Hallinan Law Offices, PLLC

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1 Hallinan Law Offices, PLLC Sandra Squire Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston, WV RE: E-42T wad- 6 --D MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY both dba ALLEGHENY POWER 42T application to increase electric rates and charges N PJ Dear Ms. Squire: Enclosed for filing please find an original and twelve copies of the Notice of Filing of Direct Testimony and on Behalf of West Virginia Community Action Partnership. Copies have been served upon all persons listed on the service list. Yours truly, 0 Jacqueline A. Hallinan Counsel for WVCAP Enclosure cc: Attached Service List Bob Scott Lisa Kesecker Mary Chipps 100 Capitol Street, Suite 804 Charleston, West Virginia Telephone 304*346*1201 Fax 304*346*1203

2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO E-42T MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY both dba ALLEGHENY POWER 42T application to increase electric rates and charges a v, s2s m 2 % Zg-0 z gxg h) PEr- FG- -5mz T-I mfn, rrl ~ t z Z frl m c13. NOTICE OF FILING OF DIRECT TESTIMONY West Virginia Community Action Partnership ( WVCAP ) hereby files the testimony of its witness, Mary Chipps, in accordance with the Commission Procedural Order of August 22, WEST VIRGINIA COMMUNITY ACTION PARTNERSHIP ( WVCAP ) BY COUNSEL Jacgeline A. Hallinan (#5 189) HALLINAN LAW OFFICES, PLLC 100 Capitol Street, Suite 804 Charleston, West Virginia (304)

3 for the West Virginia Community Action Partnership Q. Please state your name and business address. A. My name is Mary Chipps. I am the executive director of the West Virginia Community Action Partnership, located at 950 Kanawha Boulevard, East, 2nd Floor, Charleston, WV. I have worked in Community Action in varying capacities for over 9 years. The West Virginia Community Action Partnership is an alliance of Community Action Agencies in West Virginia, serving common interest dedicated to eliminating the causes of poverty affecting individuals, families and communities. The Executive Directors of these organizations make up the board of directors of the West Virginia Community Action Partnership. Q. On whose behalf are you testifying? A. The West Virginia Community Action Partnership (hereinafter WVCAP ) board of directors asked me to present the views of the partnership, and advocate for low income customers of Allegheny Power Company in this proceeding. My testimony will reflect WVCAP s view that low income people are an important part of the customer base for Allegheny Power Company, and that these customers may be uniquely impacted by the proposed rate increase, and propose a partnership to provide weatherization and energy assistance services to low income customers similar to that entered into with American Electric Power. Q. What is your education? A. I have a B.S. in Mechanical Engineering and a M.S. in Mechanical Engineering, both from West Virginia University. Q. What do CAA s and WVCAP do? A. In West Virginia, Community Action Agencies each have a designated service area, managed by a local board of directors. CAA s design programs to meet the unique needs of their local communities, so not every CAA provides all of the following services, but all work with people, community groups, business and industry within their area to promote and support increased self-sufficiency. Programs provided by CAA s include: workforce development, employment Page I

4 preparation and dispatch, education assistance, emergency food, senior independence and support, clothing, home weatherization, energy assistance, affordable housing solutions, health care access, and much more. Operating from its base in Charleston, WVCAP provides support services recognized by Partnership members as key to their ultimate success. WVCAP s mission is to develop and maintain a coordinated understanding among its members for implementation and conduct of community action programs by insuring maximum understanding, support, and assistance of West Virginia s anti-poverty effort. Primarily, but not exclusively, our emphasis is to support communitybased initiatives fostering self-sufficiency. We seek opportunities to collaborate with public and private businesses and groups to give voice to the concerns of the poor, as those concerns impact the overall well being of all the people of West Virginia. Community action agencies in West Virginia. see clients in desperate circumstances. Families experience a range of financial problems, not only with their energy bills, but also due to unexpected illnesses, unplanned major expenses and transportation crises, among others. For many of our clients, advanced age, illness or disability make it impossible to earn enough income to meet basic financial necessities. Thus, in West Virginia, the job of community action agencies is to work directly with interfaith organizations, and other partnering groups in business and industry to piece together solutions on a case-by-case basis to encourage selfsufficiency, including keeping the customer s utility service from being disconnected and keeping energy bills paid and affordable. Q. Who does WVCAP serve? A. According to the 2004 revised Census Bureau statistics, 17.9% of all West Virginians live in poverty; at the 100% of OMB Poverty Levels, that equates to an income at or below $1 6,600 for a family of three. The self-sufficiency standard for WV shows that a family of three needs at least $27,645 to make ends meet. 26.8% of families from WV earn less than the median Self-Sufficiency Wage. This shows that over I in 4 families in WV are living below a Self-Sufficiency Wage. In 2005, West Virginia Community Action Agencies helped over 32,658 individuals and 29,659 families. Over fifty percent of our customers have income of less than 50% of the poverty level, equating to an income level at or below $8300 for a family of three (at or below $4900 for household of one). Page 2

