A PIPP of an Idea: Electricity Transfer Payments

By Steve Haner

Green energy advocates never tire of telling us that accomplishing their zero-carbon electricity supply will lower our costs. If so, why does their dream bill include a new income transfer entitlement program for low-income customers?

It is called the Percentage of Income Payment Program with a handy acronym PIPP. It first appeared in Delegate Lamont Bagby’s House Bill 1483. The Henrico County Democrat saw his bill pass the House Labor and Commerce Committee February 4, but for good measure it is now enshrined on lines 1828 through 1909 of the omnibus clean energy bill revealed February 6, House Bill 1526.

B. The monthly electric utility payment of any person participating in PIPP shall be capped at six percent, or, if the participant’s home uses electric heat, 10 percent, of the participant’s household income. A participant may further reduce his monthly electric utility payment through a conservation program incentive. Under this program incentive, if a participant lowers his monthly electricity usage below his historical baseline average, the participant’s electric utility bill for such month shall be reduced by 50 percent of the monetary amount by which such participant lowered his usage.

…Participants who transition to a budget billing system in accordance with this subsection shall be forgiven of any arrearages on electric utility bills accrued prior to participation in PIPP upon making timely and full PIPP payments to the electric utility provider for 12 consecutive months; all other PIPP participants shall be forgiven of arrearages accrued prior to participation in PIPP after making timely and full PIPP payments to the electric utility provider for 12 consecutive months.

Those eligible will be those already qualified for Medicaid (a longer list than it was), existing energy assistance programs, the Supplemental Nutrition Assistance Program (SNAP) and its related program for Women, Infants and Children (WIC), housing vouchers and other major programs. How many individual Virginians or customer households is that? Nobody knows or is saying.

The House bill will be on the floor for a full vote early in the week, and the Senate Commerce and Labor Committee is expected to see its version of this gigantic energy law re-write in a Sunday afternoon meeting. A full understanding of the bill will take time, longer than any of the legislators will be willing to take before voting. But PIPP stands out as something new and unexpected. Something similar exists in Ohio, where Dominion has a natural gas company.

Being in PIPP will require you participate to in an energy efficiency and weatherization program and submit to an annual energy use audit. For a cap on your monthly bill, and a payoff on any overdue bills from the past, most will probably be willing. The line should form quickly.

How will the state fund the new round of efficiency training, audits and make overs? How will it be possible to limit people’s bills while participating in the program, and then cover any arrearages from before the program, without costing the utilities millions of dollars in lost revenue? Other ratepayers will cover the bills, of course, feeding a new Percentage of Income Payment Fund at the Department of Housing and Community Development.

The Fund shall consist of moneys contributed by electric utility providers  after collection from ratepayers through “a non-bypassable universal service fee” pursuant to a new section 585.5 in Title 56. That directs the State Corporation Commission to set the rate purely on the basis of usage. Nothing segregates the cost by customer class. “Non-bypassable” means nobody in the utility service territory can escape paying it by using a different competitive supplier.

The new customer charge and the programs it funds appear to apply only to the territories of the two major suppliers, Dominion Energy Virginia and Appalachian Power Company. The final line in the section setting up PIPP exempts the regional cooperatives and their customers (apparently both from paying and from benefiting.)

Pulling out the coops makes it harder to estimate the impact of this, as they have plenty of customers now using public assistance. But the concentrated poverty is in the more urban areas where the monopoly utilities serve. About one in seven Virginians participates in Medicaid, and the other programs likely extend the potential reach of PIPP.  This could be 15% or more of residential customers.

Of course, you shouldn’t be turning to a blog to figure out the financial impact. The General Assembly members should have handy firm estimates on the number of people involved, how much their electric bills will be lowered, and how much other customers will have to pay in addition to provide those subsidies. But of course, there are no such estimates, no formal fiscal impact statement, not even on Bagby’s stand alone bill.

At the very least, somebody should produce financial details on that Ohio program, which proved elusive in a brief Internet search. Dominion lobbyist William Murray mentioned and praised the Ohio program in the committee hearing. He said the utility was “excited” to bring it to Virginia.

