Regarding Utilities and Weatherization

Transcription

1 BEFORE THE PENNSYLVANIA HOUSE MAJORITY POLICY COMMITTEE Testimony Of: SONNY POPOWSKY CONSUMER ADVOCATE OF PENNSYLVANIA Regarding Utilities and Weatherization Philadelphia, Pennsylvania December 4, 2009 Office of Consumer Advocate 555 Walnut Street Forum Place, 5th Floor Harrisburg, PA (717) Office (717) Fax

2 Members of the House Majority Policy Committee My name is Sonny Popowsky. I have served as the Consumer Advocate of Pennsylvania since 1990, and I have worked at the Office of Consumer Advocate since Thank you for the opportunity to testify here today regarding the issues of utilities and weatherization. My Office was established by the General Assembly in 1976 to represent the interests of Pennsylvania utility consumers before the Pennsylvania Public Utility Commission and other state and federal regulatory agencies and courts in matters involving their utility service. The utility consumers that my Office represents include electricity and natural gas consumers here in Philadelphia and across the Commonwealth. Many elements of the energy utility industry have changed dramatically in the 30 years that I have worked on behalf of Pennsylvania consumers. But one thing hasn t changed. That is, the best way for consumers to save money on their electric and natural gas bills is to conserve energy by using energy wisely. That does not mean that consumers should sit in the cold or in the dark. It means that we should use our energy resources as efficiently as possible and that consumers should be able to live comfortably while using less energy and saving money on their monthly bills. Without question, one of the critical components of this energy efficiency strategy is weatherization. I am certain that you will be hearing testimony today from witnesses who are far more knowledgeable than I am on the nuts and bolts of weatherization and the details of some of the weatherization programs that are in place in Philadelphia and throughout Pennsylvania. I would like to put this issue, however, in the broader utility context. As many of you are no doubt aware, the rate caps that have protected many Pennsylvania consumers from increased electricity rates for the last decade are coming off at the end of this 1

3 year or at the end of For residential customers of PPL, which serves much of central and northeastern Pennsylvania, we know that average bills for residential customers will be increasing by approximately 30% for service beginning January 1, Here in Philadelphia, the rate caps of PECO Electric will be expiring at the end of 2010, but the expected percentage residential rate increase is expected to be significantly lower than the PPL increase for two reasons. First, PECO s rates were much higher than PPL s to begin with before rate caps were implemented, and second, it appears that the prices for the wholesale electricity generation that is being purchased now for the year 2011 are somewhat lower than the prices of the generation that PPL purchased for its customers for the year Nevertheless, it is clear that, across Pennsylvania, electric customers will be losing the protection of longstanding rate caps and that most customers will be paying higher electric rates than they were paying before those rate caps began. It is important to recall though that the General Assembly took steps, even dating back to our Electric Restructuring Act in 1996 to try to ensure that consumers -- and particularly low income residential consumers -- would not be literally left out in the cold as a result of the changes in the electric industry under that law. Specifically, in the Declarations of Policy in the 1996 Act, the General Assembly stated that: The Commonwealth must, at a minimum, continue the protections, policies and services that now assist customers who are low-income to afford electric service. The Act also stated that: There are certain public purpose costs, including programs for low-income assistance, energy conservation and others, which have been implemented and supported by public utilities bundled rates. The public purpose is to be promoted by continuing universal service and energy conservation policies, protections and services, and full recovery of such costs is to be permitted through a nonbypassable rate 2

4 mechanism. While I have been speaking only about Pennsylvania electric utilities up to this point, I would note that very similar language was included in the 1999 Natural Gas Restructuring law that provided for greater competition for natural gas customers across the Commonwealth. The 1999 Natural Gas Restructuring law required that the Public Utility Commission must at a minimum, continue the level and nature of consumer protections and policies to assist retail gas customers to afford natural gas services and ensure that universal service and energy conservation policies, activities and services are appropriately funded and available in each natural gas distribution service territory. Pursuant to these statutory requirements, all of our major Pennsylvania electric and natural gas utilities have developed two types of programs Customer Assistance Programs (CAP), which provide substantial monthly bill reductions to low income, payment troubled customers to help those customers avoid termination and pay their more affordable monthly bills on a regular basis; and Low Income Usage Reduction Programs (LIURP), which provide weatherization and other conservation services to help low-income customers reduce unnecessary home energy usage and therefore make their bills more affordable on a long-term basis. It is important to note that while these programs are administered by our utilities, they are funded through the rates paid by other utility customers, and for most utilities, that funding comes solely from residential customers. Although these costs are collected from customers, my Office has long supported these programs as a supplement to federal LIHEAP and Weatherization programs to keep as many customers as possible connected to the utility system and to reduce both the financial cost and the human costs involved in traditional utility collection and termination procedures. 3

