necessary and (b) sufficient to stimulate construction of
the project.

***c) Implementation Plan and Schedule***

By statute, the low-income programs are implemented by the low-income
weatherization and fuel assistance network. The Companies choose a lead
vendor from the network (Action for Boston Community Development,
\"ABCD\", for Boston Edison and South Middlesex Opportunity Council,
\"SMOC\", for Commonwealth Electric and Cambridge Electric), which in
turn sub-contracts on a geographic basis to other members of the
network. The lead vendor serves as the project coordinator and the
interface between the other agencies, subcontractors, other utilities,
and the Companies. Network staff meet with the Joint Management
Committee of the Energy Star Homes program as needed to refine program
design and address specific issues.

Most of the program services, including tracking and reporting, are
delivered directly by the network. However, in some cases it is more
efficient or economical for the network to subcontract some program
components on a competitive basis (*e.g.*, refrigerator purchase and
delivery).

***d) Program Administration***

Overall administration is provided by the Companies\' internal staff.
Administration with respect to program operations is provided by the
lead weatherization network vendor, and the program is coordinated by
LEAN.

e.  ***Other Program Components:*** None.

***f) Consistency with DOER's Goals***

A discussion of how the Companies' Low-Income programs meet both the
Threshold Goal and the Priority-Setting Goals can be found at the end of
this Section.

**3. Program Evaluation and Market Research**

The Companies are currently conducting a process evaluation of their
Single Family, Multi-Family and New Construction programs. The
evaluation will address barriers unique to each of the above three
program markets. One of the goals of this evaluation is to use the
results of this evaluation to inform the decisions being made pertaining
to a statewide Low-Income program. An impact evaluation is currently
planned for these programs, however, the Companies will work with LEAN
to determine if these funds would be better suited to other evaluation
efforts given the statewide effort being performed to revise the
existing program. For example, LEAN has requested that the utilities in
the state assess non-energy benefits such as arrearage reduction and the
avoidance of termination/reconnection costs.

4.  **Performance Goals, Metrics and Incentives**

The overall program goal of all the low-income programs is to provide
comprehensive weatherization, energy conservation and education services
to low-income customers in order to reduce their energy burden; make
utility bills more affordable, houses safer and more comfortable, and
reduce arrearages; and to provide these services in partnership with the
local WAP agencies.

A specific objective for the next three years is to work on coordinating
the Companies' low-income program with those of the other electric and
gas utilities in Massachusetts through LEAN.

For the New Construction program specifically, long-term goals include
the following:

-   Change appliance procurement practices;

-   Train housing authorities in life-cycle cost analysis;