5 % O/o 21% up to 50% Of Poverty Level 5 1 O/o Of the income reported, one third of our customers are employed and slightly less than one third rely on Social Security or SSI. Roughly 5 percent are receiving TANF, General Assistance, Unemployment Insurance, or have no income. No 3 3 O/o 1 V O The household information reflects 21 % of our families represent single parent homes, while 15% represent the traditional two parent homes. Additionally, 43% of the households are made up of single persons or two adults. Page 3

6 Single Parent/ Single Parent/ Other 1g0/0 r Male ad u Its/ No Children 8% Single Person 3 5 O/o Q. How long has WVCAP existed? A. Formerly known as the West Virginia Community Action Directors Association (WVCADA), WVCAP has existed 40 years, since Q. Why has WVCAP intervened in this rate case? A. According to the 2004 Census estimate, 17.9% of all West Virginians live in poverty. Allegheny Power Company (Monongahela Power and Potomac Edison) serves approximately 425,378 residential customers in all or part of 40 counties in their northern and eastern West Virginia service area. (American Electric Power has the state s second largest residential customer base with approximately 404,407 residential customers in all or part of 23 counties.) The low income ratepayers in the Allegheny Power service areas typically pay the highest percentage of their income for energy costs compared to other residential income groups. Often the price of a utility bill each month can mean the difference between eating, paying for a medical prescription, or keeping a roof over their head. WVCAP applauds Allegheny Power Company for holding the line on increasing electricity prices, recognizing that Allegheny Power has not had a rate increase since 1994, nor a fuel related adjustment since Yet basic residential energy prices are on the rise in West Virginia. Natural gas prices have risen approximately twenty percent in the past two years. Now Allegheny has requested a 12.8% increase on their electricity rates. This would equate to an approximate $7.50 a month on an average electricity bill, or $90 a year. This may sound like a small annual increase for a typical household but for those on a Page 4

7 fixed income, or with limited financial resources, this increase, particularly for those who heat with electricity, could even put some families at risk. When people are unable to afford paying basic necessities such as their home energy bills, many dangerous and unhealthy actions are often taken. Common practices include resorting to alternative heating sources, such as space heaters, ovens and burners, all of which create health and safety hazards. Other dangerous practices which are dangerous particularly for the. elderly and young children, include keeping thermostats at unhealthy and sometimes hypothermic temperatures (and hyperthermic temperatures in the summer). Those who can not afford their winter heating bill often face and make dire choices such as sacrificing food, medical car or prescription medicine. Studies have also demonstrated the clear links between homelessness and utility disconnections, as well as the connections between the life necessity of electricity which may also be unaffordable and the disruption to families and children s education. Q. Please summarize your testimony. A. My testimony will establish: 1) that the proposed rate increase has challenging implications for low income customers of Allegheny Power Company; that these low income customers are at risk of paying too large a percentage of their income for this basic need commodity, exposing them to potential payment arrears, disconnection of electricity, and financial hardship, and; 2) that there are a significant number of residential customers who are low income and are in need of assistance in lowering their energy bills through weatherization: 3) that utility-weatherization partnership programs can improve the energy-efficiency of low income customers and provide additional benefits to the Company, with lower credit and collection costs, avoided service shut-off costs, reduced uncollectible account write-offs, improved customer relations, and increased capacity. Q. What income definition have you used to describe a low income household? How many of these households are eligible for weatherization assistance in West Virginia? A. The West Virginia Governor s Office of Economic Opportunity (GOEO) Weatherization Assistance Program uses an income definition of 150% of Page 5

8 federal poverty guidelines to define eligibility for low income weatherization. (This is the same definition of eligibility for weatherization assistance used by Pennsylvania s Low Income Usage Reduction Program (LIRUP) which Allegheny Power s West Penn Power participates in.) According to the 2000 census, over 21 5,000 West Virginia households, or thirty percent of all households qualify for the federal low income weatherization assistance program. Income Guidelines for West Virginia Weatherization Assistance are appended to this testimony as an exhibit. Q. Has WVCAP worked with any of the state s natural gas and electric companies in past weatherization partnership initiatives? A. Yes. WVCAP and the state s community action weatherization network has participated in negotiated low-income weatherization, demand-side management, and energy efficiency partnerships with both of the state s major natural gas companies and with American Electric Power Company to increase the energy efficiency of their low income customers households. WVCAP and the Governors Office of Economic Opportunity (hereinafter GOEO ) Weatherization Program did work with Allegheny Power Company when Allegheny owned Mountaineer Gas Company ( ) and WVCAP and the weatherization network partnered in the Targeted Gas Energy Efficiency Program (T-GEEP) for Allegheny s Mountaineer Gas Company low-income customers. This is important to note because Allegheny s Customer Relations staff at the corporate office has knowledge of the technical focus, central administration, and program reporting capabilities of our weatherization assistance program network in their service area. Although WVCAP has not worked service area-wide with Allegheny Power Company on the electricity side, Allegheny Power s Potomac Edison Company did participate in a DSM-related Weatherization Residential Assistance Program (WRAP) with WVCAP member Eastern West Virginia Community Action Agency from 1986 through the mid-1990s. (Potomac Edison also offered WRAP Weatherization Partnerships in Maryland with CAA networks). Currently WVCAP and the community action weatherization network throughout West Virginia are participating in 1) a Targeted Gas Energy Efficiency Program (T-GEEP) with Mountaineer Gas Company and also with Hope Gas Company, as well as 2) an Electric Efficiency Partnership (EEP) with AEP s Appalachian Power Company and Wheeling Power Company service areas. Page 6