5 Of particular relevance to this Hearing, the Public Utility Commission has identified a number of important consumer and societal benefits from our utilities LIURP programs, which amounted to $21.6 million for electric utilities and $8.9 million for natural gas utilities in the year In its 2008 Report on Universal Service Programs & Collections Performance, the Commission noted with respect to LIURP that: The list of customer, utility and community benefits includes: bill reduction; improved health, safety and comfort levels; LIHEAP leveraging (Pennsylvania receives additional funds due to the LIURP resources that supplement LIHEAP funds); arrearage reduction; reduced collection activity; improved bill payment behavior; reduced use of supplemental fuels and secondary heating devices; more affordable low income housing; impact on homelessness; and less housing abandonment. The General Assembly renewed its efforts to address low income conservation issues in the enactment of Act 129 of As the members of this Committee are well aware, Act 129 imposed enforceable mandates on each of our electric distribution utilities to implement programs to help their customers reduce their energy usage at times of peak use and throughout the year. The Act included a specific requirement on the utilities that their energy efficiency and conservation plans must include specific energy efficiency measures for households at or below 150% of the Federal poverty income guidelines. Pursuant to this requirement, PECO, for example, has submitted and the Commission has approved a budget of more than $27 million over four years to provide LIURP-type conservation assistance to approximately 20,000 additional households as well as to provide energy-efficient compact fluorescent light (CFL) bulbs to LIURP participants. PECO also will work with other Weatherization providers to supply CFL bulbs to participants in those programs as well. In addition to these utility-administered programs under Pennsylvania law, there are, of course, other state and federal Weatherization programs that serve Pennsylvania consumers. 4

6 Most importantly, the Commonwealth has received an extraordinary level of federal stimulus funding -- $252.8 million through the American Recovery and Reinvestment Act -- which will allow a tremendous expansion of the Pennsylvania Weatherization Assistance Program (WAP), which is administered by the Department of Community and Economic Development (DCED). This funding will enable the WAP program to weatherize at least an additional 29,700 housing units over the next two to three years. Again, there are witnesses at this Hearing who are far more knowledgeable than I about the detailed workings of the state Weatherization program. My only suggestion in this regard is to encourage the WAP program managers and subcontractors to coordinate their efforts to the greatest extent possible with the utility-funded LIURP and Act 129 conservation programs to ensure that each participating household and the Pennsylvania economy as a whole gets the most bang for the buck from these important programs. Every time a household door is opened up to receive conservation assistance, we should try to maximize the cost-effective benefits that can be provided in that visit. Providing the maximum level of conservation assistance to as many eligible households as possible will protect the health and comfort of the participating Pennsylvania individuals and families, but it will also benefit the Commonwealth as a whole by reducing energy costs to all consumers, particularly during the coldest days of the winter and the hottest days of the summer when energy costs are at their highest. Finally, I would like to mention a benefit of conservation and weatherization that has not been mentioned very often in the past, and that is the cost of potential federal climate change legislation. On behalf of the National Association of State Utility Consumer Advocates, I have testified in Congress regarding the cost to consumers of cap and trade legislation that would put a price on the emission of carbon dioxide and therefore increase the cost of electricity from 5

7 fossil fueled-plants, such as coal and natural gas. There have been numerous studies on the most cost-effective ways to reduce carbon emissions, and the nearly universal conclusion is that the first and most cost-effective way to reduce carbon emissions and combat global warming is through conservation and energy efficiency. This only makes sense because the cost of many existing and readily available conservation measures is just a small fraction of the cost of constructing new non-carbon emitting power sources, whether they are wind, solar, or nuclear, or retrofitting existing coal plants with carbon capture technology. So, whatever the economic benefits of weatherization and other conservation measures are today, those benefits are likely to be even greater if and when the United States decides to address global warming by increasing the cost of carbon-based fossil fuels. I want to commend the Committee for holding this hearing on this critical issue and thank you for inviting me to participate. I would be happy to answer any questions that you may have