-   Improve standard practice for energy efficiency in public housing;

```{=html}
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```
-   Encourage mass procurement of energy efficient appliances by
    government authorities to stimulate the manufacturers, bring costs
    down and reduce incremental cost to the utility;

-   Expand the number of builders and developers of low-income housing
    that incorporate energy efficiency into their housing; and

-   Advocate for increased lending for the construction of low-income
    housing.

**5. Proposed Budget**

The budgets for the Low-Income New Construction for year 2000:

Boston Edison \-- \$\_\_\_\_

Cambridge Electric \-- \$\_\_\_\_

Commonwealth Electric \-- \$\_\_\_\_

Please refer to Table YY in Section II of this EEP for the program
budget for each Company, broken out by the sub-categories specified by
the DOER.

**6. Program Cost-Effectiveness**

The cost-effectiveness test for this program includes an amount that
reflects the Companies' best estimate of the specific benefits that
accrue from the implementation of comprehensive energy efficiency and
education programs for low-income customers. The Low-Income program is
consistent with the threshold goal regarding cost-effectiveness because
the benefit/cost ratio is greater than 1.0. See Section II for details
on program cost-effectiveness.

BCR ratio for each of the Companies :

1.  Boston Edison \-- \_\_\_\_\_\_

2.  Cambridge Electric \-- \_\_\_\_\_\_

3.  Commonwealth Electric \-- \_\_\_\_\_\_

## B. SINGLE FAMILY PROGRAM

**1. Background**

Low-income customers were served through the various programs listed
above until 1998 when the Companies began coordinating their programs
through LEAN.

***a) Market Barriers***

This market requires more assistance in obtaining energy efficiency
services than does the general residential customer sector for several
reasons. Specifically, many low-income households can be characterized
by the following assumptions:

-   Little cash and no available credit to fund high first cost of
    energy efficient products;

-   Often in older, poorly insulated, energy-inefficient housing;

-   Limited education and therefore ability to learn about energy
    efficient technologies or benefits;

-   Skepticism as to the benefits of a government run program;

-   Intense focus on needs for survival, leaving little time to focus on
    efficiency benefits;

-   Difficult to reach;

-   Likely to be renters not in control of large appliance purchases or
    whole-building measures;

-   High energy burden compared to higher-income customers; and

-   Often experience payment, arrearage and/or disconnect problems.

b.  ***Market Intervention Strategies***

The local weatherization network agencies are partners with the
Companies. This relationship helps to overcome possible distrust of the
utility and to take advantage of community-based resources. To overcome
lack of education and information, the program includes an education
component which provides personal, in-home instruction in good energy
practices as well as budget counseling, if needed. High first costs of
measures and the split incentive barrier are overcome by providing the
measures at no cost to the recipients.

***c) Market Indicators***

The Low-Income Single Family Program is not a market transformation
program (although elements of the program foster market transformation
by contributing to the manufacture and sale of energy efficient
products). Thus, typical market indicators are not appropriate to track.
Success will be determined by the number of customers served and the
amount of savings generated. The Companies are exploring ways to assess
other indicators such as the reduction in energy burden faced by the
target population (measured by reductions in arrearages and
disconnections of service), persistence of measures installed and
education received, and indicators of increased standard of living,
reduced health problems, safety factors, and homelessness.

***d) Eligible Population, Market Penetration to Date, and Market
Potential***

Originally the eligible population for low-income programs consisted of
customers who were at 150 percent of the poverty level. A recent change
has taken place and now customers at 200 percent of the poverty level
may participate. Specifically, the low-income sector includes low-income
customers (or buildings at least 50 percent populated by low-income
customers) characterized by the percentage of their income required for
energy (energy burden). This figure is more than double \-- and often
many times \-- the average. Particular attention is paid to those with
high usage, low income, and those with health and safety risks,
including elderly and disabled low-income households. Lower priority is
given to buildings where tenants do not pay utility bills directly. One
means of identifying eligible households is their subscription to the
R-2 and R-4 low-income rates, but fewer than half of low-income
households subscribe to these rates (due to a lack of awareness of the
rates\' existence, low-income customer inaction, and/or pride or
embarrassment).

In the past, weatherization services were available through the
Companies' programs only for electric heat customers. For year 2000, the
Companies will begin installing weatherization measures in homes heated
with oil or other fuels. There will be a ramp-up period for this effort,
beginning with 50, 52 and 26 homes respectively in the Boston Edison,
Commonwealth Electric and Cambridge Electric service territories in
2000. In addition, for the AMP program, the usage threshold for
eligibility has been 13 kWh per day; this level is being re-evaluated at
lower thresholds.

The following table presents Company-specific data for the Low Income
Single Family Program and tracking estimates for 2000- 2002 estimated
activity:

Boston Edison Single Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  99,740                  54.3%                   45,581
  ----------------------- ----------------------- -----------------------

Boston Edison planned participation Single Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  3,500                   3,000                   3,000
  ----------------------- ----------------------- -----------------------

Commonwealth Electric Single Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  13,972                  32%                     9,500
  ----------------------- ----------------------- -----------------------

Commonwealth Electric planned participation Single Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  600                     510                     520
  ----------------------- ----------------------- -----------------------

Cambridge Electric Single Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  1,295                   38%                     803
  ----------------------- ----------------------- -----------------------

Cambridge Electric planned participation Single Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  100                     80                      80
  ----------------------- ----------------------- -----------------------

**2. Program Design**

The focus of the Low-Income Single Family Program is delivering energy
efficiency products and services directly into the homes of eligible
low-income customers, in order to help lower customer energy bills while
contributing to other key energy efficiency market transformation
objectives. Most products and services available are common to all
low-income programs. The Low-Income Single Family Program is comprised
of two components: the Appliance Management Program (AMP) and the Space
Heat Program.

The AMP program offers site visit diagnostics, customer education,
disaggregation of the customer\'s electric bill, analysis of high-use
appliances, installation of conservation materials, and refrigerator and
freezer analysis to determine need for replacement. Disposal is
performed in an environmentally responsible manner, including recycling
of all CFCs. The appliance package includes up to five CFLs, hot water
flow restrictors, pipe insulation and tank wraps as applicable, along
with the replacement of existing refrigerators and freezers with high
efficiency models. In addition, waterbeds will be replaced with \"flat\"
beds and a small number of ENERGY STAR air conditioners may be provided.

Energy Managers conduct a fuel-blind audit, identifying causes of high
electricity use. Energy Managers develop solutions to high-use problems
cooperatively with customers, including budget and credit counseling if
requested by the customer. Managers install efficiency measures and
prepare work orders for other services (*e.g.*, replacement
refrigerators, weatherization), piggybacking with other programs
(especially those of DOE, DHCD, and gas utilities) where possible, and
educate customers about the measures. Fuel-blind installations are
performed to DOE WAP specifications, criteria, and priorities.
Installations are followed up to ensure proper delivery and reinforce
educational messages.

The Space Heating component provides home weatherization services on a
prescriptive basis. Installed measures may include wall and ceiling
insulation, blower door assisted air sealing, interior storm windows,
set back thermostats, and hot water tank and pipe wraps.

The program also includes increasing awareness among low-income
customers of the importance of energy efficiency and encouraging
customers to act on the basis of this awareness.

***a) Marketing Plans***

A vital element of the marketing plan is an outreach effort to notify
customers of the availability and value of low-income rates and energy
efficiency services. Current marketing efforts consist of contacting, by
mail and/or telephone, customers subscribing to the low-income rates
(R-2 and R-4) who are identified as having not received prior efficiency
services. The Companies provide these data to their vendors. Direct
mail, bill inserts, and literature distributed through social service
agencies, government offices, and other networks are also used.

The WAP agencies will do outreach in their communities and will screen
and refer customers to the Companies' program who apply for LIHEAP,
weatherization, or other services from the agencies. The program will
fund other recruitment and outreach strategies as they are developed.

***b) Customer Incentives/Rebates***

All low-income products and services are delivered with no co-payment
from the customers and, in the case of in-home single-family
participants, by means of direct installation. Specifically trained
staff from local WAP agencies provide in-home counseling to customers on
their electric bills if requested, meter high use appliances, and
install energy efficient measures. Customers save about 10 percent on
their electric bill, an important component of increasing energy
affordability in their home.

***c) Implementation Plan and Schedule***

By statute, the low-income programs are implemented by the low-income
weatherization and fuel assistance network. The Companies work closely
with the network on all aspects of program design and implementation.
The Companies choose a lead vendor from the network (Action for Boston
Community Development, \"ABCD\", for Boston Edison and South Middlesex
Opportunity Council, \"SMOC\", for Commonwealth Electric and Cambridge
Electric), which in turn sub-contracts on a geographic basis to other
members of the network. The lead vendor serves as the project
coordinator and the interface between the other agencies,
subcontractors, other utilities, and the Companies. Most of the program
services, including tracking and reporting, are delivered directly by
the network. However, in some cases it is more efficient or economical
for the network to subcontract some program components on a competitive
basis (*e.g.*, refrigerator purchase and delivery).

***d) Program Administration***

Overall administration will be provided by the Companies\' internal
staff. Administration with respect to program operations will be
provided by the lead weatherization network vendor.

e\) Other Program Design Components

The target market for weatherization services is similar to the DOE
weatherization program. The purpose is to extend the benefits of that
program to more customers and enable the weatherization network to
efficiently deliver a total package of energy efficiency services
including weatherization for heating usage and appliance services.

***f) Consistency with DOER's Priority Setting Goals***

A discussion of how the Companies' Low-Income programs meet both the
Threshold Goal and the Priority-Setting Goals can be found at the end of
this Section.

**3. Program Evaluation and Market Research**

The Companies are currently conducting a process evaluation of their
Single Family, Multi-Family and New Construction programs. The
evaluation will address barriers unique to each of the above three
program markets. One of the goals of this evaluation is to use the
results of this evaluation to inform the decisions being made pertaining
to a statewide Low-Income program. An impact evaluation is currently
planned for these programs, however, the Companies will work with LEAN
to determine if these funds would be better suited to other evaluation
efforts given the statewide effort being performed to revise the
existing program. For example, LEAN has requested that the utilities in
the state assess non-energy benefits such as arrearage reduction and the
avoidance of termination/reconnection costs.

**4. Performance Goals, Metrics and Incentives**

The overall program goal of all the low-income programs is to provide
comprehensive weatherization, energy conservation and education services
to low-income customers in order to reduce their energy burden; make
utility bills more affordable, houses safer and more comfortable, and
reduce arrearages; improve low-income customers' standard of living; and
to provide these services in partnership with the local WAP agencies.

A specific objective for the next three years is to work on coordinating
the Companies' low-income program with those of the other electric and
gas utilities in Massachusetts through LEAN.

For metrics specific to the Low-Income Single Family Program, see Table
XXX in Section II of this plan.

**5. Proposed Budget**

The budgets for the Low-Income Single Family program for year 2000:

Boston Edison \-- \$\_\_\_\_

Cambridge Electric \-- \$\_\_\_\_

Commonwealth Electric \-- \$\_\_\_\_

Please refer to Table YY in Section II of this EEP for the program
budget for each Company, broken out by the sub-categories specified by
the DOER.

**6. Program Cost-Effectiveness**

The cost-effectiveness test for this program includes an amount that
reflects the Companies' best estimate of the specific benefits that
accrue from the implementation of comprehensive energy efficiency and
education programs for low-income customers. The Low-Income Single
Family program is consistent with the threshold goal regarding
cost-effectiveness because the benefit/cost ratio is greater than 1.0.
See Section II for details on program cost-effectiveness.

BCR ratio for each of the Companies :

1.  Boston Edison \-- \_\_\_\_\_\_

2.  Cambridge Electric \-- \_\_\_\_\_\_

3.  Commonwealth Electric \-- \_\_\_\_\_\_

## C. MULTI-FAMILY SERVICES

**1. Background**

Low-income customers were served through the various programs listed
above until 1998 when the Companies began coordinating their programs
through LEAN.

***a) Market Barriers***

The multi-family low-income market experiences the same barriers as
found in the single family low-income market. Specifically, many
low-income households can be characterized by the following assumptions:

-   Little cash and no available credit to fund high first cost of
    energy efficient products;

-   Often in older, poorly insulated, energy-inefficient housing;

-   Limited education and therefore ability to learn about energy
    efficient technologies or benefits;

-   Skepticism as to the benefits of a government run program;

-   Intense focus on needs for survival, leaving little time to focus on
    efficiency benefits;

-   Difficult to reach;

-   Likely to be renters not in control of large appliance purchases or
    whole-building measures;

-   High energy burden compared to higher-income customers; and

-   Often experience payment, arrearage and/or disconnect problems.

    Additional barriers to reaching low-income customers who reside in
    multi-family buildings, often managed by a public housing authority,
    include the following:

-   Split incentives between landlords and tenants; and

-   Difficulty working with public housing authorities due to
    scheduling, financing, and bureaucratic impediments.

b.  ***Market Intervention Strategies***

In order to overcome the identified barriers and to promote the program,
the Companies' staff will build on existing relationships with Public
Housing Authorities, the WAP agencies, and other low-income housing
owners. The local weatherization network agencies are partners with the
Companies. This relationship helps to overcome possible distrust of the
utility and to take advantage of community-based resources. For the
tenants living in multi-family housing, the program includes an
education component that provides personal, in-home instruction in good
energy practices as well as budget counseling, if needed. High first
costs of measures and the split incentive barriers are overcome by
providing the measures at no cost to the recipients.

***c) Market Indicators***

The Low-Income Multi-Family Program is not a market transformation
program (although elements of the program foster market transformation
by contributing to the manufacture and sale of energy efficient
products). Thus, typical market indicators are not appropriate to track.
Success will be determined by the number of customers served and the
amount of savings generated, as well as the number of multi-family
facilities participating. The Companies are exploring ways to assess
other indicators such as the reduction in energy burden faced by the
target population (measured by reductions in arrearages and
disconnections of service), persistence of measures installed and
education received, and indicators of reduced health problems, increased
standard of living, safety factors, and homelessness.

***d) Eligible Population, Market Penetration to Date, and Market
Potential***

Originally the eligible population for low-income programs consisted of
customers who were at 150 percent of the poverty level. A recent change
has taken place and now customers at 200 percent of the poverty level
may participate.

Specifically, The low-income multi-family sector includes low-income
customers in buildings at least 50 percent populated by low-income
customers. Lower priority is given to buildings where tenants do not pay
utility bills directly.

The following table presents Company-specific data for the Low Income
Multi-Family Program and tracking estimates for 2000- 2002 estimated
activity:

Boston Edison Multi-Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  99,740                  7.6%                    92,160
  ----------------------- ----------------------- -----------------------

Boston Edison planned participation Multi-Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  500                     430                     430
  ----------------------- ----------------------- -----------------------

Commonwealth Electric Multi-Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  13,972                  8%                      12,841
  ----------------------- ----------------------- -----------------------

Commonwealth Electric planned participation Multi-Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  850                     720                     720
  ----------------------- ----------------------- -----------------------

Cambridge Electric Multi-Family

  ----------------------- ----------------------- -----------------------
  **Eligible Population** **Penetration to date** **Market Potential**

  1,295                   14%                     1,110
  ----------------------- ----------------------- -----------------------

Cambridge Electric planned participation Multi Family:

  ----------------------- ----------------------- -----------------------
  **2000**                **2001**                **2002**

  150                     120                     120
  ----------------------- ----------------------- -----------------------

**2. Program Design**

The focus of the Low-Income Multi-Family Program is delivering energy
efficiency products and services directly into the homes of existing,
eligible low-income customers who live in multi-unit housing. The
Low-Income Multi Family Program is comprised of two components: the
Appliance Management Program (AMP) and the Space Heat Program.

AMP provides appliance-related services to the multi-family low-income
population. The program offers site visit diagnostics, customer
education, disaggregation of the customer\'s electric bill, analysis of
high-use appliances, installation of conservation materials, and
refrigerator and freezer analysis to determine need for replacement.
Refrigerators and freezers in need of replacement will be replaced at no
additional cost to the low-income customer or to the landlord. Disposal
is performed in an environmentally responsible manner, including
recycling of all CFCs. The appliance package includes up to five CFLs,
hot water flow restrictors, pipe insulation and tank wraps as
