How Discount Power For Poor Will Raise Your Bill

By Steve Haner

Virginia’s two major electric utilities estimate that as many as 150,000 of their poorest residential customers will see their monthly bills reduced next year using money extracted from all their other customers on their own power bills.

Appalachian Power Company projects about 30,000 of its low income customers will receive subsidies of $500-$600 per year. Dominion Energy Virginia projects bill subsidies to about 120,000 households of about $750 per year.

Both companies told the State Corporation Commission recently that to pay for this, about $1.12 will be added to the cost of every 1,000 kWh of electricity used by homes, businesses, and industries in Virginia. The cost per kWh is the same for all customer classes, and thus represents a larger percentage price increase for the commercial and industrial users. 

Neither utility is sure that $1.12 or so is going to be the correct amount, but once the process starts annual adjustments can be made, just as with other costs collected through rate adjustment “riders”. A similar Ohio program costs customers three times as much, about $3.70 per 1,000 kWh, APCo reported. It is fair to expect Virginia costs will also rise.

This is the promised Percentage of Income Payment Plan, or PIPP, mandated by the 2020 Virginia General Assembly as part of its massive energy revisions earlier this year. The SCC has opened dockets for both utilities to determine the correct amount of “universal service fee” (actually a tax) to apply on bills starting in 2021. Once the various stakeholders finish with reports and interrogatories, hearings will be held in October.

Home energy is a major part of every household budget, of course, and represents a higher percentage of income for those with less cash. A Charlottesville-based advocacy group recently issued a report setting 6% of income as the definition of “energy burden,” and went around the city detailing where close to 5,000 such households exist, how many are using electricity or gas, and how many would benefit from efficiency measures to reduce demand.

That spending level – 6% — is also used in the PIPP statute, setting that as the highest percentage of income a household should need to pay to the utility if it does not use electricity as its main heating source. If the residence does use electricity for heat, the bill is capped at 10% of household income.  A family with $2,500 per month in income would thus pay no more than $150-250 per month for power depending on the heat source.

A huge number of administrative details remain to be hashed out, and the General Assembly ducked many key questions. Eligibility is not directly tied to income, but to participation in other well-known assistance programs, such as the existing Low Income Home Energy Assistance Program (LIHEAP), SNAP food benefits or Medicaid.What counts as “income” for the PIPP cap determination is yet to be determined.

The existing energy assistance program (LIHEAP), which is based on income, subsidized energy bills for almost 140,000 Virginia households last year. It is funded by the federal government, with about $95 million allocated for Virginia this fiscal year. It extends beyond the customers of the two large power companies and applies to rural electric cooperative customers, natural gas users and even assists with firewood.

How will the existing LIHEAP program, managed through the social services departments, coordinate with PIPP? Which should the customer turn to first, and is a customer eligible for assistance from both? So far, that issue is not addressed by either utility proposal. And in describing the challenges in Charlottesville, the advocacy group simply ignores LIHEAP and other assistance. One must look elsewhere to learn LIHEAP provided cash for energy bills to more than 700 Charlottesville families and another 950 in surrounding Albemarle County.

Both Dominion and APCo also have internal charitable arms, using company funds and outside donations to pay customer bills. Dominion Energy Share’s recent report claims almost 68,000 families or individuals received help with their bills, most of those funds of course reducing the company’s own accounts receivable. Some level of write-offs for unpaid bills is also already assumed in existing rates. Will the move to PIPP mean utilities get closer to full payment from all customers with no losses?

In the middle of all the other debates over energy six months ago, PIPP received almost no attention. The General Assembly majority simply decided that Virginians should not have to pay more than 6% or 10% of their “income” for electricity and sent the bill for the balance to other customers. It did this only for the major power company customers, setting a precedent that – in the name of equity – will be followed for rural electric cooperatives, natural gas, and propane providers.

The big question mark, both Dominion and APCo tell the SCC, is whether everybody eligible will actually take advantage of this. APCo assumed one half would, and Dominion provided estimates for different percentages, up to 100% participation. Frankly, until this starts it is largely guesswork.

There is one additional wrinkle, which Dominion did nod to in its filing. Every Dominion customer eligible for PIPP, whether or not they enroll, will be exempt from the coming tidal wave of capital costs for Dominion’s offshore wind development. That will lower their bills significantly, and raise others noticeably, for several decades as billions are collected for those turbines and the related profits.

The utilities also suggested that even the PIPP beneficiaries should pay the PIPP tax on their bills. Since their ultimate bill is capped anyway, it won’t change the amount they owe. (Except, of course, for any lower income customer who just missed the cut off or chooses not to use PIPP.)