There is another bill, already approved in the House of Delegates, that authorizes yet another new rate adjustment clause (rider) on our bills for similar reasons. But it wants to use our money to subsidize solar installations for low-income or elderly customers. House Bill 1656 has a Republican sponsor and places a $25 million annual cap on how much can be extracted from other customers for this transfer of wealth. Given that there is no reason to think it will not pass and exist side by side with PIPP (on our bills, at least).

There is at least one more benefit for low-income Dominion customers in the giant clean energy bill. As with the earlier version of a bill directing the SCC to approve a massive offshore wind installation, the language on that embedded in House Bill 1526 also exempts them from the coming rate rider that will pay for that. An SCC estimate last week put that at about $13 per month per household, but whatever percent of customers are exempt, everybody not exempt will pay that much more.

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19 responses to “A PIPP of an Idea: Electricity Transfer Payments

  1. A basic principle of utility ratemaking is, the transaction takes place at the electric meter; the utility does not know, and does not want to know, who the customer is or what he does with the electricity delivered to him.

    Assuming this were to be enacted: I can’t begin to imagine the cost of the utility bureaucracy required to acquire and verify and administer the income and other personal data for every participating household (and how, by the way, is the utility to know if the billed customer is the “head of household” or a resident teenager, and what other incomes other occupants may have). There are huge customer privacy issues involved. There’s also the cost to administer all the bill adjustments, to conduct all the “free” energy audits and weatherization programs required as part of participation, and to assess and maintain the Universal Service Fund. To fund all this, the implicit tax (the Universal Service Fund) appearing on other customers’s bills would not be nominal but a hefty percentage; in the case of business customers this may immediately raise electric rates to non-competitive levels compared with other States, and in the case of residential customers this would substantially affect household budgets; I believe the political consequences to lawmakers would be well organized and severe in the next GA elections.

    One can only hope that the PIPP concept is so outrageous that it creates immediate revulsion even in this GA — resulting in that carry-over for further study you said won’t happen.

    • this is exactly what goes on with the ACA (ObamaCare) , i.e. household income, MAGI – Modified Adjusted Gross income

      https://www.peoplekeep.com/blog/how-to-calculate-modified-adjusted-gross-income-magi

      it’s done for other entitlements also – and for the Medicaid Expansion also, I believe.

      And, this might shock Steve, but if there is this much “overhead” involved, I wonder if the legislators who support the bill know it and if they do and still want to introduce more bureacracy in the name of “helping”, I got some complaints.

      But I will point out that I believe there is a law about cutting off electricity if it endangers the occupants… and if done, and someone dies, it can lead to spectacular bad press for the big bad evil corporate bad guy and perhaps the pain of the potential bad press is a motivator for support from the corporation.

  2. Steve. Thanks for ruining a a perfectly fine weekend
    Peter

  3. Bottom line: Virginia is treating electric rates just like taxes, another source of boodle subject to legislative wheeling and dealing. Dominion Energy helped create this new world, but it’s holding the tiger by the tail. At some point, the tiger will whirl around and bite Dominion in the ass.

  4. re: ” At some point, the tiger will whirl around and bite Dominion in the ass.”

    not if they can push the cost onto other ratepayers.. hasn’t stopped them before! 😉

  5. “Being in PIPP will require you participate to in an energy efficiency and weatherization program and submit to an annual energy use audit.”
    We can get some numbers from Dominion’s EnergyShare program…which doesn’t go half as far as the proposed bills.

    EnergyShare is our year-round energy assistance program, designed to help qualified customers with paying their energy bills. EnergyShare comes in two forms for those who qualify: bill payment assistance and home “weatherization,” to increase energy efficiency. Customers 60 years of age and older, as well as veterans and those living with disabilities, can receive additional assistance. For more information and to learn how to apply, visit the EnergyShare page. https://www.dominionenergy.com/company/community/energy-assistance/energyshare

    There’s not enough money available now to cover everyone who currently qualifies. The current EnergyShare program allows $600 total for heating and $300 for cooling assistance. Determination of eligibility is determined by agencies who administer the program like County Social Services, Salvation Army and others. Won’t this put more of a strain on their staff resources? There’s no cost shown for weatherization projects.