applicable, along with the replacement of existing refrigerators and
freezers with high efficiency models. In addition, waterbeds will be
replaced with \"flat\" beds and a small number of ENERGY STAR air
conditioners may be provided.

Energy Managers conduct a fuel-blind audit, identifying causes of high
electricity use. Energy Managers develop solutions to high-use problems
cooperatively with customers, including budget and credit counseling
where appropriate. Managers install efficiency measures and prepare work
orders for other services (*e.g.*, replacement refrigerators,
weatherization), piggybacking with other programs (especially those of
DOE, DHCD, and gas utilities) where possible, and educate customers
about the measures. Fuel-blind installations are performed to DOE WAP
specifications, criteria, and priorities. Installations are followed up
to ensure proper delivery and reinforce educational messages.

The Space Heating component provides home weatherization services on a
prescriptive basis. Installed measures may include wall and ceiling
insulation, blower door-assisted air sealing, interior storm windows,
set-back thermostats, and hot water tank and pipe wraps.

In addition to measures in individual units, which are the same for all
low-income programs, this program provides hard-wired energy efficient
lighting retrofits for common areas, including outdoor lighting. The
program also provides rebates on common-area clothes washers to enable
the purchase of high-efficiency washers. Building owners will be
provided educational materials about reducing operating costs through
energy management and maintenance practices.

The program also includes increasing awareness among low-income
customers of the importance of energy efficiency and encouraging
customers to act on the basis of this awareness.

***a) Marketing Plans***

A vital element of the marketing plan is an outreach effort to notify
customers of the availability and value of low-income rates and energy
efficiency services. Current marketing efforts consist of contacting, by
mail and/or telephone, customers subscribing to the low-income rates
(R-2 and R-4) who are identified as having not received prior efficiency
services. The Companies provide these data to their vendors. Direct
mail, bill inserts, and literature distributed through social service
agencies, government offices, and other networks are also used.

The WAP agencies will do outreach in their communities and will screen
and refer customers to the Company's program who apply for LIHEAP,
weatherization, or other services from the agencies. The program will
fund other recruitment and outreach strategies as they are developed.

In addition, the Companies will use their relationships with public
housing authorities and other low-income property managers to directly
market the benefits of this program to them and their tenants.

***b) Customer Incentives/Rebates***

All low-income products and services are delivered with no co-payment
from the customer and by means of direct installation. Specifically
trained staff from local Network agencies provide in-home counseling to
customers on their electric bills if requested, meter high use
appliances, and install energy efficient measures.

**c*) Implementation Plan and Schedule***

By statute, the low-income programs are implemented by the low-income
weatherization and fuel assistance network. The Companies choose a lead
vendor from the network (Action for Boston Community Development,
\"ABCD\", for Boston Edison and South Middlesex Opportunity Council,
\"SMOC\", for Commonwealth Electric and Cambridge Electric), which in
turn sub-contracts on a geographic basis to other members of the
network. The lead vendor serves as the project coordinator and the
interface between the other agencies, subcontractors, other utilities,
and the Companies. Most of the program services, including tracking and
reporting, are delivered directly by the network. However, in some cases
it is more efficient or economical for the network to subcontract some
program components on a competitive basis (*e.g.*, refrigerator purchase
and delivery).

***d) Program Administration***

Overall administration will be provided by the Companies\' internal
staff. Administration with respect to program operations will be
provided by the lead weatherization network vendor.

e\) Other Program Design Components

The target market for weatherization services is similar to the DOE
weatherization program. The purpose is to extend the benefits of that
program to more customers and enable the weatherization network to
efficiently deliver a total package of energy efficiency services
including weatherization for heating usage and appliance services.

Buildings in which 50 percent or more of the residents are low income
require no customer co-payment and are eligible for special services.
The Network will take a lead role in overseeing services to these
customers. Special services include the negotiation of tenant
protections in landlord agreements where appropriate and requested,
coordination with community-based (community development funding) or
regional/national (HUD, DHCD) support services, and identification of
customers eligible for low-income rates or other social services. The
Companies will fund the Network to provide these services.

All potential energy saving measures will be evaluated on a
building-specific basis. Typical measures are evaluated and installed if
cost-effective, as well as custom measures which may only be applicable
to a particular building. Typical measures include new efficient
lighting equipment, refrigerators, and measures included in the AMP
program. In electrically heated buildings, typical measures would also
include insulation, air sealing, and thermostats.

***f) Consistency with DOER's Priority Setting Goals***

A discussion of how the Companies' Low-Income programs meet both the
Threshold Goal and the Priority-Setting Goals can be found at the end of
this Section.

**3. Program Evaluation and Market Research**

The Companies are currently conducting a process evaluation of their
Single Family, Multi-Family and New Construction programs. The
evaluation will address barriers unique to each of the above three
program markets. One of the goals of this evaluation is to use the
results of this evaluation to inform the decisions being made pertaining
to a statewide Low-Income program. An impact evaluation is currently
planned for these programs, however, the Companies will work with LEAN
to determine if these funds would be better suited to other evaluation
efforts given the statewide effort being performed to revise the
existing program. For example, LEAN has requested that the utilities in
the state assess non-energy benefits such as arrearage reduction and the
avoidance of termination/reconnection costs.

**4. Performance Goals, Metrics and Incentives**

The overall program goal of all the low-income programs is to provide
comprehensive weatherization, energy conservation and education services
to low-income customers in order to reduce their energy burden; make
utility bills more affordable, houses safer and more comfortable, and
reduce arrearages; improve low-income customers' standard of living; and
to provide these services in partnership with the local WAP agencies.

A specific objective for the next three years is to work on coordinating
the Companies' low-income program with those of the other electric and
gas utilities in Massachusetts through LEAN.

For metrics specific to the Low-Income Multi-Family Program, see Table
XXX in Section II of this plan.

**5. Proposed Budget**

The budgets for the Low-Income Multi-Family program for year 2000:

1.  Boston Edison \-- \$\_\_\_\_

2.  Cambridge Electric \-- \$\_\_\_\_

3.  Commonwealth Electric \-- \$\_\_\_\_

Please refer to Table YY in Section II of this EEP for the program
budget for each Company, broken out by the sub-categories specified by
the DOER.

**6. Program Cost-Effectiveness**

The cost-effectiveness test for this program includes an amount that
reflects the Companies' best estimate of the specific benefits that
accrue from the implementation of comprehensive energy efficiency and
education programs for low-income customers. The Low-Income Multi-Family
program is consistent with the threshold goal regarding
cost-effectiveness because the benefit/cost ratio is greater than 1.0.
See Section II for details on program cost-effectiveness.

BCR ratio for each of the Companies :

1.  Boston Edison \-- \_\_\_\_\_\_

2.  Cambridge Electric \-- \_\_\_\_\_\_

3.  Commonwealth Electric \-- \_\_\_\_\_\_

#### CONSISTENCY OF THE LOW-INCOME PROGRAMS WITH DOER'S GOALS

***Consistency with DOER's Threshold Goal***

The threshold goal: *"to provide funding for energy efficiency services
for low-income ratepayers at the levels directed by the
\[Restructuring\] Act"* will be met by the Companies' Low-Income
Programs. The contribution from all ratepayers (at a rate of 0.25 mill
per kWh to be used for funding energy efficiency services to low-income
people) will be spent on the Companies' low-income customers.

***Consistency with DOER's Priority Setting Goals***

This program also meets several of the priority goals set by DOER.

-   Goal -- *Allocate funds equitably*: The Low-Income programs ensure
    that energy efficiency funds are allocated equitably among customer
    classes by allocating to low-income customers that amount set by the
    Legislature for that customer class.

-   Goal -- *Support capturing lost opportunities*: These programs
    capture lost opportunities, since low-income customers would not be
    able to install energy efficiency measures on their own, and all of
    these opportunities would otherwise be lost. In general, low-income
    consumers tend to purchase the lowest-cost (and most often the least
    efficient) products available on the market. In addition, the
    Low-Income New Construction program is a lost opportunity program in
    the traditional sense.

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-   Goal -- *Give due emphasis to statewide or regional market
    transformation*: Because these programs are coordinated with all
    Massachusetts electric and gas utilities as well as the WAP
    agencies, they meet the goal of emphasizing statewide initiatives.
    Wholesale purchases of energy efficient appliances and products such
    as refrigerators and lighting fixtures and bulbs, and insulating and
    sealing materials, further the transformation of markets for these
    products by increasing production and lowering costs in the
    marketplace.

-   Goal -- *Use competitive procurement processes and foster
    development of competitive markets for energy efficient products*:
    Products installed through these programs are obtained through
    competitive procurement, thereby meeting the goal of utilizing
    competitive processes to the extent practicable and fostering
    markets for energy-efficient products.

-   Goal -- *Balance short- and long-term reductions in customers'
    energy costs*: These programs reduce considerably the customers'
    energy costs -- both in the short- and long-term. The customers see
    immediate and long-term savings on their electric (and often gas or
    oil) bills. Through bulk purchases of energy efficient appliances
    and other products, the programs stimulate reduction in the costs of
    these products in the long term.

1.  Goal -- *Optimize cost-effectiveness*: The Low-Income programs
    optimize cost-effectiveness, because energy efficiency and education
    services to low-income customers provide value not only directly to
    these customers, but also to all other ratepayers as well as society
    as a whole. There should be demonstrated reductions in arrearages,
    disconnections and reconnect costs, uncollectibles and collection
    costs, and utility administration costs. In addition, these programs
    will improve the lives of the low-income families who participate,
    increasing safety, health, and comfort. Medical and fire costs will
    be lowered, as will homelessness and its costs.

##### Attachment 3

**Connecticut utility low-income efficiency program designs**

(Connecticut Light & Power Co.)

**CL&P's Special Needs Programs: Residential**

**Low Income**

The residential low-income weatherization efforts are being expanded to
include an added focus on reducing barriers to participation (Energy
Care Initiative) and avoiding lost opportunities in the new construction
market (Low Income New Construction Initiative, which is described in
the section on Residential New Construction). The nationally recognized
WRAP program will continue and leverage its efforts with these other,
new low-income initiatives.

**ENERGY CARE INITIATIVE**

*Strategic Initiative:*

Special Needs -- Expansion of Intake to begin in 2000

*Target Market:*

Customers whose income is below 200 percent of the federal poverty
level, and for whom the energy burden (percent of total annual income
spent on energy) is high. (A study published in January 1995 by the
National Consumer Law Center shows that in Connecticut, in 1992, the
average energy burden for persons with a median income was just under 4
percent; for customers earning the minimum wage, the burden was nearly
17 percent; for those on SSI, it was 16 percent.)

Target low-income customers for whom other factors interfere with their
being able to take advantage of conservation services. For example:
limited literacy or competency; limited education; age; physical or
mental disabilities; people returning to the community from group homes,
prisons, and shelters. Also group living settings, such as residential
treatment facilities, group homes, half-way houses, and shelters.
Agencies that have responsibility for people with competency issues,
such as the following: hospital and treatment center outpatient,
discharge planning and social service departments; local social service
agencies; Department of Social Services (DSS); Department of Public
Health; Department of Mental Health and Addiction Services; Department
of Children and Families; Department of Mental Retardation; Community
Partners in Action; the Corrections Department; nursing homes; senior
centers; and nutrition sites.

In addition to the market barriers associated with all low-income
customers (lack of funds for conservation, lack of information, split
incentives, other more important issues like food and health care),
these customers may have mental or physical impediments that affect the
customers' ability to follow through on appointments or budget planning,
or lack the requisite skills to take advantage of opportunities
available. Fear of strangers or apprehension about letting contractors
into the home may also play a role.

*Services Offered:*

This is an intake service that will provide low-income customers with
information about and access to various programs through a simple-to-use
screening tool and referral service. Intake will be conducted by several
entities including CL&P's Community Relations staff, the Special
Assistance group within CL&P's Credit Department, Community Action
Agencies, Infoline, and a human services agency. *(If details are
negotiated and differences in eligibility and/or services available are
embedded in the screening tool, UI could participate in this intake
initiative and then provide approved services to eligible customers in
its service territory.*)

The programs available to customers through this initiative include:

-   WRAP, NU Start, and Energy Conservation and Budgeting Workshops.

-   Credit counseling and energy use education.

-   If they ask, customers will also be provided with information on the
    restructured electric market, including their options with respect
    to aggregation, energy brokers, and choices available to them.

-   Training will be provided to managers of group living settings
    through workshops, education and information, in order to prepare
    their clients to make wise energy decisions upon moving into their
    own homes, as well as to use energy efficiently in the group
    settings.

-   CL&P will provide increased levels of training to CAA staff through
    workshops and educational materials, as well as providing the
    screening tool to facilitate the intake process. The CAAs will
    provide energy education at the time of audit or needs assessment
    within the WRAP program.

-   CL&P will provide the screening tool to Infoline to supplement the
    information Infoline provides on the Company's programs. (Infoline
    currently takes over 12,000 calls from clients regarding utility
    services, including energy assistance, disconnects and arrearages.
    Infoline provides information, refers the callers to the appropriate
    utility, provides some counseling, and does some follow-up to ensure
    that the callers received appropriate services.)

-   CL&P will also provide any needed training to Infoline staff on use
    of the screening tool as well as on program offerings and services
    available to customers.

For year 2000, the plan is to initiate a pilot that will target one
human service agency for more intensive outreach, while still making
services available through all the other entities mentioned above. In
addition, as part of the pilot, Infoline will provide additional
outreach and case management services to elderly identified for WRAP
services.

*Marketing Plan:*

[Program objective]{.underline}*:* Increase participation by low-income
customers in the Company's WRAP program and in other programs designed
to lower the energy burden faced by this population. Expand the role of
the CAAs to increase outreach and provide additional direct services to
low-income customers. Involve a human service agency in the referral and
follow-up process.

The goal for year 2000 is to increase participation in the WRAP program
from 4000 to 6000 customers (including weatherization of 1000
fossil-fuel-heated homes).

[Communications strategy]{.underline}:

-   Take advantage of the broad awareness among Connecticut citizens of
    the availability and expertise of Infoline; build on a
    well-established, highly respected organization. Build on Infoline's
    visibility and marketing of the 211 emergency help telephone number.

-   Expand outreach to CAAs, social service agencies, mental and public
    health agencies and other human service providers to disseminate the
    information necessary to reach the target market.

-   Fund a toll-free telephone line at CL&P Special Assistance Unit
    which is staffed by knowledgeable people;

-   Expand the Special Assistance Unit within CL&P's Credit Department
    to answer the telephone line, and provide coordination and follow-up
    services;

-   Develop an Internet site that can provide information on all payment
    assistance, energy conservation and education services available to
    the target population;

-   Community Relations staff will up-date the web site and develop
    supporting materials;

-   Use radio ads and bus posters to reinforce the message;

-   Simplify the message delivered to all entities and to the target
    low-income population to maximize understanding, and therefore
    participation.

    [Key messages]{.underline}: For low-income customers struggling to
    make ends meet, the message will be that there is help available at
    no cost to them that can lower the energy burden they face, make
    utility bills more affordable, and increase comfort and safety in
    their homes. This help is easy to access, and people in their
    communities are going to provide it. In addition, the message that
    saving energy helps protect the environment will be included in the
    communications strategy.

    For the human service agency, the message will emphasize the
    benefits of referring clients to CL&P's low-income programs: Lowered
    energy burden; more money available for life's other necessities;
    better control over at least one aspect of their lives; and safer,
    more comfortable housing.

    [Tactics by target audience]{.underline}: Whether a referral comes
    through Infoline, a CAA, or another human service agency, the
    Company will emphasize the fact that customers (and human service
    agency personnel) will only have to deal directly with a specialized
    team within the Company: the Special Assistance and Community
    Relations staff who will assist them. That team will ensure that all
    appropriate services -- from payment plans, arrearage forgiveness,
    education, and credit counseling through energy conservation -- will
    be delivered with minimum of hassle to the customer.

    *How Delivered:*

    The enclosed flow chart \[unavailable\] entitled "Pilot Low Income
    Program Service Delivery Process" shows how and by whom services
    would be delivered. It also shows how shows how referrals will come
    into the tracking system, and how follow-up and evaluation will take
    place.

    [Human Service Agencies]{.underline}

    CL&P will provide the screening tool and training to participating
    organizations and agencies. Because the offered services will
    supplement what is currently provided, those traditionally provided
    by the human service agencies will be funded by CL&P, no funds will
    flow from CL&P to these agencies.

    [Infoline]{.underline}

    An agreement between CL&P and Infoline will be finalized that
    recognizes Infoline's expertise in utility services, outreach intake
    capabilities, in order to provide expanded energy-related services