9 Q. What efforts are taken in West Virginia to evaluate and quantify the cost of the weatherization assistance program s investment in energy efficiency by a utility - have evaluations been performed on previous utility-weatherization partnerships in West Virginia? The West Virginia Weatherization Assistance Program regularly audits and reviews the effectiveness of its field work via monthly reporting and in-field technical inspections and in-house program management inspections to assure a high-level of performance. \ GOEO which administers and manages the statewide Weatherization Assistance Program has had a couple of small evaluations performed on various utility partnership activities. Concord College s Community-Based Research Center completed a PRISM impact evaluation of the APCO Weatherization DSM partnership program in May, PRISM analysis is a nationally recognized analytical tool developed by Princeton University, used to transform utility billing data into statistically sound savings estimates. The study sampled 121 homes in the 310 home APCO Weatherization partnership project. Results of the evaluation showed a mean annual savings of 3,511 kwh per unit. Overall, homes included in the evaluation demonstrated a 13.75% reduction in total electricity usage following weatherization. The analysis did not break down heating and cooling versus baseload usage, but only considered total electric usage. Another example, in separate 42T rate increase case settlement with Mountaineer Gas Company in 2001 (then owned by Allegheny Power), a threeyear Mountaineer Gas-Weatherization partnership was undertaken. From this partnership, in the fall of 2005, the GOEO undertook an evaluation to assess the cost-effectiveness of the partnership. The results indicate that the weatherized homes experienced an average reduction of thirty-one percent of total gas usage and thirty-five percent of temperature sensitive load on an annual basis. These results indicate the program is achieving its intended result of significantly reducing recipient ratepayer energy bills. The weatherization of these homes will have long-term impacts on energy bills, year after year. Similarly, in this Allegheny Power rate case, the proposed weatherization partnership program will help to reduce low income ratepayers home energy bills and their consumption as their electricity costs in this rate case are projected to rise. Q. How is the state s low income population hurt by rising energy prices, Page 7

10 unemployment, and underemployment? A. West Virginia s population living in poverty is higher than the national average. In a 2006 report issued by the Center on Budget and Policy Priorities and the Economic Policy Institute, two Washington, D.C. research groups, West Virginia s poorest families are poorer than families in any other state. The bottom twenty percent of families earned, on average, only $1 3,208 per year, the lowest income in the nation. Twenty years ago, five other states had more extreme poverty than West Virginia. This situation is compounded by lower wages, underemployment and especially unemployment. Although an inconvenience for the average citizen with median income, it is a hard fact for many: home energy is a crippling financial burden for low income West Virginia households. According to the April 2006 West Virginia Home Energy Affordability Gap Study Report On The Brink authored by Fisher, Sheehan & Colton, a public finance and general economic consulting firm in Boston, MA, appended as an exhibit to this testimony, West Virginia households with incomes of below fifty percent of the federal poverty level (an estimated 56,000 households) pay fifty-one percent or more of their annual income simply for their home energy bills. This report illustrates the gap between income and utility costs in West Virginia. The number one finding from this study is the following: Home energy is a crippling financial burden for low income West Virginia households. Q. What resources are available in West Virginia to help low income citizens I with their energy bills? A. Efforts to address the low income citizen s energy affordability problem in our state are largely dependent on federal energy assistance funds, federal weatherization assistance funds, and the state s limited 20% discount program. In winter of , 3.98%, or 12,795 customers of Monongahela Power s residential customers, and 2.33%, or 2,447 customers of Potomac Edison s customers, participated in the West Virginia 20% discount program. Utility companies, church and ministerial associations, local Salvation Army efforts and United Way organizations have small energy assistance funds, often coordinated with local community action agencies. These funds are very limited, typically offering one time assistance on one fuel bill per year per family. Funds are depleted long before the heating season ends. Federal programs and policies to address the energy needs of low income households have been in place for over twenty-five years in West Virginia. Page 8