    Dominion’s 2019 EnergyShare report
    https://www.dominionenergy.com/library/domcom/media/community/energy-assistance/energyshare/energyshare-annual-report-2019.pdf?modified=20190702130937&la=en
    show a 2015 “$42 million incremental commitment for EnergyShare.”
    2018 says $130 million commitment through 2028″ after increasing funding to veterans and those with disabilities.

    For 2019, 67,800 families and individuals were helped with Bill Assistance.
    4500-Veterans
    4300 with disabilities
    59000 BillPay Clients assisted
    8900 Multifamily homes weatherized (91% of homes weatherized)
    900 single family homes were weatherized.

    Dominion’s Virginia outage summary page says Total Customers Served: 2,646,503. Using Steve Haner’s guestimate of 15% is 396,975 customer accounts would qualify under the proposed bills.

    And all this goes on Dominion customers, including those on fixed incomes but above Medicaid levels?

    • The Ohio program seems to be the inspiration and the closest parallel. More info on that would be good. Another key question is, will this replace or be additive to the existing programs. I have a sinking feeling I know the answer.

    • Maryland has had its own MEAP (Maryland Energy Assistance Program) which tried to base its outlays on a similar income-based classification of customers. It looked like a disaster initially when the utilities were drafted to do the classification and income determinations; now it’s handled by the State agencies already involved in poverty assistance and they simply certify individuals to come to the utilities and get the assistance that is provided. Maryland also has had restrictions on disconnections during a defined winter period. This has worked well for a good many years in Maryland; Virginia does not need to reinvent the wheel on this.

  6. Virginia Medicaid eligibility is 138% of poverty level.

    Ohio energy assistance is based on 150% of poverty level
    https://development.ohio.gov/is/is_pipp.htm
    Covers amt over 6% of monthly income for gas and electric; 10% electric heat
    Income level for Weatherization is up to 200% of federal poverty level.
    Subsidized by the state.
    There are multiple programs for assistance.
    Details of one state plan: https://development.ohio.gov/files/is/2017-2018%20FINAL%20HEAP%20State%20Plan.pdf

  7. Bill says: VA Department of Housing and Community Development is designated as the state agency responsible for administering such program.

    Ohio uses anti-poverty agencies to administer the program. Most are Community Action Partners, Commissions, etc. They appear to be from the
    “Economic Opportunity Act of 1964, which helped create hundreds of community action agencies throughout the United States.”

  8. Bill says: Up to 12 percent of the Fund may be used to pay the Department of Housing and Community Development’s expenses in administering PIPP.
    and
    DHCD shall Develop and maintain a statewide list of available private and governmental resources for low-income Virginians in need of energy assistance;

    But I see nothing about paying the agencies Social Service Departments for the extra work they’ll have to do….

  9. If folks are already getting food stamps or Medicaid or TANF, they’re already in the Social Services system – essentially already pre-qualified.

    I would agree, don’t want to see another process that duplicates others and imposes more burdens on already overworked folks.

    There are numerous benefits available to people based on income – already.

    We talk about Food Stamps (SNAP) but there is also USDA – which distributes a wide range of commodity foods through Food Banks and then through local food pantries.

    The qualification process is already in place and adding this one may well be one more check box on an existing form.

    But this is my question when we talk about minimum wage – does a minimum wage reduce our entitlement costs?

    There is another concept called Basic Income:

    https://en.wikipedia.org/wiki/Basic_income

    and it sorta aggregates all these various individual entitlements into one universal basic income – which would, in theory, do away with all these separate silo programs.

  10. Does anyone know who wrote this bill and handed it to the Democrats?

    • Watching from the outside, I’d say a large and somewhat chaotic committee. But “Virginia’s Energy Curmedgeon” (as they call me) was not in the room. From what I know of Delegate Sullivan, I suspect he played a big role.

      • My experience suggests the bill described in this piece is far more complex than the General Assembly could put together on its own. It rather suggests that it is edited from a model bill authored by an interested think tank.

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