    to the target population, and to maximize benefits for participants
    in those services. The agreement will encompass the following
    provisions:

-   Infoline staff will expand the information they provide to callers
    regarding the Company's programs, based on the screening tool;

-   Infoline will identify callers as potential recipients of all
    energy-related services, including WRAP, NU Start, budget billing,
    energy assistance, winter protection, other DSM services, and gas
    arrearage forgiveness;

-   Infoline will determine the level of assistance needed by a caller
    to access the identified appropriate services and will proceed
    accordingly:

1.  If a customer is illiterate, Infoline staff would prepare program
    applications for the caller's signature;

2.  Infoline staff will call CL&P Special Assistance or Customer
    Relations group to arrange necessary energy services;

3.  Infoline will call a CAA for energy assistance help or refer the
    caller to the local CAA;

4.  Infoline will refer the caller to another human service agency; and

5.  Infoline will provide more extensive follow-up.

-   CL&P and Infoline will develop a computer tool for Infoline that is
    compatible with CL&P's computer system to track clients and enable
    follow-up and evaluation;

-   Infoline will follow up with callers to ensure delivery of services
    and provide additional support when necessary; and

-   Infoline will enter caller information in a database that includes
    such information as eligibility level, services and/or agencies
    referred to; services delivered or reasons for non-delivery.

    For the 2000 pilot program, Infoline will provide an enhanced level
    of services to some customers. Infoline will refer these families to
    all appropriate and necessary energy-related services, and will
    provide close follow-up to ensure that they receive what they need.

    [Community Action Agencies (CAAs)]{.underline}

    An agreement between CL&P and each of the CAAs will be finalized
    that spells out the expanded intake role of the CAAs going forward,
    as follows:

-   CL&P will provide the screening tool and training in its use to the
    CAAs;

-   Working with the CAAs, CL&P will develop educational materials to be
    provided to customers at the time of audits and installations by
    CAAs or subcontractors. Education will focus on the end uses that
    require the highest electricity use in each home, including
    lighting, cooking, heating, cooling, and appliances. Customers will
    be informed about the best ways to manage these uses more
    efficiently;

-   CAAs will expand their outreach activities in order to increase
    participation by customers not traditionally served;

-   CAAs will refer customers, if eligible, to CL&P for appropriate
    payment assistance, NU Start, winter protection, or non-WRAP DSM
    services if not eligible for WRAP; to WRAP for weatherization and
    comprehensive energy efficiency services if eligible; and/or to the
    appropriate human service agency for non-energy-related services;

-   CAAs will provide energy assistance if a customer is eligible;

-   CAAs will deliver Expanded WRAP services (described under WRAP
    program, below) once they receive work orders from the WRAP Unit;

-   CAAs will enter customer information in a database, including
    services and agencies referred to;

-   CAAs will follow up all referred customers with telephone calls or
    home visits, if necessary, to ensure appropriate service delivery.

    [CL&P]{.underline}

    Community Relations staff will be the central, coordinating point
    for this expanded intake initiative. They will work with the Special
    Assistance Unit, human service agencies, Infoline, and the CAAs to
    monitor delivery of energy-related services to this vulnerable
    population of customers. Specifically:

-   Working with Infoline and the CAAs, Community Relations staff will
    develop a simple-to-use screening tool for affected agencies to use
    to access services, and will provide training and supporting
    materials for its use.

-   Community Relations staff will provide follow-up directly or through
    the WRAP Unit to ensure that applicable conservation and education
    services are delivered;

-   Community Relations staff will closely coordinate with Special
    Assistance staff in order to help customers work out a budget or
    arrearage forgiveness plan, or develop other innovative strategies
    to help people pay their electric bills, if necessary, while
    conservation and education services are provided to lower those
    bills;

-   Community Relations staff will conduct workshops and meetings,
    provide training sessions and materials, conduct surveys, review,
    evaluate, assess, and refine strategies, to ensure that the
    initiative is being successfully implemented;

-   Community Relations staff will keep the Internet site up-to-date;

-   Special Assistance staff will provide knowledgeable coverage for the
    toll-free telephone line.

    *Budget:* \$5,130,000 for Energy Care and WRAP combined (see below)

    *Measuring Success:* Program participation will be tracked by
    Infoline, the CAAs, WRAP, and CL&P Customer Relations. A process
    evaluation will be conducted beginning six to twelve months into
    2000, so that any major problems can be identified and corrected
    early on in program delivery, with continuing process evaluations at
    the end of years one and three.

    **WRAP** **(WEATHERIZATION RESIDENTIAL ASSISTANCE PARTNERSHIP)**

    *Strategic Initiative:*

    A Special Needs program begun in 1990, expanding in 2000

    *Target Market:*

    The target population for the WRAP program consists of customers
    with an annual income below 200 percent of the federal poverty
    level, in single or multifamily homes, regardless of fuel used for
    heat. In Connecticut, approximately 100,000 to 150,000 households
    fall into this category. (The number changes with changes in the
    economy.) Of these, approximately 36,000 have been identified as
    "hardship" customers who receive protection from disconnections
    during the winter months. These customers have a high energy burden
    (often more than double or triple) compared to other customers.

    For year 2000, eligibility criteria will be simplified, and all
    customers who meet the income requirements will be eligible for some
    services. An assessment of which measures are cost-effective for a
    particular house will be made at the time of audit. NU Start program
    participants are offered WRAP services at the time of their
    enrollment in NU Start in order to lower their energy burden and
    reduce the chances of their becoming delinquent again. Eligible
    customers will receive credit counseling and energy use education,
    as appropriate.

    This market requires more assistance in obtaining energy efficiency
    services than does the general residential customer sector for
    several reasons. Specifically, many low-income households can be
    characterized by the following assumptions:

-   Little cash and no available credit to fund high first cost of
    energy efficient products;

-   Often residing in older, poorly insulated, energy-inefficient
    housing;

-   Limited time or education and therefore ability to learn about
    energy efficient technologies or benefits;

-   Intense focus on needs for survival, leaving little time to focus on
    efficiency benefits;

-   Difficult to reach;

-   Likely to be renters not in control of large appliance purchases or
    whole-building measures;

-   High energy burden compared to higher-income customers;

-   Often experience payment, arrearage and/or disconnect problems.

    *Services Offered:*

    WRAP offers a full range of energy conservation measures to address
    inefficient lighting, general waste heat, water heating, inefficient
    heating equipment, refrigeration, and insufficient insulation.
    Measures include (where cost-effective) CFLs, lighting fixtures,
    water heater wraps or replacement, heat pump water heaters, low-flow
    showerheads, low-flow faucet aerators, waterbed insulated covers,
    door sweeps, thermostats, weatherization and insulation, energy
    efficient refrigerators and freezers, broken window replacement, and
    burner and furnace replacement.

    Refrigerators are the single biggest power consumers in most
    households. A typical refrigerator made around 1990 uses over 900
    kilowatt hours per year, which is approximately the same amount of
    energy that would be used by leaving a 1,250 watt hairdryer on for a
    month. Energy Star refrigerators, however, incorporate several
    advanced features including better insulation, more efficient
    compressors, improved heat transfer surfaces and more precise
    temperature mechanisms. The Company will install Energy Star
    refrigerators in at least one-quarter of the homes served through
    WRAP.

    Comprehensive energy use education will be provided to every
    household visited, and budget management and counseling will be
    provided when needed and requested. CL&P also sends a newsletter
    ("Help Line") with energy education, conservation tips, safety
    information, and other useful resource listings to participants and
    other low-income customers. Finally, CL&P provides training for the
    network of CAAs that deliver the direct services.

    In 2000, CL&P may explore a pilot program to install solar hot water
    heaters -- perhaps coordinated with the Renewable Energy Fund, in
    low-income households. Such a program has been proposed in
    Pennsylvania. Another possible addition to the program is the
    installation of solar water heating or rooftop photovoltaics (PV) in
    conjunction with the DOE's "Million Solar Roof" initiative.

    *Marketing Plan:*

    [Program objective]{.underline}*:* To provide comprehensive
    weatherization, energy conservation and education services to
    low-income customers in order to reduce their energy burden; make
    utility bills more affordable, houses safer and more comfortable,
    and reduce arrearages; and to provide these services in partnership
    with the local CAAs.

    Specific objectives for year 2000 include the following:

-   Increase the number of low-income homes served through WRAP from
    4000 to 6000;

-   Included in the 6000, provide 1000 fossil-fuel heated homes with
    weatherization as well as all appropriate electric energy-saving
    measures;

-   Provide one-quarter of the households with new, energy-efficient
    refrigerators;

-   With every audit, provide energy use education and information on
    opportunities for saving energy through changing appliance usage and
    practices;

-   Provide credit and budget counseling when appropriate; follow up
    with telephone calls and visits to ensure persistence of savings and
    reinforce education.

    [Communications strategy]{.underline}: Overall, the strategy is to
    use as many avenues as are practical and efficient to market the
    WRAP program. The primary new marketing tool for 2000 will be the
    Energy Care initiative described above which will entail a simple
    screening tool to be used by the CAAs, Infoline, and the human
    service agency network that works with the low-income population in
    Connecticut.

    [Key messages]{.underline}: The message for the WRAP program is the
    same as that for the Energy Care initiative: that there is free help
    available to lower the energy burden faced by low-income customers,
    to make utility bills more affordable, and to increase comfort and
    safety in their homes; this help is easy to access; and it will be
    provided by local people from their communities.

    [Tactics by target audience]{.underline}: In addition to the Energy
    Care activities described above, specific marketing tactics for
    low-income customers will include the following:

-   CL&P will send letters in coordination with DSS twice a year
    informing customers of their opportunity to participate;

-   CL&P will publicize the WRAP program in the newsletter "Help Line"
    it sends to low-income, elderly and disabled customers;

-   CL&P will re-institute its popular "Good Neighbor Energy Calendar"
    that provides energy tips and publicizes the WRAP program;

-   CL&P will provide bill inserts advertising availability of the WRAP
    program to eligible customers;

-   Customers who apply for payment assistance, NU Start, or credit help
    will be screened and, where appropriate, referred by the Special
    Assistance department to WRAP;

-   Customers who call the Company's toll-free telephone line or regular
    business line for assistance will be screened and referred to WRAP,
    if appropriate;

-   Callers (or human service agencies assisting customers) can access
    the screening tool over the Internet at CL&P's web site.

-   CAAs will do outreach within their communities and will screen and
    refer clients to WRAP who request other services the CAAs provide;

-   CAAs will screen and refer appropriate clients who apply for fuel
    assistance;

-   CAAs will conduct energy use and conservation workshops for the
    local population and refer interested attendees to WRAP.

[Marketing budget]{.underline}: \$253,000 for WRAP and Energy care
combined.

*How Delivered:*

The WRAP program coordinates CL&P-funded services with those funded by
the state and by the Department of Energy (DOE). Some services are
funded by Connecticut Natural Gas and Yankee Gas; these services are
also coordinated with this program. Such coordination enables CL&P to
leverage its outreach to the low-income community and to serve more
families. The flow chart presented in the description of the Energy Care
initiative delineates the delivery of services in the WRAP program,
since Energy Care is one of the primary intake points for WRAP.

[WRAP]{.underline}

The WRAP Unit (administrators of the program) also administers all of
the residential energy audits provided by Connecticut Natural Gas,
Southern Connecticut Gas, United Illuminating, Yankee Gas, and the major
oil distributors, which spreads the administrative costs over a large
number of entities.

An application is received by the WRAP Unit through any of the channels
described above or through the Energy Care initiative. The WRAP unit
forwards a work order to the appropriate CAA, according to where the
customer lives.

The WRAP unit provides training and workshops to the CAAs and auditors,
to provide consistency, quality, cost-effectiveness, and standardization
in that training.

The WRAP unit does bulk purchasing of refrigerators and other materials
such as lightbulbs, showerheads, aerators, waterbed covers, and water
heater wraps, in order to obtain discount pricing and assure quality.

The WRAP unit provides administrative simplicity and uniformity to
delivery of services to low-income customers across service territories.
Problem-solving is simplified and benefits from being able to
extrapolate to one area from experience in another.

The WRAP Unit sends questionnaires to participants as a measure of
quality control and to ensure consistency of service delivery among
CAAs. Responses that raise questions as to service delivery will result
in follow-up by the WRAP Unit to determine the cause of any problems and
to find solutions in coordination with the relevant CAA.

[CAAs]{.underline}

A CAA receives a work order from the WRAP unit and arranges for the
following listed services to be delivered by contractors who have won
the right to provide them through competitive bidding, or by the CAAs
themselves, as appropriate:

-   Conduct a fuel-blind energy audit of the household;

-   Identify causes of high electricity use related to lighting and
    appliances;

-   Identify solutions to high-use problems by working cooperatively
    with customers in their homes;

-   Install all cost-effective energy saving measures including those
    listed above;

-   Educate the customers on use and care of the measures to ensure
    continued savings;

-   Provide budget and credit counseling when appropriate and requested;

-   "Piggy-back" service delivery whenever possible to services being
    delivered through public or other utility funding, in order to
    reduce administrative costs as well as inconvenience to the customer
    through multiple home visits;

-   Conduct periodic energy conservation workshops to reinforce
    education provided during home visits.

CAAs will enter customer data into a database that is compatible with
CL&P's and Infoline's in order to track customer participation, measures
installed, and other services delivered.

CAAs will conduct follow-up visits to all households where major
measures were installed. CAAs will telephone others whose initial
referral came through the CAAs to ensure proper delivery of services by
the contractors and to reinforce the messages on reducing energy use
that were presented during the audits.

For those customers referred by Infoline, Infoline will follow up with
telephone calls to ensure that customers received the services they were
entitled to.

*Budget:* \$5,130,000 for WRAP and Energy Care combined (see above)

*Measuring Success:*

The use of a compatible computer system will enable swift and accurate
tracking of all participants in the WRAP program, no matter how the
referrals come in.

An independent contractor will conduct an evaluation in 2001 to measure
energy savings as well as efficacy of the education and counseling
components of the program in program year 2000. The contractor will
determine whether the goals for participation, lower energy bills, and
savings outlined above were met. The contractor will also assess
customer satisfaction levels with the program, analyze the structure and
service delivery system, and recommend changes that might increase the
efficiency of delivery, cost-effectiveness, and/or acceptance of the
program by the target population.

CL&P will track and analyze the number of disconnections of service to
participants, any decrease in the amount of arrearages owed by
participants, and the average monthly payments made by participants in
arrearage, in order to compare these data with information in the same
categories prior to the start of the program.

Based on the results of the impact evaluations described above, CL&P
will estimate the reduction in average energy burden faced by
participants.

6,000 households are targeted in year 2000, with 9,795 MWh targeted.

**Attachment 4**

Howat and Oppenheim, **\"Analysis of Low-Income Benefits in Determining
Cost-Effectiveness of Energy Efficiency Programs\"**

**ANALYSIS OF LOW-INCOME BENEFITS IN DETERMINING COST-EFFECTIVENESS OF
ENERGY EFFICIENCY PROGRAMS**

# John Howat

# Jerrold Oppenheim

# National Consumer Law Center

April 14, 1999

I.  [INTRODUCTION]{.underline}

    The benefits of investing in efficiency measures for low-income
    homes go far beyond the value of energy, capacity, transmission and
    distribution costs that are avoided as a result of the investments.
    Although some benefits are more readily quantifiable than others, it
    is certain that none of the benefits amount to zero. Accordingly,
    equity demands that all benefits be accounted for in some manner.

    Some of these non-energy benefits are relatively easy to quantify.
    Others will be quantifiable only by approximation and with
    difficulty. Still others will be extremely difficult to quantify in
    a meaningful way. We therefore suggest that, after reasonable
    efforts at quantification are undertaken, the focus be turned to
    development of an \"adder\" that encompasses all that has been
    learned without embarking on an endless search for unnecessary
    precision. Non-energy, non-environmental benefits can be computed to
    be at least equal to energy benefits, although we propose use of an
    adder that is much smaller.[^76] The non-energy benefits that have
    been identified include both utility benefits and societal benefits.

    This analysis follows two parameters. First, is that the benefits
    identified are in addition to general economic and environmental
    benefits which accrue to society as a whole. Using an incremental
    value analysis for low-income benefits results in a calculation that
    does not double count these broader benefits and results in values
    which are in addition to those values.

II. [UTILITY AND ENERGY SYSTEM BENEFITS]{.underline}

    Utility companies incur a range of costs that may be avoided through
    implementation of effective energy efficiency programs. Among the
    most quantifiable of these benefits are reductions in
    payment-related costs that utilities incur. In some cases, these
    represent transfer payments from non-low income customers to low
    income customers. These have value to reduce the negative effects of
    inter-customer transfers but generally should be excluded from a
    societal analysis. In addition, energy efficiency programs can serve
    to (1) reduce the number of emergency calls, and (2) from a utility
    perspective, retain customers who contribute to a utility company\'s
    fixed costs.

    A.  [Payment-Related]{.underline}

        This section thus examines the effect that energy efficiency
        programs can have on mitigating the broad range of costs that
        utilities and their ratepayers incur as a result of unpaid bills
        by low income customers. Although these costs exist in unpaid
