Protecting Low-Income Ratepayers as the Electricity System Evolves

Abstract

I. INTRODUCTIONElectric utilities in the United States can no longer rely solely on producing and selling kilowatts to generate revenue. The challenges facing these companies today include: flattening electricity consumption, pressing resiliency and security concerns, and rising demand for distributed resources (DER). In addition to implementing standard system upgrades, utilities are being called to integrate decentralized assets, facilitate customer generation and use options, and invest in smarter grid technology-all while operating more efficiently and with less carbon output.These realities are fundamentally changing the way that utilities will be operated and regulated in the near future. Several states, like New York, Minnesota, Massachusetts, California, and Hawaii, are investigating how to prepare for and guide this evolution. At the forefront of these discussions are important questions over how utility business models and rate structures must change, as well as how tomorrow's electricity system will continue to deliver affordable, reliable, and universal service.Under-examined throughout this process, however, is the concern of how this grid evolution will impact the most vulnerable in our communities: ratepayers. Indeed, these changes raise a host of consumer protection issues from addressing stringent distributed financing rules1 and the landlord- tenant impediment to upgrades,2 to ensuring cost containment as smart metering enables new pricing structures.3 This article analyzes just one aspect of this multifaceted conundrum: how modern rate structure reforms will likely impact ratepayer assistance programs. The goal is to explain this problem and provide a preliminary set of policy solutions for industry members, stakeholders, and regulators. No single policy will provide the answer for most states. However, using some of the suggestions outlined in this article, in combination with an inclusive dialogue, we can better ensure a more just and equitable outcome for consumers in the electricity system of tomorrow.To that end, this article proceeds as follows: Part II describes the chronic energy burden weighing down households, and explores the various federal and state policies in place to lighten this load. Part III follows with a brief discussion of the current set of challenges prompting grid modernization efforts, and describes what implications those efforts present for ratepayers. With this background as context, Part IV lays out a series of policy approaches that can help regulators and reformers address these concerns and meet their intended objective: modernizing the electricity system while ensuring affordable service, universal access, and equal participation for all ratepayers.II. THE ENERGY BURDEN FACING LOW-INCOME HOUSEHOLDS AND THE CURRENT STATE OF ASSISTANCE PROGRAMSTo better understand the proposed grid reforms outlined in Part IV, it is necessary to first set out the status quo for households in the United States today. This Part discusses the primary metric by which affordability is often measured by utilities and regulators: the burden. The second subsection addresses federal and state-level policies and programs to help alleviate this burden.A. What Is the Energy Burden?According to the most recent data from the U.S. Census Bureau, 46.7 million people were in poverty in the United States in 2014-nearly 14.8% of the population. 4 But those numbers tell only part of the story. Generally, although each state and utility-run assistance program defines low-income differently, most peg eligibility to certain thresholds at or up to 200% of the federal poverty level (FPL)-which brings the total of people potentially eligible for assistance programs in the United States to around 106 million.5In the context of assistance, many programs look to not only a person's income in relation to the FPL but also his or her total energy burden- that is, the percentage of a customer's income spent on energy. …