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36 responses to “How Discount Power For Poor Will Raise Your Bill

  1. Who pays for the 10% military discount at Lowes?

    If you think distance learning is tough on the poor, imagine how much less effective it will be without electricity.

    Sounds like a good argument for a greater level of progressive income taxing. In fact, putting an income ceiling on expenditures for necessities, like healthcare, and now the utilities, like property-based tax credits, may even be more evidence of correlation to the many-times failed attempts at a “trickle down”economy. Correlation?! Hell, it’s causal!

    • The veterans themselves, who spend 20% more because they are getting the discount. Ah, but the thought experiment should be, if veterans shopping at Lowe’s got everything they wanted with a price cap, how would they then behave?

      The purpose of this is to protect a favored class of customers from the coming tsunami of electricity price increases, as evidenced by the provision protecting them from the offshore wind RAC.

    • For that matter, whenever any corporation says that they are “giving” to some Charity? The investors are? heh heh ….

    • Lowe’s is not a monopoly.

    • The Company eats that cost short term because they know it will entice the Veteran to return and spend more. It also entices them to tell their buddies who in turn do the same thing.

      It’s called a business model and it’s pretty darn successful.

      Some veterans don’t ask for the discount because it was their honor to serve this country.

  2. Steve is, fairly meticulous in laying out issues and in cases like this how there may well be multiple programs to “help” and all of them offloading costs to others – via taxes are embedded subsidies.

    Electricity is not the only thing – telephone – both landline and cellphone and internet are some more. Then we have WIC, SNAP, NLSP (free and reduce), TANF, Medicaid and a dozen or more others including SSI (social security income).

    Of course – we have most that are taxpayer-funded and others that are embedded subsidies that ratepayers pay.

    So we have a labyrinth of all these overlapping programs, each with it’s own requirements and each having to have someone administer it.

    At least now days, they’re all keyed to one standard for poverty levels.

    Some advocate that we get rid of all these program and have a single agency deliver a basic income to these folks.

    It makes a lot of sense to me but politically the idea of “giving” someone basic income is not supported.

  3. All taxation should be in the form of visible transparent taxes. The latest pig’s trick from The Imperial Clown Show in Richmond is to hide taxes inside the prices of other things.

  4. 150,000 might be a low number.

    According to Virginia Dept of Social Services,
    72,296 Virginia Public Assistance families participated in SNAP in June
    and 312,390 Non Public Assistance families participated in SNAP in June.

    Dept of Medical Assistance says 441,087 adults are newly enrolled in Medicaid and 126,394 are parents as of 7/15/20; 1.5 million are enrolled including 684,000 children. Not sure how to translate that to households using electricity.

  5. Good reporting, Steve. As Rippert observes above, this redistributionist scheme is a hidden tax — one of many. Liberals and progressives have abandoned (at least temporarily) the idea of redistributing wealth through Virginia’s tax code. Increases in the income tax are highly visible and create massive blowback. Instead, legislators are redistributing wealth through indirect means such as PIPP. You can see the same phenomenon at work in health care, housing, transportation — wherever government has a hand in the economy.

    Add up all these things, and they create a significant burden on the middle class…. which progressives then turn around and blame on the failings of the market economy.

  6. +1 Rippert..
    It’s just Socialism,,, plain and simple

  7. The bigger issue might be, and I realize this is nationwide, is that business pays much less for power. So when business demands renewables, that means they are asking individual rate payers pay that high cost for them. Then we discount lower incomes, and who knows what else. But the bottom line is the individuals rate payers are unprotected from the costs. The cost does not have to be higher, but if the state selects the highest possible cost source (nuclear/off-shore wind) then we are talking very high cost. Can you say “New Jersey” (who went hog wild for nuclear years ago and had very high elec costs for some decades…and sill is high side of costs).

    I would say Virginia tax code is designed to be extremely tax friendly to those below about $100k income. We slam the middle income category because, well, they tell me that’s where the money is that we want to tax.

    • Economists get rich providing testimony both ways, but in theory all classes of customer are supposed to pay a fair share. It costs the utility more to serve a city full of individual homes than it does to serve a large industry on a single meter or a small number of meters, pulling the same load.

      You are correct that the individual ratepayer is seldom well represented in the process. The industrials have people like me on the payroll, and teams of lawyers, and there is now this army of advocates for “economic justice.” The SCC staff and AG’s office are charged with looking out for average consumers but it is not their sole focus, and the General Assembly doesn’t give a tinker’s dam about them. So many more people are reading this blog now maybe I’ll go through this all again….