        bills by non low income customers, the burden falls most heavily
        on low income customers where bill payment is related to ability
        to pay and therefore can be effected by energy cost reductions.
        These benefits have been excluded from calculation of general
        non-energy benefits to avoid duplication. These costs include
        arrearages and late payments,[^77] bad debt,[^78] credit and
        collection expenses,[^79] termination and reconnection
        costs,[^80] negotiation of payment plans,[^81] and regulatory
        expenses.[^82]

        Literature review reveals considerable variability in the
        estimates of payment-related benefits stemming from utility DSM
        programming.[^83] Further, some of these costs and the
        mitigation benefits associated with energy efficiency programs
        have not been quantified. We use the information available to
        develop an appropriate range of adders where feasible and
        provide qualitative discussion in those instances where benefits
        have not been well quantified.

        Effective programming may include not only the installation of
        measures to enhance efficiency and comfort, but also counseling
        and other informational assistance geared toward removing
        barriers to prompt payment. In comprehensive low-income energy
        programs, both installation services and information services
        are provided to customers to increase their ability to reduce
        and manage their energy-related budgets. For example, Wisconsin
        Public Service Co. found that adoption of a system of Customer
        Assistance Advisors resulted in maintenance of write-offs at
        around 0.25 percent of revenues, compared to an industry average
        of 0.51 percent. In addition, disconnections dropped to 24 per
        10,000 compared to an industry average of 422 (and its own
        previous rate of around 120 per 10,000).[^84]

        Further, the Wisconsin study found that the majority of
        customers in arrears want to pay their bills but lack the
        resources and/or skills to successfully achieve this. In
        addition, researchers discovered that: (1) it is in the
        utility\'s best interest to begin discussions with customers
        before arrearage problems get too large, (2) individualized
        attention to the customer is very important, and (3) the utility
        can achieve positive results by assuming a \"service agency\"
        role and provide assistance to customers in bill management and
        payment.[^85]

        1.  [Reductions in arrearages and late payments]{.underline}

            Although it is widely understood that the energy cost burden
            on low-income households is proportionately three to four
            times greater than the burden on non-low-income
            households,[^86] studies show that less than one half of
            utility arrearages are actually attributable to low-income
            customers.[^87] Effective energy efficiency programming
            targeted to low-income households in arrears can ease the
            financial burden and thereby increase the ability of
            low-income families to make utility payments.

            There are two components of costs related to unpaid utility
            bills. One is the cost of non-payment of bills that is
            recovered through rates. This is a transfer payment from a
            societal point of view, but a benefit from the utility and
            ratepayer perspectives (Energy System Test). All items that
            might be considered transfer payments from a societal point
            of view are so indicated in the attached table by an
            asterisk. The second is the administration of these
            non-payment-related activities (shut-offs, payment plans,
            etc). These costs can be avoided through low income
            weatherization and therefore represent an economic benefit
            to the overall regulated energy system.

            Despite the fact that less than one half of total arrearages
            have been found to be attributable to low-income customers,
            the arrearage reduction benefits associated with energy
            efficiency programs should be tabulated in the cost
            effectiveness analysis of low-income programs. Low-income
            customers are more likely to be in arrears due to lack of
            funds with which to pay utility bills than are
            non-low-income customers. Since studies show these customers
            want to pay their bills if they can,[^88] DSM measures that
            release funds are more likely to result in arrearage
            payments from low-income customers than from others. Thus,
            DSM programming designed to reduce consumption and thereby
            free up funds that may be applied toward outstanding bills
            is more likely to be successful when targeted to low-income
            households.[^89]

            Quantification of the scale of arrearage reduction and
            therefore the benefits associated with reducing related
            administrative costs has been accomplished through survey
            analysis of participating and non-participating households.
            A review of studies of arrearage reduction benefits
            conducted for the Boston Edison Settlement Board by the
            Tellus Institute indicates that energy efficiency programs
            generate reductions in arrearages ranging from \$0 to \$469
            per participating household.[^90] In the \"Progress Report
            of the National Weatherization Assistance Program,\" for
            example, the authors found a reduced arrearage value of \$32
            per weatherized low-income household relative to program
            costs of \$1,550.[^91] These actual arrearage reductions
            represent a transfer payment when they are written off as an
            uncollected debt. However, the administrative costs with the
            collection costs may be substantial, **generating a
            non-energy adder of 2.1 percent.**

            Similarly, a recent study of a Pacific Gas and Electric
            low-income weatherization and education program found that
            reduced carrying charges on arrearages range between \$4 and
            \$63 per weatherized household. Based on reported program
            costs of \$719 per weatherized household, **a non-energy
            benefit adder range of 0.6 percent and 8.8 percent is
            justified.**[^92]

        2.  [Reductions in uncollectibles and bad debt
            write-offs]{.underline}

            A number of studies demonstrate that utility DSM and
            customer relations programs significantly reduce the level
            of utility uncollectibles and bad debt write-offs. Such
            programs also cut costs associated with collection,
            termination and reconnection, negotiation and administration
            of payment plans, tracking hardship accounts, other
            administration, regulatory response, and complaint
            resolution.[^93]

            In Colorado, for example, write-offs dropped 18 percent at
            weatherized homes. Further, arrearages dropped 26 percent,
            emergency gas assistance calls dropped 74 percent, and bills
            were reduced 22 percent. Total annual benefit to the utility
            is estimated at \$30.56 per participating household on a
            \$2417 per household cost, not counting reductions in
            complaints and collection costs, increases in comfort and
            health, and increases in discretionary income.[^94] The
            present value of these benefits is \$204.72 per
            participating household.[^95] **The Colorado reduction in
            payment-related costs thus generated a non-energy benefit
            adder of 8.47 percent**.

            Another study found that all benefits associated with
            reduced uncollectibles range between \$16 and \$58 per
            weatherized household.[^96] With the reported total program
            cost of \$719 per household, **this benefit estimate
            produces a range of avoided cost adders of 2.2 percent to
            8.1**.

            These are transfer payments from a societal point of view
            and benefits from a utility/ratepayer perspective.

        3.  [Reduced Collection Costs]{.underline}

            In a 1994 analysis, Roger Colton found that utility
            companies incur significant costs associated with collection
            activities, including telephone contacts and premise visits
            with customers. He further found that implementation of
            low-income DSM programs generates substantial utility
            collection-related expense savings.[^97] In testimony before
            the Pennsylvania Public Utilities Commission, Columbia Gas
            Company reported the following costs associated with each
            instance of the various collections activities:[^98]

  ----------------------------------------- -----------------------------
  **Activity**                              **Cost**

  Telephone Contact                         \$ 1.28

  Premise Visit                             18.09
  ----------------------------------------- -----------------------------

This table does not reflect the costs associated with collection and
credit agency fees. Since these entities usually work on a commission
basis, it may be assumed that the costs reflected in the above table
would be higher were collection agency fees to be included.

Colton\'s analysis does not include estimates of program costs that
would be incurred to mitigate the reported collection expenses. We
therefore do not provide an estimate of an adder to be applied to the
non-energy benefits identified by Colton.

1.  [Reduced Termination and Reconnection Costs]{.underline}

    Another set of utility and ratepayer costs avoided through
    implementation of DSM programs is the processing and distribution of
    shutoff notices, as well as the disconnection and reconnection of
    customer accounts. The table below is based on the Pennsylvania PUC
    testimony mentioned above, and reflects the costs associated with
    each instance of the reported activity.[^99]

  ----------------------------------------- -----------------------------
  **Activity**                              **Cost**

  Shutoff Notice                            \$ 0.75

  Disconnection                             21.92

  Reconnection                              43.84
  ----------------------------------------- -----------------------------

The identified costs refer only to those incurred by the utility
company, and not to the customer\'s costs. As noted previously, Colton
does not estimate the program costs that would be incurred to mitigate
the reported collection expenses. We therefore do not provide a
non-energy benefits adder based on his analysis.

However, Skumatz, *et al*. quantified avoided utility costs that may be
generated through implementation of DSM programs, including notices,
customer calls, and termination and reconnection costs. The Skumatz
study reported these costs to range between \$2 and \$12 per weatherized
household.[^100] Under their reported total program cost of \$719 per
household, **a range of avoided cost adders of 0.3 percent to 1.1
percent accounts for this set of non-energy benefits**.[^101]

1.  [Reduced Costs of Negotiation, Administration of Payment Plans,
    Complaint Resolution and Tracking]{.underline}

    The Columbia Gas Company reported that it incurs significant costs
    in negotiating payment plans with individual customers.[^102]
    Accounting for time of customer service representatives and clerical
    worker along with associated overhead, Columbia Gas estimated that
    in 1989 it incurred a cost of \$14.64 for each individual payment
    plan negotiation.[^103] To the extent effective utility DSM programs
    make bills more affordable, they simultaneously reduce the need for
    utility companies to incur costs associated with payment plan
    negotiation. However, we do not have sufficient data to calculate an
    adder for this non-energy benefit category.

2.  [Reduced Regulatory Costs]{.underline}

    Utilities incur regulatory costs in dealing with payment-related
    problems. Such regulatory expenses in this context include the
    portion of rate cases devoted to issues generated by inability to
    pay, rulemaking attention to payment-related issues, and regulatory
    attention to individual complaints.[^104] Effective utility DSM,
    customer relations and customer education programs reduce these
    costs. Due to insufficient data, we do not attempt to quantify this
    benefit at this time.

3.  [Reduced Rate Discount Payments]{.underline}

    Many utility companies offer reduced or negotiated payment schedules
    for customers with limited ability to reduce overdue balances or
    make full and prompt bill payments. Increasing customers\' ability
    to pay through enhanced end-use efficiency and education regarding
    available social services reduces the foregone revenues associated
    with reduced rate discounts. Further, as a low-income household\'s
    consumption decreases as a result of implementation of DSM measures,
    low-income discounts paid by all of the service territory\'s
    ratepayers also decrease. The Skumatz study includes an estimated
    range of \$42-270 per weatherized household to account for this
    non-energy benefit.[^105] Based on reported program costs of \$719
    per weatherized household, **an adder of 5.8 percent - 37.6 percent
    is appropriately applied to cost-effectiveness testing**.

    This may be a transfer payment from a societal point of view and a
    benefit from a utility/ratepayer perspective.

4.  [Avoidance of Decreased Sales/Maintenance of Contributions to Fixed
    Costs]{.underline}

    Niagara Mohawk\'s Affordable Payment and Arrearage Forgiveness
    Program was designed with the objectives of improving both relations
    with \"payment-troubled\" customers and company profitability. The
    Program\'s goals were to increase the regularity and total amount of
    payments by participating customers, increase the use of available
    assistance through programs such as the Low-Income Home Energy
    Assistance Program (LIHEAP), decrease the number of collection
    actions for participating customers, and eliminate arrearages of
    participating customers. The program reduced billing shortfalls and
    bad debt write-offs while retaining customers paying a portion of
    their monthly bills.[^106] Evaluators noted that as an alternative
    to the program, the company could terminate service to customers
    with payment problems. However \"...from an economic perspective, as
    long as customers can cover variable costs, it makes economic sense
    to serve them.\"[^107] Fixed costs are incurred whether or not a
    customer consumes electricity. Maintaining a customer who pay enough
    to cover all allocated variable costs plus makes some contribution
    to fixed costs contributes more to net income than does termination
    of service to that customer. This is similar to the rationale for
    economic development rates for industrial customers.

    Thus, as long as negotiated customer payments combined with payment
    assistance exceed variable costs, there is a utility and ratepayer
    benefit generated from incremental contributions to fixed costs.
    However, we currently lack sufficient data to quantify this
    additional benefit, which is a transfer payment from a societal
    point of view but a benefit from a utility/ratepayer perspective.

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A.  [Reduced Emergency Calls]{.underline}

    1.  [Gas]{.underline}

        Several analysts have assessed the health and safety impacts of
        low-income weatherization and DSM programs. Many low-income
        households have old and poorly maintained space and water
        heating systems that present health and safety risks.

        For example, a 1997 evaluation of Louisville Gas and Electric
        Company\'s Energy Partners Program[^108] conducted by Proctor
        Engineering Group included a tabulation of the frequencies of
        various health and safety problems encountered by program
        personnel.[^109] Among participating households, 23 percent had
        gas leaks, 26 percent had inadequate draft for space or water
        heaters, nine percent had high carbon monoxide levels (100-400
        ppm), seven percent had very high carbon monoxide levels (over
        400 ppm), and one percent had very high carbon monoxide levels
        and inadequate draft on the same appliance. The report
        characterized the combination of very high carbon monoxide
        levels and poor draft as a \"potentially lethal safety
        problem,\" and noted that the program provided significant
        health and safety benefits to participants by reducing the risk
        of illness or death from high levels of noxious combustion
        gasses, fires, and explosions resulting from gas leaks.[^110]

        In addition to mitigating costs directly associated with illness
        or death as noted above, effective DSM programming that includes
        maintenance and repair of space and water heating appliances
        reduces the need for gas utility companies to incur costs
        associated with making emergency calls to deal with potentially
        hazardous problems. Public Service Colorado estimated this
        savings to average nearly \$16 per weatherized household during
        the first year after delivery of weatherization services.[^111]
        Skumatz estimated the value over time of utility benefits
        associated with fewer emergency gas calls to range between \$84
        and \$170, **resulting in an adder range of 11.6 percent to 23.6
        percent**.

    2.  [Electric]{.underline}

        While gas service calls have the most significant impact on
        energy system costs which can be avoided as the result of DSM
        programs, the electric distribution utilities have some added
        costs in responding to customer requests which result from poor
        quality or malfunctioning electric systems. Unsafe and hazardous
        conditions as well as disputes in payment between owner and
        renters often results in service calls which can be avoided as
        the result of a well planned and executed energy efficiency
        program. There has been little hard analysis on the exact costs
        of these services but they are certainly a component in the
        overall cost of service.

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I.  [SOCIETAL BENEFITS]{.underline}

    In addition to generating benefits associated with direct energy
    savings and savings to utility ratepayers and shareholders, utility
    low-income DSM programs generate a range of benefits to society at
    large. However, societal benefits are often very difficult to
    quantify. Some societal benefits may be considered \"transfer
    payments\" among sectors within society, thus raising questions
    about the application of certain quantified benefits in
    cost-effectiveness testing while others clearly represent costs
    avoided by some sector of society (either public or
    charitable).[^112]

    Among societal benefits are the following: (1) incremental economic
    development associated specifically with delivery of DSM services to
    low-income households; (2) maintenance of the real estate tax base
    and reduction of public expenditures associated with delivery of
    medical, firefighting and fire prevention, and social services;
    operation of homeless and housing programs; and unemployment
    payments; (3) increased equity; and (4) benefits to low-income
    people, including housing, reduced moving and homelessness,
    maintenance of utility services, improved property values, and
    improved health. We deal with each of these benefit categories
    below.

    A.  [Incremental Economic Development]{.underline}

        Investments in energy efficiency lower consumer energy
        expenditures, thereby allowing increased spending in other
        sectors of the economy. While specific changes in total
        employment generated by energy efficiency expenditures depend on
        the structure of a local or regional economy, research has
        generally demonstrated that increased non-energy expenditures
        produce net employment gains as well as other contributions to
        economic well being.[^113] These have been incorporated into the
        general economic benefit calculations made to support a general
        economic adder.

        Energy expenditures typically represent cash outflows from a
        regional economy. Efficiency-based expenditure reductions are
        generally redirected in a manner that, particularly after
        accounting for multiplier effects, produce significant net
        employment and income gains. Further, the electric and gas
        utility industries, as well as the oil and gas mining
        industries, are among the most capital-intensive in the economy.
        Redirecting expenditures away from these industries and toward