11 The Department of Health and Human Resources Low income Home Energy Assistance Program (LIHEAP) assists with utility bill payment. In West Virginia, just in the past two years, the number of households receiving heating assistance has increased by 10 % (72,266 households receiving LIHEAP in FY 05; receiving heating assistance in FY 06). According to National Energy Assistance Directors Association summary reports, 47% of LIHEAP eligible West Virginia households applied for and received LIHEAP assistance in FY The Department of Energy Weatherization Assistance Program administered through GOEO provides long-term investment in energy efficiency. In West Virginia 1,I 22 low-income households received weatherization assistance in PY 05-06, including 455 households that used electricity as their primary fuel type. The application waiting list for this program is over 3,000 on file. These federally funded programs provide a base level of funding and cost-effective training and technical assistance and program design used to leverage other funding sources to aggressively address and begin to solve the growing need for low income customer assistance. The Weatherization Assistance Program is a long-term investment solution for the longer-term reduction of low income energy bills to provide energy efficiency. When a low income home receives a weatherization assistance program investment, its energy usage and energy bills are reduced for years to come. Q. Is there a growing trend nationally and regionally for utility-weatherization low income energy efficiency programs to piggyback? A. Yes. Partnerships and multi-party collaboratives are common. Heating, lighting, and refrigeration are all essential utility necessities citizens rely on to maintain everyday life and ensure their health and safety. Despite the enormous percentage of their income that is used for energy, low income families do not have the money or credit available for investing in conservation resources to reduce their energy needs. Utilities, community action agencies and other stakeholders have formed program partnerships to leverage funding from multiple sources to create a more efficient, effective program delivery structure and longer term solution to this problem. Community action agencies provide direct customer services for many programs. Such agencies are generally well connected in the community and are trusted to provide services to low income households, and have, as long term local delivery agents of the federally funded weatherization programs, developed the technical expertise to effectively provide low income energy efficiency Page 9

12 services on behalf of utility companies. In West Virginia, the Weatherization Assistance Program utilizes state of the art diagnostic and analytical tools. Computer assisted residential energy audit protocols are utilized through the use of the DOE National Energy Audit Tool, a product of Oak Ridge National Laboratory, to help assure a substantially greater than one SIR. (Savings to lnvestrnent Ratios - a ratio oflifetime savingto-initial investment.) The SIR calculates the "present value" of dollars saved by an energy conservation measure, by adjusting the future savings to reflect energy cost escalation rates and discount rates. A SIR of one indicates that the investment will pay for itself over the lifetime of the measure. A SIR of greater than one indicates an earlier recovery of the initial investment. West Virginia's Weatherization Assistance Program also uses diagnostic blower-door testing and other diagnostic tools and metering devices to be able to identify and prioritize recommended measures for improving energy efficiency and reducing energy costs. Digital duct manometers and pressure pans are used to detect duct leakage and ensure comprehensive duct sealing and insulation. Old refrigerators are metered for energy usage data. And, customer education is an integral part of the service package provided in order to encourage changes in the customer's energy lifestyle and use. Residential weatherization programs involve a great deal of customer contact. The program takes advantage of this contact to include important customer education about maintenance and upkeep of measures installed as well as behavioral changes that can help reduced cost and bill payment arrearage. The American Council for an Energy Efficiency Economy (ACEEE) issued a report in September 2005 titled "Meeting Essential Needs: The Results of a National Search for Exemplary Utility Funded Low income Energy Efficiency Programs.'' This report recognized effective utility-weatherization partnerships and noted that energy affordability for low income households has long been a public issue recognizing that the households on average pay a much higher share for their energy compared to households at higher income levels. Weatherization and related energy efficiency improvements have proven especially valuable, as they can provide long term benefits for the customer and the utility company. Kevin Monte de Ramos, author of Poverty and the P ublic Utility: Building Shareholder Value Through Low income lnitiatives (2005), presents the business case for utilities to fund and offer energy efficiency programs to their low income households based on the multiple benefits of such programs. While benefits to low income program participants are clear, in this publication it is also shown that Page 10

13 a// utility ratepayers benefit by improved service reliability, reduced billing costs with the provision of more affordable energy and the programs allow occupants to pay down past arrears while meeting current obligations, further benefiting a// ratepayers. As a consequence, ratepayers no longer need to subsidize the same level of bad debt. And shareholders also see cash flows improved by these actions, and reduced credit and collection activities, leading to accounting profits that accumulate exponentially over time. Q. Do other Allegheny companies in other states partner in low income weatherization assistance programs? A. Yes. Allegheny Power Company does participate in the Pennsylvania Low Income Usage Reduction Program, of which low-income weatherization is a part of that program. (see more below) Utilities in about half the states across the country fund or implement energy efficiency and weatherization programs for their low income customers. Recent energy cost increases across the country have dramatically heightened the importance of these coordinated low income energy programs. Piggybacking utility low income efficiency programs onto the DOE Weatherization Assistance Program, especially when a statewide administrator is used, can be used to cut utility administration costs and assure more successful penetration into their low income customer base. Specifically in Pennsylvania, through the Low Income Payment 81 Usage Reduction Program (LIPURP) and the Low Income Usage Reduction Program (LIURP), Allegheny Power s West Penn Power cost-effectively ensures that lowincome, and payment troubled customers have access to affordable energy by establishing affordable payment arrangements and by providing assistance in reducing their energy consumption to a more affordable level. Allegheny s LIURP contractors perform audits of customer s homes, provide energy conservation education, make recommendations for installation, and install electric space heating, electric water heating, or baseload measures. Q. How are low income residential customers different from other residential customers and what do you recommend for them in this proceeding? A. Low income customers have the highest energy burdens and the least amount of flexibility in being able to afford or cover escalating energy bills. They live in some of the state s worst housing stock. Therefore, low income consumer energy efficiency programs should be considered as an investment by the utility and are recommended by WVCAP. Page 11 I