  8. James Wyatt Whitehead V

    When I talk to family, friends, and neighbors about PIPP they have no idea what I am talking about. When I try to explain it most sort of shrug their shoulders and not worry.

    • Hence my decision to stop writing so much about SCC matters and the impact on average customers. Indeed, they seem not to care.

      • I suspect many are much more concerned about how the cable and wireless companies are ripping them off or how much gasoline costs.

        I’d venture that most folks who are not hard core conservatives actually want to help the less fortunate… not just those pesky “leftists”.

        For instance, they support health care for folks – that’s a far bigger big ticket item than a couple of bucks on the electric bill.

        And health care is how the GOP lost Virginia.

  9. So, I’m supposed to be upset after a July that saw only four days below 90 degrees and then four days of 100 degree heat that I might have to pay between $14 and $44 a year so that my fellow Virginians can run their A/C and not die of heat stroke? And that the poorest 1.7 percent of Virginians won’t have to pay the freight on transitioning away from the type of power source that makes July’s like this one more common?

    Sorry, I’m good. This is a fine idea.

    • How does one skip to heat stroke without having one of the previous heat injuries?

      Furthermore, how is someone who’s located in a domicile exposed to high temps when they have fans, water and shade from the sun?

      I think perhaps before you opine, you should have a semblance of what you’re discussing, and clearly that isn’t the case.

      Perhaps you should just give up all your possess and pay others electric bills instead of using my money.

      • The problem with being a pedant is that every so often you’ll run into someone or something who knows more than you; this from the CDC: “Air-conditioning is the number one protective factor against heat-related illness and death.”

        If I thought giving away all my possess (sic) would make a meaningful difference in the ability of my fellow Virginians to pay their electric bills I would. It won’t so I’m fine with the plan outlined above. You’re not because you’d rather keep all your money no matter what else happens. It’s your right to have those priorities, but they’re not ones many major schools of thought would label as morally or ethically virtuous.

        • “Can COVID-19 spread through air conditioning?
          We don’t know for certain if the COVID-19 virus spreads through air conditioning. But we do know that when it’s hot and humid, people are more likely to stay indoors, with the windows closed — giving the virus more opportunity to spread.

          Coronavirus spreads through droplets that an infected person emits through coughs or sneezes and through smaller, infectious viral particles that can drift around in the air for several hours. Outdoors, air currents can scatter and dilute the virus, making transmission less likely. You’re more likely to inhale the virus indoors, with the windows closed, whether or not you have the air conditioning on.

          If you must be indoors with anyone outside of your household, increase air circulation by keeping the windows open as much as possible.”

          https://www.health.harvard.edu/diseases-and-conditions/covid-19-basics#:~:text=We%20don't%20know,as%20much%20as%20possible.

          The problem with that statement though is you don’t know more, you literally know nothing of what you’re talking about. AC does squat against humidity (things you’d know if you understood science, like you claim) and the industry standard for cooling is 20 degrees delta. That means if it’s 100 out the best you can hope your HVAC to achieve is 80.

          Furthermore, what’s the percentage of homes with AC in the areas where it would be required in your mind. As someone who was has lived in Georgia (Army/Railroad)the heat index hits 120 and we lived without AC just fine.

          Oh so now there is a qualifier for your to put your money where your mouth is, I wasn’t aware of that. I should’ve surmised that thought given the relative smug nature in which you pontificate.

          “You’re not because you’d rather keep all your money no matter what else happens. It’s your right to have those priorities, but they’re not ones many major schools of thought would label as morally or ethically virtuous.”

          You’re right I’d rather keep the money that I earned working, I already pay enough in taxes. The invocation of “morality” would require that me keeping my money was wrong. There is nothing wrong with me wanting to keep the money I worked for, as I worked for it. If I feel the need to given charitably, I will do so. When it’s forced it’s not charity.

          As for “ethical”, again nothing unethical about me wanting to keep my money.

          PS: I don’t think you’re in touch with any major schools of thought, let alone society. You’re just the standard do as I say, not as I do do Communist wannabe.

  10. Baconator with extra cheese

    I actually love this increase in power bills for the middle class. Maybe when they finally have taxes raised, power bills raised, and a reduction in services (schools and cops) they’ll start paying more attention. Like other when I bring these subjects up most people have no idea or they are very empathetic and don’t mind paying a “little” more for the poor or the environment. I’m hopeful the “little” mores add up sooner rather than later and they pay attention.

  11. Baconator with extra cheese

    I for the life of me can’t figure out how the City of Richmond will ever be able to covert all the government buildings away from natural gas by the deadlines being pushed by the GA and Rep McEachin. And how the city will be able to afford to use electric heat in those inefficient buildings.
    Well…. maybe school will just be out forever in the city.