        more labor-intensive sectors, such as retail trade or services,
        results in total employment and income gains.[^114]

        There is an incremental economic development benefit associated
        with energy efficiency investment in low-income households.
        Accepted macroeconomic theory holds that, as income declines
        there is an increasing propensity to spend and a proportionate
        decreasing propensity to save.[^115] Therefore, in the case of
        low-income households, all savings stemming from energy
        efficiency improvements are likely to be immediately redirected
        into the local economy. Higher income households are more likely
        to save a portion of the savings, thus reducing the economic
        \"ripple effect\" that re-spending would create. To our
        knowledge, this incremental economic development benefit has not
        been quantified, so we treat it in a qualitative manner for the
        purposes of this analysis.

    B.  [Public Funds]{.underline}

        Utility DSM programs reduce the need for a wide variety of
        public expenditures. Below, we review the positive effects that
        DSM programs have on public expenditures in the areas of
        healthcare, public safety, housing, housing values, unemployment
        insurance, and social services.

        1.  [Health]{.underline}

            The elderly poor are particularly susceptible to
            weather-induced health problems.[^116] Indeed, hypothermia
            and hyperthermia are examples of potentially fatal health
            conditions that are most common among elderly people with
            limited ability to pay for adequate levels of energy
            service.[^117]

            Energy efficiency programs targeted to low-income mitigate a
            variety of health effects and the costs associated with
            treatment. An obvious example is that weatherization combats
            hypothermia and the use of carbon-monoxide-producing
            appliances. One study estimates that the value of reduced
            illnesses and increased health is \$1,300 per weatherized
            household.[^118] Under the reported program cost of \$719
            per weatherized household, **an adder of up to 181 percent
            reflects this value.**

        2.  [Fire]{.underline}

            Many low-income households have old and poorly maintained
            space and water heating systems that present safety risks to
            occupants.[^119] Gas leaks in space heating and water
            heating equipment pose the threat of a house fire. Further,
            high utility bills and service disconnections lead to use of
            fire-hazardous alternative heating sources, such as electric
            space heaters or gas grills.[^120]

            Much as effective weatherization programming reduces the
            need for emergency gas service calls, it too reduces public
            expenditures for fire fighting and prevention. The Oak Ridge
            National Laboratory\'s \"Progress Report of the National
            Weatherization Assistance Program\" concludes that the value
            of reduced incidence of fire attributable to weatherization
            activities is \$3 per weatherized household.[^121]
            **Therefore, an adder of less than one percent reflects this
            benefit**.

        3.  [Building Inspection]{.underline}

            Low-income Weatherization Assistance and utility DSM
            programs include components that improve a building\'s
            heating system and envelope.[^122] To the extent that these
            programs are successful in bringing substandard buildings up
            to building and health codes, they reduce the need for
            building inspections.

        4.  [Homeless Shelters]{.underline}

            As noted in Section III.D.3, below, DSM programs contribute
            to the prevention of homelessness and housing abandonment by
            enhancing energy service affordability and by reducing the
            number of service terminations that lead to loss of
            residency. Reductions in homelessness have the added public
            funds benefit of reducing the financial strain on
            homelessness shelters.

        5.  [Maintenance of Real Estate Tax Base]{.underline}

            As noted, weatherization aids in the prevention of housing
            abandonment.[^123] In addition, home energy efficiency
            investments increase housing values. For example, one study
            found that home values increase by 20.7 times the annual
            reduction in fuel use.[^124] Because real estate tax rates
            are directly tied to property valuations, increased housing
            value caused by home energy efficiency investments are
            directly tied to maintenance or enlargement of the real
            estate tax base.

        6.  [Housing Programs]{.underline}

            Low-income DSM and Weatherization programs include
            components that reduce the need for publicly funded housing
            agencies to expend funds. For example, agencies that deliver
            low-income weatherization services often work with local
            housing authorities to improve building shell and heating
            system conditions. The absence of these services would
            require expenditures by the housing agency to either improve
            sub-standard conditions or achieve optimal energy efficiency
            levels.[^125]

        7.  [Reduced Unemployment Insurance Payments]{.underline}

            As noted above, there is an incremental economic development
            benefit associated with low-income DSM programs. This
            benefit, which may be stated in terms of increased
            employment and personal income, carries an added public
            funds benefit of reduced unemployment insurance payments.
            Evaluation of the National Weatherization Assistance Program
            referenced a non-energy benefit of avoided cost of
            unemployment benefits to be associated with the program.
            This benefit was estimated to be \$82 per weatherized
            household, **justifying the use of an adder of 5.29
            percent.**

            This may be considered a transfer payment from a societal
            point of view but a benefit from a utility/ratepayer
            perspective.

        8.  [Cost Reduction from Efficiencies in Social Service
            Delivery]{.underline}

            Weatherization Assistance and utility DSM programs can
            incorporate components geared toward referring participants
            to other available social services, thus reducing the costs
            associated with outreach and administration of these other
            programs. For example, many households that receive
            weatherization assistance also receive a referral to
            separate assistance programs such as the Low Income Home
            Energy Assistance Program. The per-client outreach costs of
            the referred program are thus reduced.[^126]

    C.  [Equity]{.underline}

        The energy cost burden[^127] of a low-income household is three
        to four times higher than that of a median income
        household.[^128] For example, expenditures for electricity by
        low-income households represent, on average, 7.7 percent of
        their total income; the very poor, living at less than 50
        percent of the federally-determined poverty level spend 23
        percent. In contrast, the average residential consumer spends
        only 2.4 percent of income on electricity.[^129]

        Clearly, households qualifying for the federal Weatherization
        Assistance Program cannot reconcile monthly income with expenses
        for basic necessities Paying energy and utility bills requires
        that other necessities must be foregone. This energy budget
        dilemma is faced uniquely by the poor.[^130]

        The equity benefits of energy efficiency programs within the
        low-income community, represented by the reduced societal
        disparity in proportionate household energy expenditures, are
        thus **equal to the energy cost savings benefits** of the
        programs.[^131] This is true because each energy or utility
        dollar a low-income household is not required to spend reduces
        the energy burden of that household, thereby reducing the energy
        burden \"gap\" between the poor and non-poor. The societal
        benefit stemming from the reduction of this gap is reflected not
        only by increased fairness, but also by the reduced requirement
        of low-income households to forego other necessities. The
        public, in recognition of the benefit associated with reduction
        of the energy burden gap, has shown strong support for taking
        care of the energy needs of low-income households.[^132]
        **Assuming that the energy savings benefit over time of a given
        DSM program is at least 75 percent of total program costs, it is
        appropriate to apply an avoided cost adder of 75 percent to this
        non-energy benefit.**

    D.  [Low-Income Benefits]{.underline}

        1.  [Housing Development]{.underline}

            Residential energy efficiency programs may appropriately be
            viewed as housing programs. The broad concept of housing
            includes far more than merely the physical structure of a
            dwelling. Rather, housing may be understood as a disparate
            but *inseparable* bundle of goods, services and qualities,
            including shelter, location, investment, privacy, proximity
            to amenities, and accessibility to utilities and other
            tangible services, which together comprise a household\'s
            living arrangement. When viewed in this light, it is obvious
            that action of most any kind directed at any one aspect of
            the bundle\'s attributes will have repercussions on other
            aspects or attributes.[^133]

            Accordingly, energy efficiency programs that improve housing
            development economics, reduce customer payments to
            utilities, reduce homelessness, improve housing maintenance,
            maintain or improve property values, reduce housing
            abandonments, reduce moving costs and reduce adverse health
            effects must be viewed as generating non-energy benefits in
            addition to the energy savings benefits.

            Unfortunately, while many of these benefits may lend
            themselves to quantification through careful analysis,
            little work has been in this area to date. We review below
            some of the existing literature related to housing and
            community development aspects of weatherization and utility
            DSM programs, and provide quantitative estimates of such
            benefits where feasible.

            The economics of low-income housing development are usually
            characterized by a precarious balance between rigid
            development costs, limited prospective income streams, and a
            developer\'s ability to obtain attractive financing and
            subsidies. DSM programming targeted toward new residential
            construction can enhance these economics in a number of
            ways. First, DSM programming can have a mitigating effect on
            the marginal cost of meeting or exceeding the energy
            requirements of the Massachusetts Building Code. Overall
            project economics would then be improved by the resulting
            reduction in this development cost. In addition, DSM
            measures that improve the efficiency of energy usage in the
            new facility reduce the level of future energy expenditures
            and therefore the operating cost associated with the
            facility. Reduced strain on operating budgets of residents
            and/or property managers may induce some financial
            institutions to offer relatively attractive financing
            terms.[^134] These benefits will tend to be
            project-specific.

        2.  [Reduced Mobility]{.underline}

            An analysis conducted by the Upjohn Institute of the
            determinants of the decision of low-income renters to move
            out of their dwellings reveals that low-income renters are
            willing to pay sizable portions of their annual incomes to
            not move.[^135] The study further reveals that there is a
            very high psychological and financial cost of mobility among
            low-income renters, particularly those who are elderly or
            whose households include children. The study found average
            moving costs for \"typical\" low-income households to be
            between ten percent and 20 percent of annual income.[^136]

            One important implication of the results of the Upjohn
            Institute Study is that, given the high cost of mobility to
            low-income households, there is particular value to policies
            and programs that reduce the need of these households to
            move. Low-income DSM and weatherization programs reduce
            mobility in at least three ways. First, energy efficiency
            improvements reduce the level of energy/utility expenditure
            required to attain a minimal living standard thus freeing up
            funds to pay rent or other required housing costs. Second,
            weatherization improvements ameliorate dangerous or
            substandard conditions in heating equipment or building
            shell that might otherwise force a household to
            relocate.[^137] Finally, some utility programs include
            arrearage forgiveness or payment plan components that result
            in fewer service terminations and, therefore, reduced
            mobility.[^138]

            Researchers estimate the value of reduced mobility among
            program participants was as much as \$840 per weatherized
            household.[^139] **Under the study\'s reported program cost
            of \$719 per weatherized household, an adder of up to 117
            percent is justified as a quantification of this non-energy
            benefit to low-income participants**.

        3.  [Reduced Homelessness, Housing Loss, Housing
            Abandonment]{.underline}

            Studies have demonstrated the clear link between
            homelessness and utility terminations. As indicated above,
            energy efficiency programming and customer relations help to
            ameliorate late payment problems.[^140] It follows that
            terminations may also be reduced as a result of such
            programming.

            According to surveys conducted by the Energy Coordinating
            Agency of Philadelphia and Institute for Public Policy
            Studies of Temple University, there was an average of over
            60,000 gas electric and water service terminations each year
            in the city during the years of 1984 through 1989. The study
            further found that, of homes where utility service was
            terminated, 32 percent of electric and 24 percent of gas
            cases led to abandonment within one year of the utility
            termination. Through a name match between Philadelphia
            Electric Company\'s list of termination notices and lists of
            homeless adults served by the City of Philadelphia, the
            study found a discernable relationship between utility
            termination and homelessness. In surveys of individuals
            living in emergency shelters, 7.9 percent of respondents
            cited utility terminations as the reason for their
            homelessness. (Higher percentages cited related causes, such
            as \"eviction for non-payment\" and lack of housing in the
            income range as the causal factors.) The study noted that of
            the many factors contributing to homelessness, mitigation of
            high energy costs is among those \"most susceptible to
            remedy.\"[^141] Similarly, a study of homelessness in
            Northern Kentucky indicates that utility shutoffs were among
            the primary causes of homelessness in that region.[^142]

            The studies cited above do not provide the information
            necessary to quantify or project the benefit of homelessness
            prevention associated with energy efficiency programming.
            Similarly, they do not project the costs associated with
            such programming.

        4.  [Reduced Loss of Service Due to Termination]{.underline}

            By enhancing energy affordability and arranging payment
            plans with customers in arrears, DSM programs reduce the
            number of service terminations suffered by customers.
            Researchers estimate that the value of fewer service
            terminations to customers is as high as \$425 per
            participating household.[^143] Under the reported program
            cost of \$719 per weatherized household, **an adder of up to
            59.1 percent would be applied to reflect this value.**

        5.  [Improved Maintenance, Maintenance of Property
            Values]{.underline}

            Literature review demonstrates a link between residential
            housing values, energy costs and energy efficiency
            characteristics.[^144] In a review of seven studies
            conducted between 1970 and 1985, a study published in *The
            Appraisal Journal* found that (1) value of energy efficient
            homes with low structural heat loss was \$3,248 higher than
            comparable inefficient homes, and (2) home value increased
            by about \$20.73 for every \$1 decrease in annual fuel
            bills.[^145] In addition, many DSM measures contribute to
            the maintenance of property by improving thermal integrity
            and heating system efficiency.

            Evaluation of the National Weatherization Assistance Program
            computed a non-energy benefit of increased property value
            associated with the program. This benefit was estimated to
            be \$126 per weatherized household,[^146] **justifying an
            adder of 8.13 percent**.

        6.  [Health]{.underline}

            Older people living in poverty are more likely than their
            non-poor counterparts to experience rapidly declining health
            and to develop difficulties performing routine daily
            activities as they age. Thus, low-income individuals are at
            a much higher risk of requiring nursing home care as they
            age.[^147] Further, among those most likely to develop
            hypothermia are the poor who can not afford to pay for
            adequate home heating.[^148] In addition, low-income
            households are at increased risk of fire and exposure to
            hazardous fumes due to use of unsafe heating sources because
            of utility terminations.[^149] Finally, high energy burdens
            cause low-income households to forego expenditures on
            preventive health measures and nutritional food items.[^150]
            DSM programs thus improve participants\' health by
            preventing such dangers as hypothermia, carbon monoxide
            poisoning, and fires. We have not quantified this benefit.

II. [CONCLUSION]{.underline}

Based on the foregoing presentation of benefits to society, individuals,
utilities, and ratepayers from delivery of comprehensive low-income
energy efficiency programs, a benefit adder of between 17 percent and
more than 300 percent could reasonably be incorporated to represent the
incremental value of a low-income focus beyond the general societal,
economic, and environmental benefits of efficiency programs.

Furthermore, this omits a benefits that have not been quantified in the
literature but that can be reasonably quantified as follows:[^151]

\* Reductions in electricity emergency calls can be extrapolated from
experience with gas. Assuming the rate of electricity emergency calls is
20 percent that of gas, a reasonable estimate of the avoidable cost is 2
percent - 4.5 percent of avoided costs.

\* The incremental economic multiplier effect from low-income energy
efficiency programs due to increased level of spending can be reasonably
estimated at 1 percent-2 percent of avoided cost.

\* A reasonable lower bound for increased property values can be
calculated as a \$4000 improvement in value of an \$80,000 home, or 4
percent - 5 percent of avoided cost.

\* The value of increasing the ability of the housing market to sustain
affordable housing for low-income families is difficult to precisely
measure. However, it can be estimated by placing a reasonable value of
50 percent of the value established for maintenance and improvement in
housing values. This would translate to an adder of 2 percent - 4
percent of avoided cost.

\* The value of efficiencies in social service delivery can be estimated
by assuming each household provided with comprehensive energy efficiency
services also receives one referral at a (conservative) average cost
savings of \$20. This would translate to an adder of 3 percent.