14 WVCAP identifies common goals in this rate increase case that should be met by designing a low income weatherization utility partnership, and providing a most efficient investment for the Company by structuring a program to attain economic benefits for other customers as well: 0 In the form of reduced uncollectible expense; 0 More regular payment of monthly bills; 0 Reduced collection and payment arrearagekall center costs, and many others. Resource savings are not just limited to energy and capacity savings, but extend to the viability of neighborhoods where low income customers live and which the utilities serve. It should be noted these economic benefits also accrue to community action agencies and other providers working with utility customers. For example, once a disconnection has occurred, or is threatened, there is a fair amount of staff time and cost involved by several parties trying to coordinate the household s reconnection, including community action emergency assistance services staff, LIHEAP office staff, ministerial and fuel fund contacts, and utility call center staff. Utility rate increases in West Virginia correlate to an increase in the requests received to help with bill termination notices and payment assistance. The DOE Weatherization Assistance Program has evolved into a diagnostically sophisticated, metrically cost-effective program, providing savings to investment ratios of greater than one for tax dollars and utility ratepayers. WVCAP asks that Allegheny Power commit at least $300,000 a year to an integrated portfolio of low income weatherization services to assist low income ratepayers, to include customers in owner and rental housing, and mobile homes. The agreed upon program design would provide targeted electric energy savings measures to improve the overall thermal characteristics of each low income ratepayers home in the most cost effective manner. Program design could be similar to the Electric Efficiency Partnership (EEP) that American Electric Power Company is partnering with weatherization in the southern half and northern panhandle portions of the state-- appended as an exhibit to this testimony. Page 12

15 Therefore, WVCAP asks Allegheny Power Company undertake an electric partnership program in its Monongahela Power Company and Potomac Edison service territories. WVCAP recommends a simple program design, where Allegheny would piggyback with the GOEO West Virginia Weatherization Assistance Program to assist additional low-income customers with increased weatherization assistance, and refers to the program design developed in coordination with AEP as a potential model. The design has the advantage of being coordinated by one agency: the West Virginia Office of Economic Opportunity Weatherization Assistance Program. This centralization provides uniformity of service, coordination, evaluation, and a single point of coordinating access for the cooperating utility. WVCAP proposes that Allegheny work with the GOEO Weatherization Program staff on the details of the program design to include standard administrative costs and the following allowable measures: Energy efficiency measures to supplement regular DOE Weatherization measures; Electric baseload measures, including Energy-Star refrigerator replacements justified with documented paybacks, compact florescent light bulbs, low-flow shower heads, and water heater replacement in certain circumstances; and Electric heating system replacements when the existing system is inoperable, severely damaged, or unsafe. Q. Does that conclude your testimony? A. Yes, it does. I thank the Commission for the opportunity to submit this testimony. Page 13

16 Program Design / Scope of Work Weatherization / AEP Electric Efficiency Partnership Introduction The West Virginia Governor s Office of Economic Opportunity s (GOEO) Weatherization Assistance Prograin (WAP), in partnership with American Electric Power (AEP), is instituting an Electric Efficiency Partnership (EEP) program designed to reduce heating, cooling, and electric baseload costs for low-income families in AEP s service territory, by improving the energy efficiency of their homes. The program will enhance the existing low-income Weatherization Assistance Program by expanding comprehensive weatherization services to those low-income customers who heat their homes with electricity as the primary source and baseload services to those low-income customers who use another source than electricity as primary heat but are electric service customers of AEP. Only measures that impact the consumption of electricity will be allowed, for instance, no water heating conservation measures, such as pipe insulation, tank wraps, and low-flow shower heads, would be charged to AEP unless there is an electric water heater. Participation will be restricted to those customers who now qualify for the U.S. Department of Energy s Weatherization Assistance Program and are customers of Appalachian Power Company or Wheeling Power Company. The intent of the program is to target measures and thermal improvements in qualifying homes to improve the overall efficiency and to reduce energy consumption, by determining the most cost effective procedures, based on building components, existing conditions, cost of the measures, and potential savings. AEP may refer customers to GOEO for program services. GOEO will contact the appropriate local agency in order to provide a Weatherization Assistance Program application to any referred customer to determine eligibility. In addition to the regular program prioritized customers (elderly and people with disabilities), priority will be given to high-end users as identified by AEP or the local agency. Implementation The GOEO WAP coordinates and administers the program. Administrative funds from the Department of Energy and the WV Department of Health and Human Resources Weatherization Assistance Program will be used to administer the EEP program at the State level. No AEP fwnds will be used to administer the program at the State level, Work on participating homes will be performed by local subgrantees of the GOEO WAP in AEP s West Virginia service area. Up to 10% of the funds utilized by the local subgrantees can be used for administration of the program. Justification for the administrative charges includes the increased recordkeeping and reporting requirements, and payment for customer energy education. Weatherization work will follow the Weatherization Measures and Installation Standards of the current WV WAP. The intent is for AEP funds to supplement DOEDHHR Weatherization 1 Testimony of Mary Chipps for WVCAP Exhibit 1