  12. I think what might be interesting would be to compare the cost to consumers bills of:

    1. – Dominion keeping the excess profits
    2. – Dominion keeping the tax rebates
    3. – Dominion’s actual profit on the coal ash cleanup
    4. – the cost of the coal ash cleanup without the profit

    Now, THAT would be an interesting blog post!

    • At some point I might…..I want to wait until it is clear that half or less of what you pay each month actually buys your own electricity….

      • James Wyatt Whitehead V

        When people realize this Mr. Haner I think you will see some seek to leave the power grid for good. The Tesla Powerwall looks promising. Somehow it stores solar electricity for night time use. Not sure if it works for wind. We have had Bacon’s Rebellion, the Whiskey Rebellion, maybe the Electric ReVOLT is next?

        • “Somehow it stores solar electricity for night time use. Not sure if it works for wind.”
          Really,,, you gotta be kidding… Power Wall is nothing but fancy marketing words for a battery bank,,, that means it’s a bunch of batteries,,,,
          It will store electricity no matter how you manufacture it..

    • UpAgainsttheWall…
      If you want to pay other people’s bills that’s fine… but don’t ask the rest of us to pay other people’s bills…
      Having been in business for years I’ve observed that all these Po Folk have plenty of money for lottery tickets, beer, cigarettes, cable, fast food, etc.. . all stuff I don’t have.. these Po Folk are Poor because they puposefully make bad, stupid, irresponsible financial decisions..
      They will always be around us but we sure don’t have to subsidize them.. and we sure as heck shouldn’t be Forced by a bunch of liberal left wing democrats to subsidize the Irresponsible among us…

  13. re: socialism – geeze … Ohio is more Republican than Virginia AND more “socialist”…

    ” Percentage of Income Payment Plan Plus (PIPP)
    The Percentage of Income Payment Plan (PIPP) helps eligible Ohioans manage their energy bills year- round. Payments are based on a percentage of household income and are consistent year-round.

    If your home is heated with gas, you will have a monthly payment of 6% of your household income for your natural gas bill, and 6% of your household income for your electric bill. If you heat with electric, your monthly payment is 10% of your household income. The balance of your utility bill is subsidized by the state of Ohio. There is a minimum monthly payment of $10.00.”

    and look at the Rs for their Congressional delegation:

    Ohio’s 1st district: Steve Chabot (R) (since 2011)
    Ohio’s 2nd district: Brad Wenstrup (R) (since 2013)
    Ohio’s 3rd district: Joyce Beatty (D) (since 2013)
    Ohio’s 4th district: Jim Jordan (R) (since 2007)
    Ohio’s 5th district: Bob Latta (R) (since 2007)
    Ohio’s 6th district: Bill Johnson (R) (since 2011)
    Ohio’s 7th district: Bob Gibbs (R) (since 2011)
    Ohio’s 8th district: Warren Davidson (R) (since 2016)
    Ohio’s 9th district: Marcy Kaptur (D) (since 1983)
    Ohio’s 10th district: Mike Turner (R) (since 2003)
    Ohio’s 11th district: Marcia Fudge (D) (since 2008)
    Ohio’s 12th district: Troy Balderson (R) (since 2018)
    Ohio’s 13th district: Tim Ryan (D) (since 2003)
    Ohio’s 14th district: David Joyce (R) (since 2013)
    Ohio’s 15th district: Steve Stivers (R) (since 2011)
    Ohio’s 16th district: Anthony Gonzalez (R) (since 2019)

  14. All this moaning about how the liberals are redistributing wealth. These folks need to take a good look at Virginia’s tax system. JLARC did a few years ago. They found 20 tax preferences, totaling $2.9 billion annually, for which the distribution of benefits to taxpayers “skewed to higher income Virginians.”
    http://jlarc.virginia.gov/pdfs/reports/Rpt425.pdf

  15. Interesting document but at 170 pages – a handful!

    • Skim the summaries and Chapter 3.

      • Yes.. thanks… I did not make the connection with actually doing volunteer taxes but now I do.

        There are scores of these things (70)… we usually hand a page with all of them on it and ask clients to look over it while we key in their basic data.

        A very few folks are very much aware of them and come in knowing which ones benefit them but wage earners and retired with pension almost never qualify for any unless they are veterans.

        If someone has paid for long term care insurance, or college or has interest earning municipal bonds – it can benefit.

        but I see where JLARC has a concept of these expenditures “paying for themselves”

        BR actually did a blog post on this some years back in the good old days before the culture wars:

        https://www.baconsrebellion.com/wp/virginia-12-5-billion-in-tax-preferences/

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