At the lower bound, these estimates add 12 percent of avoided cost to
the computation of a reasonable adder, without counting other
nonquantified cost savings. When added to the lower estimates appearing
in the literature and described in this paper, the total approaches the
consensus value of a 50 percent adder. Thus 50 percent represents a
value that is close to the bottom of a reasonable range of benefits from
low-income energy efficiency programs.

As the table that follows displays, an adder of more than triple avoided
costs can be justified for all low-income DSM programs --- more for
technology-specific measures such as gas-related, space-heating
measures, and new construction.[^152] There is a wide range in estimates
and in the precision with which they are computed; for many factors, no
quantification has been done to date. Nevertheless, the lowest estimate
of an adder to avoided cost is 17 percent [without counting]{.underline}
unquantified benefits such as avoided utility collection costs, avoided
administrative costs, avoided regulatory costs, incremental economic
development benefits, public fund savings (*e.g.*, Fire and Building
Departments), and reduced homelessness.

The mid-point of the range of estimates --- still not counting the
unquantified benefits --- is 172 percent of avoided costs. Even taking
only a third of the range (going one-third of the distance from low to
high) yields an adder of 103 percent for all low-income programs.

Indeed, removing the estimates for equity and all the items that may be
considered to be transfer payments from the societal perspective ---
still not counting the unquantified benefits --- and taking only a third
of the range instead of the midpoint --- yields an adder of 59 percent.

In the spirit of compromise, at least as a starting point for later
review as benefit quantification and future low-income DSM program
measures are refined, we propose a cost-effectiveness adder of 50
percent of avoided cost for all low-income DSM programs with additional
adders as appropriate that are technology-specific, program-specific, or
site-specific. We submit that anyone taking the table that follows as a
menu, selecting only the benefits and values in which they believe, will
be able to justify a 50 percent adder. Analysts have thus reached their
justification of 50 percent in different ways but are able to reach a
consensus that 50 percent of avoided cost is a reasonable and
appropriate adder for low-income DSM programs.

**Attachment 5**

##### Summary of Low-Income Assistance Programs

**SUMMARY OF LOW-INCOME ASSISTANCE PROGRAMS**

The following is a summary of the low-income assistance programs
currently in place throughout the United States broken down into the
different components selected by each state. Benefits and disadvantages
of most options are included.

**ASSISTANCE OPTIONS**

***Dollar Discounts***

\* Flat lifeline credit \-- percent or dollar amount; easily
administered, but not highly targeted. Percentage method is more
targeted to high-use households; dollar method is more targeted to low
usage (who may be lower income);

\* Credit offered per kWh usage \-- can promote conservation, which
addresses the issue of not stimulating usage with a discount (on the
other hand, most low-income households have other essential needs to be
filled with the money saved from efficiency); for example:

1-400 kWh/month = 30% discount

401 - 800 kWh/month = 20% discount

801 - 1200 kWh/month = 10% discount

Over 1200 kWh/month = flat credit to account for those households which
have a need for larger usage (large family, medical needs, etc.);

\* Larger credits offered for senior citizens, disabled ratepayers or
those who use some type of medical life support. This adds some
administrative work but better targets benefits to those most affected
by unaffordability;

\* Reduction that is a predetermined percentage (10%, 15%, etc.) of
bill, with the percentage reduction determined according to income level
or federal poverty level (FPL) \-- the lower the income, the higher the
discount. This also increases administration but better targets the
assistance;

\* Percentage of Income Payment Plan (PIPP) \-- Customers pay a
percentage of their income (9%, 10%, 11%, etc) on their bills depending
on their level of income in relation to FPL guidelines \-- involves the
greatest addition to administration but also the greatest targeting and
thus is the most efficient use of dollars to increase affordability and
decrease payment troubles;

\* Waiver of customer reconnection charge \-- results in apparent
revenue loss, but adding charges to bills of those who already cannot
afford to pay does not increase likelihood of payment and may be past
point of diminishing returns;

Customer Charge options (advantages and disadvantages similar to dollar
discounts, but minimal when customer charge is small)

\* Customer charge can be completely waived;

\* Customer charge can be frozen;

\* Tax on customer charge can be waived; and

\* Percentage can be waived according to income level.

**ELIGIBILITY**

\* Households already on another form of state or federal assistance are
automatically eligible \-- provides ease of administration but misses
large numbers of low-income households receiving no assistance;

\* Households eligible for LIHEAP are automatically eligible -- provides
ease of administration but, by itself, leaves out majority of low-income
households;

\* Customers with incomes at a certain percentage of the state median
income (usually 50% or 60%) \-- most encompassing but requires agency
(*e.g.*, CAPs) to screen incomes of those not receiving assistance;

\* Customers who have incomes equal to or lower than a percentage of the
FPL \-- (same benefits and disadvantages as above);

\* For senior citizen programs, age and income levels set the guidelines
-- household must qualify by age and income so, by itself, eligibility
is narrow and administratively burdensome;

\* Applicants must have a negative cash flow, cannot be on public
assistance, and have a history of broken payment agreements (arrearage
management) \-- used for arrearage management screening on an individual
basis; higher administrative cost and narrower eligibility than simpler
screens (*e.g.*, high use, high burden).

NOTE: Most programs have eligibility screens that are a combination of a
number of these criteria rather than just one.

**COST AND COST RECOVERY OF PROGRAMS**

\* Most programs range from 0.5 to 5.0 percent of annual utility
jurisdictional revenue;

\* Funded by utility stockholders \-- short-term customer savings but
not equitable;

\* Funded by residential ratepayers in rates \-- since the programs
provide non-residential customer savings, it is not equitable to charge
only one sector for them;

\* Funded by all ratepayers in rates \-- equitable since all customer
sectors, and shareholders, receive benefits;

\* Funded by both stockholders and ratepayers -- most equitable since
all benefit;

\* Option of printing charge to fund these programs on customer bills
\-- printing one item on bill provides information on one program but
invites printing of others (such as economic development or irrigators\'
rate subsidies).

**ENERGY EFFICIENCY/WEATHERIZATION** (measure selection depends on
budgets and cost-effectiveness)

\* Water conservation measures (such as water heater wraps, low-flow
showerheads and faucet aerators);

\* Compact fluorescent bulbs;

\* Conservation educator visits participants\' homes;

\* Energy audits (may be fuel-blind) conducted to determine
weatherization needs;

\* Weatherization measures, including attic, wall and ceiling
insulation, weather stripping, new windows, boiler repair or
replacement;

\* Refrigerator replacement (after metering);

\* Energy education workshops to instruct on energy efficiency
mechanisms and promote conservation;

\* Referrals to conservation and weatherization programs and energy and
financial management courses;

\* Budget counseling; and

\* Additional measures for new construction/rehabilitation and
multifamily buildings.

**ARREARAGE PROGRAMS** (Relatively high administrative cost but provide
commensurate benefits to all customers due to increased collections and
decreased collection costs. Setting individual affordable payment (or
percentage of income) plans and larger arrearage forgiveness amounts
increases likelihood of success due to customer sense of achievability.
Rewarding each timely payment with an incremental benefit encourages
development of payment habits.)

\* Arrearage forgiven with monthly payment of current bill;

\* Affordable monthly payment determined according to income including
payment going toward arrearages. Successful completion of the minimum
number of months required by utility results in the forgiveness of an
equal amount of outstanding debt;

\* Participating low-income customers pay a predetermined portion of
their bill and a portion of their arrears is forgiven. For example, with
each payment made on time and in full, 1/24 or 1/12 of the arrearage is
forgiven;

\* Fixed monthly payments to arrearages that lead to complete
forgiveness after a pre-determined period of time (usually one to three
years);

\* Participants receive forgiveness set at a certain level, *e.g.*,
\$250, and must pay the remainder;

\* Percentage of arrearage forgiven; and

\* Participants pay set amount (\$5-\$10) a month toward arrearages. If
they pay more than the set amount, utility matches the amount toward
arrearage.

**OUTREACH** (All of the options listed below are effective elements of
a comprehensive approach)

\* Local agencies (community action agencies, Salvation Army, and LIHEAP
agencies) help in the application process and refer to the utility \--
very effective but limited to the people these agencies can reach;

\* Utility sends information on programs through electric bill;

\* Annual \"utility discount days\" scheduled where customers can
directly sign up if they are found to be eligible;

\* Utility sends out periodic flyers;

\* Utility selects participants from a list of customers who meet the
state\'s LIHEAP criteria;

\* Local community ministries perform the outreach. Sign up is only
available in certain months;

\* Negative check-off option. When a customer applies for federal,
state, or local assistance, customer automatically is enrolled in the
utility program unless opting out of it;

\* Utility performs computer match up for automatic enrollment \-- may
be most effective but raises privacy concerns that must be managed (note
partial alternative of post card at benefit sign up to alleviate this
concern);

\* Ads in newspapers;

\* TV and radio spots \-- TV is effective but costly (CATV may be an
alternative);

\* Legal services offer pamphlets and worksheets which are available at
their locations throughout the state;

\* Community meetings and workshops;

\* Flyers posted at social services offices; and

\* Utility solicits customers when they have contact with them, *i.e.*,
when they call regarding payment trouble or arrearages \-- effective
time to reach people but audience is limited.

**PROGRAM MANAGEMENT**

\* Community action agencies manage program \-- close to community but
lack customer data base and utility expertise;

\* Utility manages program \-- maintains information and expertise but
relatively remote from low-income community;

\* Independent statewide administrator \-- provides uniform program but
could add to bureaucracy and stifle local creativity;

\* Department of Human Services; and

\* State office which handles LIHEAP manages the program.

Note: Many programs are managed by a combined effort from both the
utility and social service programs \-- many of the most successful
programs operate this way, combining the benefits each brings.

[^1]: Contact John Howat at NCLC, 18 Tremont St., Boston, Mass. 02108,
    tel. 617-523-8010.

[^2]: Generally, assistance is either a fixed dollar amount or a fixed
    percentage of the bill. Many programs include an arrearage
    management component. In some programs, benefits are targeted
    depending on income. In others, benefits are targeted according to
    special needs such as an Supplemental Security Income
    (SSI)-qualifying disability.

[^3]: \"Energy and the Poor \-- The Forgotten Crisis\", National
    Consumer Law Center, Boston, MA, 1989.

[^4]: [Id.]{.underline}

[^5]: \"Low-Income Energy Policy in a Restructuring Electricity
    Industry: An Assessment of Federal Options\", Lester W. Baxter for
    Oak Ridge National Laboratory, ORNL/CON-443, July 1997.

[^6]: Many of these reports are summarized in Howat and Oppenheim,
    \"Analysis of Low-Income Benefits in Determining Cost-Effectiveness
    of Energy Efficiency Programs\" (National Consumer Law Center,
    1999), which is Attachment 4.

[^7]: Central Power and Light Company\'s poll of commercial/industrial
    and residential customers in a self-administered questionnaire given
    at a Texas Town Meeting on Electricity Issues, Texas A&M University
    Center for Instruction, May 31-June 2, 1996.

[^8]: \"Analysis of Low-Income Benefits in Determining
    Cost-Effectiveness of Energy Efficiency Programs,\" Attachment 4.

[^9]: As noted above, surveys show consumer willingness to pay small
    amounts monthly to support low-income families. *E.g*., note 8
    above. Willingness to pay for such public goods is markedly greater
    when it is known that all are contributing.

[^10]: The Department of Telecommunications and Energy declined to adopt
    one 50 percent adder across the board, but it ruled that most of the
    benefits enumerated should be set out on a utility-by-utility basis.
    DTE 98-100 (1999).

[^11]: Many studies show the economic development benefits of
    utility-funded demand-side management or energy efficiency programs.
    Job growth occurs from funds directly spent as well as from
    multiplier effects. This increased economic activity also generates
    increased state and local tax revenue. *E.g.*, Goldberg and Laitner,
    \"Energy Efficiency and Renewable Energy Technologies as an Economic
    Development Strategy for Texas\" (Texas Dept. of Economic
    Development 1998); Laitner and Bernow, \"Employment and other
    macroeconomic benefits of an innovation-led climate strategy for the
    United States,\" 26 Energy Policy 425 (1998); Galvin, \"Examination
    of Components of an Environmental/Economic Benefit Adder\" (Optimal
    Energy 1999).

[^12]: Twenty parties (Action, Inc. *et al.*), Joint Motion for Approval
    of Proposed Guidelines Regarding Cost Effectiveness, Monitoring and
    Evaluation Issues and Shareholder Incentives, filed in Mass. DTE
    Docket no. 98-100, April 14, 1999.

[^13]: A description of the Massachusetts programs is Attachment 2.

[^14]: NStar (BCR of 2.1), Massachusetts Electric Co. (a subsidiary of
    National Grid USA) (1.94), and Western Massachusetts Electric Co. (a
    subsidiary of Northeast Utilities) (2.8). Utility-specific
    determinations of cost-effectiveness are pending at the Department
    as of the date of this report.

[^15]: Skumatz and Dickerson, \"Extra! Extra! Non-Energy Benefits Swamp
    Load Impacts for PG&E Program!\" 1998 Summer Study on Energy
    Efficiency in Buildings Proceedings at 8.301 (American Council for
    an Energy Efficient Economy 1998).

[^16]: Berry *et al*., Progress Report of the National Weatherization
    Assistance Program at 38, 45 (Oak Ridge National Laboratory 1997).

[^17]: Magouirk, \"Evaluation of Non-energy benefits from the Energy
    Savings Partners Program,\" 1995 Energy Program Evaluation
    Conference at 155.

[^18]: \"Ohio\'s Weatherization Assistance Program: An Independent
    Evaluation\", by Proctor Engineering Group, Tellus Institute, and
    Residential Building Analysis, 1996-1998.

[^19]: Blasnik, \"Impact Evaluation of Ohio\'s Home Weatherization
    Assistance Program\" at 37 (Proctor Engineering Group 1999).

[^20]: Pennsylvania Public Utility Commission Bureau of Consumer
    Services, \"Low Income Usage Reduction Program\" at 10 (1995).

[^21]: Blasnik, \"Impact Evaluation of Louisville Gas & Electric Co.\'s
    Energy Partners Program\" (Proctor Engineering Group 1997).

[^22]: Megdal & Associates, Process Evaluation of the Demand-Side
    Management Residential Low-Income Energy Savings Program, submitted
    to the Boston Gas Co., at 15 (1998).

[^23]: Megdal & Associates, Cost-Effectiveness Analysis of the
    Demand-Side Management Residential Low-Income Energy Savings
    Program, submitted to the Boston Gas Co., at 8 (1998).

[^24]: \"Energy Efficiency Programs for Low-Income Households:
    Successful Approaches for a Competitive Environment\", conducted by
    Miriam Pye for ACEEE in August 1996.

[^25]: A & C Enercom Inc. *et al*., \"Final Report: Process and Impact
    Evaluation Customer Assistance Program\" at iii, 11, 13,
    18-19.(1996).

[^26]: Meyer and Curry-White, \"The Affordable Energy Corporation\'s All
    Seasons Assurance Plan at 59 (1994?).

[^27]: Response Analysis Corp., \"Niagara Mohawk Power Corp.\'s
    Affordability Plan\" at 4 (1996).

[^28]: Scan America *et al*., \"Impact Assessment of the Equitable Gas
    Co. Energy Assistance Program\" at 46, 112 (Scanada Consultants Ltd.
    *et al*. 1996).

[^29]: Skumatz, above, at 8.307.

[^30]: Berry, above, at 38, 39.

[^31]: Robinson, \"An Examination of the Relationship Between Utility
    Terminations, Housing Abandonment and Homelessness\" at 1,2 (eight
    percent of homeless respondents cite utility cut-off as the cause;
    32 percent of electric and 24 percent of gas cut-offs led to
    abandonment within one year) (Energy Coordinating Agency of
    Philadelphia 1991).

[^32]: Scan America *et al*., above, at 30-31.

[^33]: Personal communication, James Jacob (manager, consumer advocacy
    division), Brooklyn Union Gas (Oct. 1, 1999); Mary Grassi and James
    Jacob, Keeping Customers \"On Track\" (presentation to National Low
    Income Energy Consortium Conference, 1999); Jim Yardley, \"The Gas
    Company as Social Worker: Brooklyn Union Tries Softer Approach to
    Pursue Unpaid Bills,\" New York Times at 35 (Jan,. 17, 1999);
    evaluation letters to New York Public Service Commission (1997,
    1998, 1999).

[^34]: See generally National Consumer Law Center, Access to Utility
    Services, 1998 Supplement, App. B, attached as Attach. 1.

[^35]: Note that, where customer charges are very low, waiver of the
    customer charge would have little benefit, and a larger fixed dollar
    amount is therefore more appropriate.

[^36]: Robinson and Chalfant, "Economic Revitalization Through Energy
    Conservation" at 19 (The Energy Coordinating Council of
    Philadelphia, 1993).

[^37]: For example, an Argonne National Laboratory study, based on U.S.
    Department of Energy national consumption data by income, found that
    the poorest quintile used 26 percent less electricity than average
    while the richest used 24 percent more than average. The poorest
    quintile used only 14 percent less natural gas, while the richest
    used 25 percent more. Poyer and Allison, Energy Consumption and
    Expenditure Projections by Income Quintiles on the Basis of the
    Annual Energy Outlook 1997 Forecast at 7 (1998).

    There is a range of estimates for residential electricity price
    elasticity, with many studies showing very little price
    responsiveness irrespective of income. The range is -0.05 to -0.80
    (short-run) and -0.30 to -4.54 (long-run); *i.e.*, a one percent
    increase in price leads to the indicated decrease in demand. EPRI,
    TR-105045 at 197 (1997); Laurits R. Christenson Assocs., \"Customer
    Price Responsiveness,\" EPRI Retail Electricity Book. A value of
    less than 1.0 is considered inelastic. In any event, it is clear
    that electricity consumption varies to some extent with income.
    Results are 0.30- 0.61. D. Chapman *et al*., \"Electricity Demand
    Growth and the Energy Crisis, Science, Nov. 17, 1972; R. F.
    Halvorsen, \"Residential Demand for Electricity,\" Ph.D.
    Dissertation, Harvard Univ., Dec. 1972.

    The correlation between income and gas usage is smaller because many
    low-income families live in substandard, poorly weatherized homes
    that require excessive consumption of gas to heat.

[^38]: The typical funding level among the states is about one mill per
    kWh for affordability and efficiency combined.

[^39]: However, the Illinois restructuring statute provides for a
    per-meter charge for gas and electricity that is graduated by
    customer size (*i.e.*, residential customers pay \$0.40 per meter
    per month, small businesses \$8.00, and large businesses \$600.00).
    There is as yet no operational experience with this mechanism.

[^40]: M. Quaid and S. Pigg. \"Measuring the Effects of Low-Income
    Energy Services on Utility Customer Payment Behavior,\" Proceedings
    of the 1991 Fifth International Energy Program Evaluation
    Conference, 1991.

[^41]: *E.g.*, Ron Grosse, \"Win-Win Alternatives to Credit &
    Collections\", Wisconsin Public Service Co., 1997.

[^42]: Matousek and Radue, \"Wisconsin Public Services Corp. Lifestyles
    II\" at 25 (Matousek & Assocs. 1993).

[^43]: Niagara Mohawk Power Corporation Affordable Payment and Arrearage
    Forgiveness Program Evaluation, prepared by Response Analysis
    Corporation, Princeton, NJ, May 1992.

[^44]: [Id.]{.underline}

[^45]: [Id.]{.underline}

[^46]: \"Guarantee of Service Plan\", p. 1, Clark Public Utilities,
    Vancouver, Washington, 1999.

[^47]: [Id.]{.underline} pp. 2-3.

[^48]: [Id.]{.underline}; Weiss, \"Low-Income Assistance Pays for