17 Assistance Program funds to provide customers a more comprehensive job as defined and permitted by the current WV WAP. Specifically, AEP funds would be used for the following measures on their low-income customers homes. 0 On electrically heated homes, AEP funds will pay for 50% of the material costs on the job to cost share on energy efficiency thermal measures, such as insulation and air sealing measures. 0 On electrically heated homes, AEP funds will pay 100% for the cost of an electric heating system if the old one is inoperable, severely damaged, unsafe, or not cost-effective or sensible to repair. Specifically, if the cost of repair of the unit is greater than 2/3 the cost a replacement, the unit will be replaced. The payment would be based on actual cost of the replacement unit (material only) with a maximum cost of $ On electrically heated and non-electrically heated homes where AEP is the electricity supplier, AEP hnds will pay 100% for electric baseload measures including: a. Energy Star refrigerator on units where there is a documented payback of energy savings to be achieved as per the National Energy Audit; b. Compact fluorescent light bulbs on any lights running over 2 hours each day; c. Low-flow shower heads; d. Water pipe insulation; and e. Water heater tank insulation. The measures noted in c., d., and e., above will only be paid with AEP funds when there is an electric water heater. 0 On electrically heated and non-electrically heated homes where AEP is the electricity supplier, AEP funds will pay 50% of the material cost for Energy Star electric water heaters in limited situations, such as inoperable, severely damaged, or leaking units. All homes served will receive energy education related to the measures installed and other means of conserving electricity in their homes. Invoicing and Reporting GOEO will invoice AEP quarterly. The first quarterly invoice, for 2006, will be submitted upon agreement to this Scope of Work document. The first invoice will be for the period of on or about September 1,2006 through December 31, Subsequent quarterly invoices for the will be submitted on or about January 1, April 1, July 1, and October 1 of 2007 and 2008, and January 1, April 1, July 1 of The program is scheduled to conclude on September 30,2009. GOEO WAP will provide AEP with quarterly reports outlining statistical information on customers served and measures provided. GOEO WAP will also provide AEP with quarterly financial reports showing payments made from GOEO to local service providers for the work done. Any other records, reports, or financial information will be sent to AEP at AEP s request. 2 Testimony of Mary Chipps for WVCAP Exhibit 1

18 01 /22/ i I-r u1 $ ON THE BRINK: 2005 THE HOME ENERGY AFFORDABILITY GAP APRIL 2006 I Finding #1 I Poverty Level Home Energy Burden Home energy is a crippling financial burden for low- Below 50% 51.5% income West Virginia households. West Virginia households with incomes of below 50% of the Federal Poverty Level pay 51.5% of their 'annual income simply 50-74% 20.6% for their home energy bills % % 14.7%' 11.5% Home energy unaffordability, however, is not simply the province of the very poor. Bills for households between 75% and 100% of Poverty take up 14.7% of income. Even households with incomes between 150% and 185% of the Federal Poverty Level have energy bills above the % 9.4% percentage of income generally considered to be affordable. 150% - 185% 7.7% I Finding #2 I Poverty Level No. of Households The number of households facing these energy burdens is Below 50% 56,287 staggering. According to the 2000 Census, more than 56,000 West Virginia households live with income at or below 50% of the Federal Poverty Level and thus face a 50-74% 36,313 home energy burden of 51.5% % 39, % 41, % 42, % - 185% 57,294 ~- Exhibit 2 Testimony of Mary Chipps for WVCAP 01/22/2007 Case No E-42T More than 36,000 West Virginia households live with incomes between 50% and 74% of Poverty (home energy burden of 20.6%). And more than 39,000 more West Virginia households live with incomes between 75% and 99% of the Federal Poverty Level (home energy burden of 14.7%) FISHER, SHEEHAN & COLTON PVBL~C FINANCE AND GENERAL ECONOMICS BELMONT, MSSACHUSETTS

19 01 /22/ (base year) 2005 (current year) Change I Finding #3 I Home Energy Gross Affordability LIHEAF Existing sources of energy assistance do not adequately Gap Allocation address the energy affordability gap in West Virginia. Actual low-income energy bills exceeded affordable $176,620,071 $266,632,444 $15,125,156 $16,798,695 energy bills in West. Virginia by $267 million at winter heating fuel prices. In contrast, West Virginia received a gross allotment of federal energy assistance funds of $16.8 million for Fiscal Year $ West Virginia s LIHEAP allocation has lost ground relative to its Home Energy Affordability Gap. From 2002 to 2005, the total Home Energy Affordability Gap increased by $90.0 million. In comparison, the federal LIHEAP allocation to West Virginia increased $1.7 million. I Finding #4 I Home Energy Affordability Gap: 2002 (base year) $176,620,07 1 The Home Energy Affordability Gap Index in West Virginia was 151.O for This Index indicates that the Hoie Energy Affordability Gap has increased 5 1.O% between 2002 and the current year. Home Energy Affordability $266,632,444 Gap: 2005 (current year) Home Energy Affordability Gap Index (2002 = 100) The Home Energy Affordability Gap Index uses the year 2002 as its base year. In that year, the Index was set equal to 100. A current year Index of more than 100 thus indicates that the Home Energy Affordability Gap for West Virginia has increased since A current year Index of less than 100 indicates that the Home Energy Affordability Gap has decreased since Exhibit 2 Testimony of Mary Chipps for WVCAP Case No E-42T FISHER, SHEEHAN & COLTON PUBLIC FINANCE AND GENERAL ECONOMCS BELMONT, MASSACHUSETTS

20 01 /22/2007 I Finding #5 I End Use Average Annual Bill Electric $509 Hot water $27 1 Space heating $978 Space Cooling $64 The energy affordability gap in West Virginia is not created exclusively, or even primarily, 'by home heating and cooling bills. At prices, while home heating bills were $978 of a $1,822 bill, electric bills (other than cooling) were $509. Annual cooling bills represented $64 in expenditures, while domestic hot water represented $27 1 in expenditures. Total annual bill $1,822 Fuel 1 Finding #6 I Price Price Price In West Virginia, natural gas prices rose Natural gas - heating - (ccf) $0.794 $1.003 $ % during the winter heating season. Fuel oil prices rose Electric heating (kwh) $0.060 $0.060 $0.060 substantially (29.6%) while propane prices rose 9.0%. Propane heating (gallon) $1.578 $1.617 $1.763 Heating season electric prices stayed relatively constant (1.O%) in the same Fuel Oil heating(gal1on) $1.555 $1.404 $1.819 period while cooling season electric prices fell (3.1%). Electric cooling (kwh) $0.065 $0.064 $0.062 Exhibit 2 Testimony of Mary Chipps for WCAP 01 /22/2007 Case No E-42T FISHER, SHEEHAN & COLTON PUBLIC FINANCE AND GENERAL ECONOMCS BELMONT, MASSACHUSETTS

21 01 /22/2007 West Virginia Energy Gap Rankings (scale of 1-51) A higher ranking indicates better conditions while a lower ranking indicates worse conditions relative to other states. AVERAGE DOLLAR AMOUNT BY WHICH ACTUAL HOME ENERGY BILLS EXCEEDED AFFORDABLE HOME ENERGY BILLS FOR HOUSEHOLDS BELOW 185% OF POVERTY LEVEL. $976 per household RANK: #38 AVERAGE TOTAL HOME ENERGY BURDEN FOR HOUSEHOLDS BELOW 50% OF POVERTY LEVEL. 51.5% of household income RANK. #39 PERCENT OF INDIVIDUALS BELOW 100% OF POVERTY LEVEL. 17.9% of all individuals RANK: #47 COMBINED HEATING/COOLING AFFORDABILITY GAP COVERED BY FEDERAL HOME ENERGY ASSISTANCE. 8.1% of gap is covered RANK. #44 Exhibit 2 Testimony of Mary Chipps for WCAP 01 /22/2007 Case No E-42T FISHER, SHEEHAN& COLTON PUBLIC FINANCE AND GENERAL ECONOMCS BEMO~, MSSACHUSEVS

22 01 /22/2007 DEFINITIONS AND EXPLANATIONS Each state (along with the District of Columbia) has been ranked (from 1 to 51) in terms of four separate measures of the extent of the energy affordability gap facing its low-income customers: (1) The percent of individuals with annual incomes at or below 100% of the Federal Poverty Level. This data is obtained directly from the 2000 US. Census. (2) The average total home energy burden for households with income at or below 50% of the Federal Poverty Level shows the percentage of income that households with these incomes spend on home energy. Total home energy includes all energy usage, not merely heating and cooling. A home energy bill is calculated on a county-by-county basis. The statewide average is a population-weighted average of county-by-county data. (3) The average affordability gap (in dollars per household) for all households with income at or below 185% of Poverty is the dollar difference between actual total home energy bills and bills that are set equal to an affordable percentage of income. Affordability for total home energy bills is set at 6% of household income. (4) The extent to which federal energy assistance covers the combined heatinglcooling affordability gap for each state. The combined heating/cooling affordability gap is the difference between actual heating/cooling bills and bills that are set equal to; an affordable percentage of income. Affordability for combined heatinglcooling bills is set at 2% of income. This measure thus examines the proportion of the heating/cooling gap that is covered by the gross federal Low- Income Home Energy Assistance Program (LIHEAP) allocation to the state assuming that the entire LLHEAP allocation is used for cash benefits. In the state s rankings, a higher ranking indicates better conditions while a lower ranking indicates worse conditions relative to other states. Thus, for example: (1) The state with the rank of #1 has the lowest percentage of individuals living in households with income at or below 100% of the Federal Poverty Level while the state with the rank of #51 has the highest percentage. (2) The state with the rank of #1 has the lowest average home energy burden for households with income below 50% of the Federal Poverty Level while the state with the rank of #51 has the highest average home energy burden. (3) The state with the rank of #I has the lowest average affordability gap (dollars per household) while the state with the rank of #5 1 has the highest dollar gap. (4) The state with the rank of #1 has the highest percentage of its heatinglcooling affordability gap covered by federal energy assistance while the state with the rank of #51 has the lowest percentage of its heatinglcooling gap covered. All references to states include the District of Columbia as a state. Low-income home energy bills are calculated using average residential revenues per unit of energy. State financial resources and utilityspecific discounts are not considered. Exhibit 2 Testimony of Mary Chipps for WVCAP 01 /22/2007 Case No E-42T FISHER, SHEEHAN & COLTON PUBLIC FINANCE AND GENERAL EcoNoMCs BELMONT, MASSACHUSETTS 1