    Itself,\" Northwest Energy Coalition, 1998.

[^49]: [Id.]{.underline}

[^50]: Federal LIHEAP rules permit the cut-off to be as high as 60 per
    cent of a state\'s median income.

[^51]: Extending the discount to other institutions is certainly
    possible. The obstacles to date have probably been the additional
    administrative effort required and some doubt about whether the
    benefit would flow through to the low-income consumers.

[^52]: California relies on self-certification, which has resulted in a
    high penetration of the discount rate. While it is possible that
    some technically ineligible households qualify for the rate in this
    way, it seems unlikely that many families without true need would go
    to the trouble of declaring themselves needy.

[^53]: The Massachusetts electricity restructuring statute extended the
    low-income rate discount to those at or below 175 percent of the FPL
    and set as the screening device receipt of a public benefit the
    eligibility for which was an income of 175 percent of FPL or below
    or eligibility for LIHEAP (175 percent of FPL for households of one
    or two, 150 percent of FPL for others). The fuel assistance network
    (mostly community action agencies) will certify eligibility for
    LIHEAP, even if funds are exhausted, in order to qualify a household
    for the discount rate. It turned out that, for households of two or
    more with incomes between 150 percent and 175 percent of FPL, there
    are no public benefit programs. Efforts are currently underway to
    correct this unintended gap. This experience demonstrates the care
    that is needed when surrogates are used for intended eligibility
    standards.

[^54]: See generally National Consumer Law Center, Access to Utilities,
    chps. 3 and 6 (shut-off protections), 4 (credit and deposits), 5
    (late charges and payment plans), 9 and 10 (landlords).

[^55]: J. Oppenheim, \"Cap The Gap: Assuring Residential Customers Share
    Benefits of Electricity Industry Restructuring\" (National Consumer
    Law Center 1999).

[^56]: United Illuminating Company in Connecticut is still implementing
    a neighborhood low-income program in addition to -- not instead of
    -- a program "piggy-backed" onto the DOE weatherization program and
    implemented by the CAP agencies. Connecticut Light & Power Company
    has agreed to pilot such a neighborhood program beginning in 2001 in
    order to comply with a CPUC directive for the two IOUs to implement
    the same programs for residential customers throughout Connecticut.

[^57]: For discussion of program design, see Brown *et al*., Utility
    Investments in Low-Income Energy-Efficiency Programs (Oak Ridge
    National Laboratory 1992); Spade and Brockway, A Guide to Low-Income
    Energy Efficiency (National Consumer Law Center 1996); Pye, \"Energy
    Efficiency Programs for Low-Income Households: Successful Approaches
    for a Competitive Environment\" (summary of seven utility programs)
    (American Council for an Energy Efficient Economy, 1996); Brockway
    *et al*., Approaches to Electric Utility Energy Efficiency for Low
    Income Customers in a Changing Regulatory Environment (utility
    programs in seven restructuring states) (Oak Ridge National
    Laboratory 1998).

[^58]: For a discussion of the Weatherization Assistance Program (WAP)
    network, including community action agencies, see Mihlmester *et
    al*., Characterization of the Weatherization Assistance Program
    Network (Oak Ridge National Laboratory 1992).

[^59]: A newly designed community-based energy efficiency program that
    will be implemented as a pilot by the Northeast Utilities and United
    Illuminating Companies in Connecticut in 2001 will attempt to
    coordinate efficiency services to low-income customers within a
    selected community with the local lead-abatement program.

[^60]: Peters, Baggett, and Seiden, Process and Impact Evaluation of New
    England Power Service Company\'s Appliance Management Program
    (Research Into Action 1999), U.S. Energy Information Administration
    (1997 consumption).

[^61]: Berry, Brown, and Kinney, Progress Report of the National
    Weatherization Assistance Program (Oak Ridge National Laboratory
    1997).

[^62]: "Process and Impact Evaluation of New England Power Service
    Company's Appliance Management Program", vol. 1, pp. i-ii, Jane S.
    Peters, Research Into Action, and Ken Seiden, Essential Economics,
    Inc., July 1998.

[^63]: Personal communication with Beth Sachs of the Vermont Efficiency
    Investment Corporation (VEIC).

[^64]: Personal communication with Tim Woolf, program designer for the
    Cape Light Compact.

[^65]: See description of the Massachusetts Electric Company's Appliance
    Management Program, below.

[^66]: United Illuminating Company in Connecticut contracts out service
    delivery of its "neighborhood blitz" low-income program; and Vermont
    has formed an "energy efficiency utility" separate from its
    investor-owned utilities to provide services.

[^67]: Massachusetts through legislation and Connecticut through
    regulatory directive are in the process of instituting state-wide
    low-income energy efficiency and education programs.

[^68]: \"Energy Efficiency Programs for Low-Income Households:
    Successful Approaches for a Competitive Environment\", p. 23, Miriam
    Pye for ACEEE, August 1996.

[^69]: [Id.]{.underline}, p. 24.

[^70]: [Id.]{.underline}, p. 23.

[^71]: Ron Grosse, \"Win-Win Alternatives to Credit & Collections\",
    Wisconsin Public Service Co., 1997.

[^72]: \"The Gas Company as Social Worker\", The New York Times, January
    17, 1999.

[^73]: Personal communication, James Jacob (manager, consumer advocacy
    division), Brooklyn Union Gas (Oct. 1, 1999); Mary Grassi and James
    Jacob, Keeping Customers \"On Track\" (presentation to National Low
    Income Energy Consortium Conference, 1999); Jim Yardley, \"The Gas
    Company as Social Worker: Brooklyn Union Tries Softer Approach to
    Pursue Unpaid Bills,\" New York Times at 35 (Jan,. 17, 1999);
    evaluation letters to New York Public Service Commission (1997,
    1998, 1999).

[^74]: See materials from Gerald Norlander, Public Utility Law Project
    (including Memorandum of Understanding between NYNEX and Department
    of Social Services for confidential matching program) in National
    Consumer Law Center, Low-Income Energy and Utility Programs: The
    Challenges Ahead at 261 et seq. (conference proceedings, 1995).

[^75]: See, for example, \"Progress Report of the National
    Weatherization Assistance Program\", Linda Berry *et al*.,
    ORNL/CON-450, September 1997.

[^76]: A Non-Energy Benefit Avoided Cost Adder reflects the ratio of the
    estimated present value in dollar terms of the benefit to total
    program costs (which equal avoided energy benefits where the benefit
    cost ratio is 1.0). This ratio is then added to a utility\'s avoided
    cost during a cost-effectiveness test of a specific DSM measure or
    program. This method of calculating and applying an adder is
    appropriate and justifiable because it allows for a consistent
    accounting of non-energy benefits irrespective of a utility\'s
    particular avoided cost. The adder is intended to provide a
    framework to be used in the development and evaluation of utility
    DSM programs, and for the accounting of benefits beyond those
    directly related to energy savings. The adder is not intended to
    provide a precise dollar value of non-energy benefits. Our
    calculation and recommended application of the adder is based on the
    following assumptions: (1) the energy benefit to total cost ratio of
    the programs reviewed in the development of the adders specified in
    this paper is 1.0; and (2) for a given DSM program, there is a
    positive correlation between the level of energy benefits and the
    level of the non-energy benefits identified in this paper that are
    generated by the DSM program.

[^77]: Money that is owed utilities from previous consumption and one or
    more late payments. Biewald, et.al., \"Non-Price Factors of Boston
    Edison\'s Demand-Side Management Programs: A Review of the Societal
    Benefits of Energy Efficiency,\" (1995), p. 14-1.

[^78]: Debt that is incurred if collection efforts are unsuccessful.
    [Id.]{.underline}

[^79]: Expenses associated with credit and collection of unpaid bills,
    including issuance of shutoff notices, personal contact with
    customers, disconnection of service, reconnection of service, and
    payments to collection agencies. [Id.]{.underline}

[^80]: Costs associated with disconnecting and reconnecting service in
    the event of non-payment.

[^81]: Utility personnel costs of negotiating payment plans with
    customers. [Id.]{.underline}

[^82]: Rate cases and other regulatory proceedings that are, in part or
    in total, devoted to issues related to treatment of customers with
    outstanding bills or customer complaints against utility companies.

    [Id.]{.underline}

[^83]: The variability of study results is due to both program
    distinctions and the studies\' methodological distinctions.

[^84]: R. Grosse, \"Win-Win Alternatives tot Credit & Collections\"
    (Wisconsin Public Service Co. 1997). Information regarding the
    utility expenditures required to generate these reductions, as well
    as the dollar value of the reductions, was not provided.

[^85]: [Id.]{.underline}

[^86]: J. Oppenheim, \"The Utilities,\" [Access to Utility
    Service]{.underline}, National Consumer Law Center, 1998 Supplement,
    pp. 30-31 from U.S. Department of Energy/Energy Information
    Administration, \"Electric Sales and Revenue, 1996,\" Table 14
    (1997); U.S. Census, March 1998; \"Current Population Survey,\"
    Table H-8; U.S. Census, 1990 summary tape, file 3A, Tables H3, P3,
    P80, P121. [See]{.underline} § III.C, Equity Benefits, below.

[^87]: Quaid, M., and Pigg, S., \"Measuring the Effects of Low-Income
    Energy Services on Utility Customer Payment Behavior,\" *Proceedings
    of the 1991 Fifth International Energy Program Evaluation
    Conference*, 1991.

[^88]: [See]{.underline} § II.A, above.

[^89]: On the other hand, a review of Niagara Mohawk\'s low-income DSM
    program showed that customers with the least ability to pay bills
    paid the smallest dollar amount against arrearages after DSM.
    Customers with ability to pay reduced their arrearages by an average
    of \$469 after delivery of the DSM program, no doubt at least
    partially because they had larger arrearages since level of usage is
    correlated with income. No program costs were reported. Alliance to
    Save Energy, \"Evaluating the Benefits of Comprehensive Energy
    Management for Low-Income, Payment-troubled Customers,\" 1992.

[^90]: Biewald, *et al*., at 14-2 - 14-5. The authors issue numerous
    caveats regarding the comparison of results from different studies.
    For example, they cite differences in the measures installed and
    information provided through different programs, other
    administrative and programmatic distinctions, and variations of
    benefit measurement methodologies.

[^91]: Linda G. Berry, *et al*., \"Progress Report of the National
    Weatherization Assistance Program,\" at 38, 45 (Oak Ridge National
    Laboratory, 1997).

[^92]: Lisa A. Skumatz, Chris Ann Dickerson[,]{.underline} \"Extra!
    Extra! Non-Energy Benefits Swamp Load Impacts for PG&E Program!\"
    [1998 Summer Study on Energy Efficiency in Buildings
    Proceeding]{.underline}, pp. 8.301-8.307 (American Council for and
    Energy Efficient Economy, 1998). In the study, present values were
    calculated based on a ten year lifetime, discounted at four percent
    annually. Items in bold are summarized in the attached table.

[^93]: Payment assistance programs yield similar types of benefits. For
    example, the Clark County (Washington) Public Utility District
    capped low-income families\' gas service payments at nine percent of
    income starting in 1988, at a cost to it of \$450,000 per year. The
    program also provided positive assistance to customers in upgrading
    bill management and payment skills. Over two thousand customers
    participated in the program, which yielded the following results:
    (1) Write-offs dropped 36 percent, saving \$300,000 per year; (2)
    disconnections dropped 65 percent; (3) delinquent balances fell from
    67 percent of the eligible population to 13 percent. Collection
    costs saved were about \$100,000 per year at the rate of \$108 per
    customer in arrears per year. Per customer payments increased from
    \$29 per month to \$52, as customers felt more hopeful about
    handling the more affordable payment. Thus the direct annual utility
    benefits of about \$500,000 exceeded total program costs by 11
    percent, generating a one-year benefit cost ratio of 1.11:1. Weiss,
    \"Low-Income Assistance Pays for Itself,\" Northwest Energy
    Coalition (1998).

[^94]: J.K. Magouirk, \"Evaluation of Non-energy benefits from the
    Energy \$avings Partners Program,\" [1995 Energy Program Evaluation
    Conference, Chicago]{.underline}, pp. 155-175 (1995).

[^95]: The Colorado study reported savings only for the first year after
    weatherization. We calculated the present value of savings over
    measure lifetimes based on a ten-year lifetime, discounted at 4
    percent annually.

[^96]: Skumatz at 8.307.

[^97]: Colton, \"Identifying Savings Arising from Low-Income Programs,\"
    National Consumer Law Center, 1994, p. 16.

[^98]: [Id.]{.underline} at 3.

[^99]: [Id.]{.underline}

[^100]: Skumatz at 8.307. The variance in costs reported by Colton and
    Skumatz is due largely to the fact that Colton reports the utility
    cost of each instance of the particular collection activity, while
    Skumatz reports an average over all participating households.

[^101]: This is reported in the attached table under \"Reconnection and
    Termination\" since the other elements are not otherwise quantified.

[^102]: Colton at 7.

[^103]: [Id.]{.underline}

[^104]: [Id.]{.underline} at 6-7.

[^105]: Skumatz at 8.307.

[^106]: Response Analysis Corporation, \"Niagara Mohawk Power
    Corporation Affordable Payment and Arrearage Forgiveness Program,\"
    p. 1-3 (1992).

[^107]: [Id.]{.underline} at p. 3-9.

[^108]: Louisville Gas and Electric Company\'s Energy Partners Program
    is designed to reduce the energy consumption of low-income and
    \"payment-troubled\" customers. Program goals included saving
    15%-20% of participants\' energy usage; reducing bills and therefore
    disconnections, arrearage levels and collection actions; and
    improving the health and safety of participants. Blasnik, \"Impact
    Evaluation of Louisville Gas and Electric Company\'s Energy Partners
    Program: Final Report,\" (1997), p. 1.

[^109]: [Id.]{.underline} at 39.

[^110]: [Id.]{.underline} at 40.

[^111]: Skumatz at p. 8.305.

[^112]: Benefits that may be considered transfer payments are noted in
    the attached table with an asterisk.

[^113]: [See]{.underline}, *e.g.*, Skip Laitner, *et al*., \"Energy
    Efficiency as an Investment in Ohio\'s Future,\" p. 30 (American
    Council for an Energy Efficient Economy, 1994).

[^114]: [Id.]{.underline} at 31.

[^115]: [See]{.underline}, *e.g.*, Paul A. Samuelson,
    [Economics]{.underline}, pp. 210 - 215 (McGraw-Hill, 1976).

[^116]: [See]{.underline} § III.D.7, below.

[^117]: Spade, *et al*., \"The Energy Affordability Crisis of Older
    Americans: An Examination of the Hazards to Health and Well-being
    Posed by the Growing Incidence of Unmet Home Energy Needs,\" p. 28
    (National Consumer Law Center, 1995).

[^118]: Skumatz at 8.307.

[^119]: [See]{.underline} § II.B, above.

[^120]: Spade at 36.

[^121]: Berry, *et al*., at 38, 39. The report does not distinguish
    between public and private costs of fire avoided by the
    Weatherization Assistance Program.

[^122]: [Id.]{.underline} at 7.

[^123]: [See]{.underline} § III.D.3, below.

[^124]: Nevin, *et al*., \"Evidence of Rational Market Valuations for
    Home Energy Efficiency,\" [The Appraisal Journal]{.underline}, p.
    403 (Appraisal Institute, 1998).

[^125]: Interview with Art Wilcox, South Middlesex Opportunity Council
    (1999).

[^126]: [Id.]{.underline}

[^127]: The energy burden refers to percentage of household income
    devoted to home energy costs.

[^128]: Tannenbaum, et. al. \"Low-Income Energy Services in a
    Competitive Environment,\" Energy Center of Wisconsin. 1998. Also,
    Argonne National Laboratory, \"Residential Energy Consumption
    Survey\" reported in Rabago, et. al. \"An Alternative Framework for
    Low-Income Electric Ratepayer Service.\" 1992. p. 2.

[^129]: Computed by J. Oppenheim, \"The Utilities,\" [Access to Utility
    Service]{.underline}, National Consumer Law Center, 1998 Supplement,
    pp. 30-31. from U.S. Department of Energy/Energy Information
    Administration, \"Electric Sales and Revenue, 1996,\" Table 14
    (1997); U.S. Census, March 1998; \"Current Population Survey,\"
    Table H-8; U.S. Census, 1990 summary tape, file 3A, Tables H3, P3,
    P80, P121.

[^130]: The concept of \"Shelter Poverty\" was developed initially by
    Michael E. Stone in the mid-1970s and more recently in [Shelter
    Poverty: New Ideas on Housing Affordability]{.underline}, (Temple
    University Press, 1993) Shelter Poverty is a framework used to
    demonstrate that non-shelter necessities must compete for left-over
    dollars after shelter (housing and utility) costs are taken \"off
    the table\" to avoid homelessness.

[^131]: In a 1996 national study, the U.S. Department of Energy found
    that weatherization saved 33.5 percent of the gas space heating cost
    of an average low-income household. Berry, *et al*., p. 22.

[^132]: There is overwhelming public support for programs to ensure that
    all households have their basic energy needs met. For example, a
    national survey found that 89 percent of those with an opinion favor
    federal low-income energy payment assistance and 79 percent of those
    with an opinion favor an increase in such funding. Behavior Research
    Center, \"Public Opinion National Survey on Low-Income Home Energy
    Assistance Program,\" p. 2 (1998). In a 1997 survey conducted by El
    Paso Electric Company, respondents in aggregate rated the factor of
    meeting everyone\'s basic energy needs as highly important. This
    factor received an aggregate rating of 8.9 on a scale of 0 (not at
    all important) to 10 (extremely important). Guild, *et al*.,
    \"Southwest Town Meeting on Electricity Issues\" (El Paso Electric
    Company, 1997). In addition, results of a 1987 residential survey of
    Connecticut residents demonstrate strong public support for energy
    cost assistance to low-income and elderly persons. Further, the
    study identified strong public support for the notion that access to
    energy for residential use is a right in our society. John M.
    Kennedy, \"Public Support for Residential Energy Assistance,\" [71
    Sociology and Social Research]{.underline} 308 (1987).

[^133]: Montgomery *et al*., Housing in America: Problems and
    Perspectives, 1979. pp. 3-6.

[^134]: This is a similar concept to that which was behind the
    development of the \"Home Energy Rating System\" that has been
    implemented in a number of different states (*e.g.*, Vermont).
    Simply put, participating financial institutions offer reduced
    mortgage rates for purchase of dwellings that exceed certain energy
    efficiency standards.

[^135]: Bartik, *et al*., \"Maximum Score Estimates of the Determinants
    of Mobility: Implications for the Value of Residential Attachment
    and Neighborhood Amenities,\" Upjohn Institute Staff Working Paper
    90-01, pp. 1, 10-11(1990).

[^136]: [Id.]{.underline} at 10-11. A \"typical\" low-income household,
    based on overall means of the sample population, consisted of a
    non-minority household, with no spouse present, two children, and a
    head age 44, which had been at its current residence for 48 months.

[^137]: [See]{.underline} § II.B and III.B.2, above.

[^138]: [See]{.underline} § II.A, above and III.D.3, below.

[^139]: Skumatz at 8.307.

[^140]: [See]{.underline} § II.A, above.

[^141]: Liz Robinson, \"An Examination of the Relationship between
    Utility Terminations, Housing Abandonments and Homelessness,\" pp.
    1, 2 (Energy Coordinating Agency of Philadelphia, 1991).

[^142]: William K. Woods, *et al*., \"Homelessness and Low-Cost Housing
    in Northern Kentucky,\" p. 2 (Northern Kentucky Coalition for the
    Homeless and Applied Information Resources, 1990).

[^143]: Skumatz, p. 8.307.

[^144]: Nevin, *et al*., at 403.

[^145]: [Id.]{.underline}

[^146]: Berry, *et al*., at 38.

[^147]: Interview with Raymond Coward, Dean of the School of Health and
    Human Services, University of New Hampshire from \"USA Today
    Magazine,\" April 1998, v 126 n2635 p. 5.

[^148]: Bonnie Guiton, \"Special Report on Cold Stress and Heat
    Stress,\" p. 1 (U.S. Office of Consumer Affairs).

[^149]: Colton, 1993.

[^150]: Cambridge Systematics, Inc., \"Hard to Quantify Benefits and
    costs Scoping Study,\" prepared for the New York Low-Income
    Evaluation Task Force. 1994

[^151]: Interview with Stephen Cowell, Conservation Services Group.
    Documentation to be provided.

[^152]: Sources for the table are indicated in the text and footnotes of
    the paper.