23 01 /22/2007 Energy bills are a function of the following primary factors: Tenure of household (ownerhenter) Housing unit size (by tenure) HDDs and CDDs (by county) Household size (by tenure) Heating fuel mix (by tenure) Energy use intensities (by fuel and end use) Bills are estimated using the U.S. Department of Energy's "energy intensities'' published in the most recent DOE Residential Energy Consumption Survey (RECS). The energy intensities used for each state are those published for the Census Division in which the state is located. State-specific demographic data is obtained from the most recent Decennial Census of the U.S. Census Bureau. Heating Degree-Days (HDDs) and Cooling Degree-Days (CDDs) are obtained from the National Weather Service's Climate Prediction Center on a county-by-county basis for the entire country. State price data for each end-use is obtained from the Energy Information Administration's (EIA) fuel-specific price reports (e.g., Natural Gas Monthly, Electric Power Monthly). Each state's Home Energy Affordability Gap is calculated on a county-by-county basis. Once total energy bills are estimated for each county, each county bill is weighted by the percentage of persons below 185% of the Federal Poverty Level in each county to the total statewide population below 185% of the Federal Poverty Level to derive a statewide result. The Home Energy Affordability Gap Index uses 2002 as its base year. In that year, the Index was set equal to 100. A current year Index of more than 100 thus indicates that the Home Energy Affordability Gap has increased since A current year Index of less than 100 indicates that the Home Energy Affordability Gap has decreased since The Home Energy Affordability Gap is a function of many variables. Increases in income, for example, result in decreases in the Gap while increases in energy prices result in an increase in the Gap. The Home Energy Affordability Gap Index allows the reader to determine the cumulative impact of these variables. Since the Gap is calculated assuming normal Heating Degree Days (HDDs) and Cooling Degree Days (CDDs), temperatures do not have an impact on the Gap or the Home Energy Affordability Gap Index. Price data for the various fuels underlying the calculation of the Home Energy Affordability Gap was used from the following time periods: Natural gas Fuel oil Non-heating prices Natural gas Fuel oil Liquefied petroleum gas (LPG) Eni iiuii L Testimony of Mary Chipps for WVCAP 01 /22/2007 Case No E-42T FISHER, SHEEHAN & COLTON PUBLIC FINANCE AND GENERAL ECONOMlCS BELMONT, MASSACHUSETTS

24 CERTIFICATE OF SERVICE The undersigned, counsel for West Virginia Community Action Partnership, hereby certifies that she has served a copy of the TESTIMONY OF WEST VIRGINIA COMMUNITY ACTION PARTNERSHIP, by placing a true and exact copy thereof in a properly addressed envelope, deposited in the United States mail, postage prepaid, at Charleston, West Virginia this 22nd day of January, 2007, upon the following: Christopher L. Callas, Esq. Talai B. Hasn, Esq. Jackson & Kelly P.O. Box 553 Charleston, WV E. Dandridge McDonald, Esq. Anthony M. Caldwell, Esq. Post Office Box Charleston, WV Robert J. Conley 1153 Old Mill Rd. Weston WV Naomi Moreland RR#, Box 431 Ridgeley WV Thomas N. Hanna, Esq Virginia Street, E. Suite 201 Charleston, WV Susan J. Riggs, Esq. Post Office Box 273 Charleston, WV Billy Jack Gregg, Esq. Director, Consumer Advocate Division 7* Floor Union Bldg 723 Kanawha Blvd. East Charleston, WV Timothy L. Hairston P.O. Box 346 Dellslow, WV Elaine C. Lippman, Esq. Scott H. Stauss, Esq Hampshire Avenue, NW Washington, DS Michael L. Kurtz, Esq. Kurt J. Boehm, Esq. 36 East Seventh St., Suite 1510 Cincinnati, OH Stephen J. Baron Suite 305, 570 Colonial Park Drive Roswell, GA Kathryn Reed Bayless, Esq West Main St. Princeton, WV 24740

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