State PBF/USF History, Legislation, Implementation

New Jersey's Universal Service Fund (USF) provides low-income energy assistance through a fixed-credit percentage of income payment plan under which participants are required to pay no more than six percent of their annual income toward electric and gas bills — three percent for electric and three percent for gas or six percent for all-electric heat customers. The customer credit is capped at $1,800 annually.

The program has been operating since FY 2004, when it spent about $65 million on credits and enrolled about 130,000 households. In FY 2014, about $157.6 million provided assistance to 252,029 households. It is funded through a Societal Benefits Charge (SBC) paid by all regulated electric and gas utility customers.

The following shows how the USF credit is calculated for a USF participant with an annual income of $24,000 that heats with natural gas. The calculation takes household's annual gas bill and subtracts any LIHEAP and/or Lifeline benefits. It then makes sure that the household doesn't expend more than three percent of its income for gas service.

Step #1 – Determine the customer’s current natural gas burden

Step #2 – Determine what the customer should be paying for natural gas under USF

Step #3 – USF will pay the difference

Note: A similar calculation is made using a customer's electricity costs. However, the LIHEAP benefit is not counted a second time. It is applied only once to the utility providing energy for heating purposes. If a customer also receives a Lifeline benefit (another program funded by the USF), that benefit is applied to the natural gas and/or electric utility bill based on the information provided by the state.

First-year USF participants are also eligible for arrearage forgiveness under a program component called Fresh Start, which forgives their pre-program arrears if participants pay their monthly bills in full and on time for an entire year. In 2014, the program enrolled about 19,000 households and forgave arrearages totaling almost $8 million.

The USF also funds the Lifeline program, which provides an annual benefit of up to $225 for low-income elderly and disabled persons including recipients of Supplemental Security Income and those eligible for the state's Pharmaceutical Assistance for the Aged and Disabled program. In 2014, Lifeline assisted 172,924 enrollees with a program budget over $66.6 million.

The New Jersey Board of Public Utilities (BPU) also funds the Temporary Relief for Utility Expenses (TRUE) program. Initially, in 2011, the BPU awarded the Affordable Housing Alliance a $25 million grant for the program. In 2014, TRUE provided $672,174 in assistance to 1,335 households.

TRUE provides one-time assistance payments up to $750 for electric expenses and up to $750 for natural gas expenses for a total of up to $1500 per household. Payments are made directly to utility companies on behalf of customers. It is available for both renters and homeowners who meet several criteria: they must not be enrolled in or eligible for the USF program or LIHEAP; be facing a crisis situation that includes a documented notice of overdue payments for gas and/or electricity; and have a history of making regular payments toward their utility bills.

Similar to TRUE is the Payment Assistance for Gas and Electric (PAGE) program. The Affordable Housing Alliance also administers this for the BPU. PAGE is an annual assistance program designed to help low and moderate-income households that experience an economic hardship. Recipients of the USF in the past six months or LIHEAP within the last heating season are ineligible. Households must have a documented notice of overdue payment for gas and/or electric service, in addition to having a history of making regular payments toward their utility bills. If a household has received a TRUE grant, it must wait 60 days to apply for PAGE. PAGE began January 2014 and provided almost $2.2 million for 2,862 households in its first year.

History

The USF is a result of New Jersey's 1999 restructuring legislation (the Electric Discount and Energy Competition Act or EDECA) that provided for a permanent fund to help address low-income energy needs through a societal benefits charge created by the legislation.

The restructuring act left it to the BPU to determine the level of USF funding, its administration, purposes, and programs to be funded, as well as whether new charges should be imposed to fund new or expanded programs. The law also defined the USF as "nonlapsing," meaning it does not have a sunset.

The BPU began holding hearings on implementation of the USF in mid-2000. In September 2000, New Jersey's Ratepayer Advocate (RPA), with support from groups such as AARP, Legal Services of New Jersey, Citizen Action, and state government, submitted a detailed proposal for a comprehensive universal service program designed to create affordable energy bills for New Jersey's low-income consumers that would be funded through a statewide universal service charge on both electric and gas customers.

In March 2003, the BPU issued its long-awaited Universal Service Fund Order establishing a permanent statewide assistance program and, in July, it followed with another directive ordering utilities to start assessing customers for the cost of the program. First-year funding was originally estimated at about $30 million — it turned out to be about $65 million — plus 10 percent for administrative and start-up costs, estimated at $500,000.

The July order also told utilities to begin assessing customers for the cost of the Lifeline program. Historically, that program had been funded from state casino revenues, but New Jersey's Governor, in setting the 2004 state budget, decided Lifeline should be funded through the SBC beginning August 1, 2003. Lifeline is administered by the Department of Human Services (DHS).

During FY 2004, the first year of USF operations, New Jersey electric and gas customers whose household income was equal to or less than 175 percent of the federal poverty level were eligible for the program. First-year participants were enrolled through an automatic enrollment process, through which the program administrator at the time, DHS, the LIHEAP grantee, reviewed information it had on file about customers already enrolled in either LIHEAP or Lifeline from September 1, 2002, through August 31, 2003. Using this data, plus information provided by the utilities, DHS automatically enrolled customers who met the eligibility criteria. A manual enrollment process, wherein customers could apply directly, began in November 2004.

In March 2004, the BPU approved establishment of an arrearage payment plan. The Fresh Start program began in April 2004, and was available to about 135,000 USF enrollees. Under the program, only pre-program arrears are eligible for forgiveness, and they must total more than $60. During FY 2005, the first full year of Fresh Start operations, arrearage payments totaled $23 million.

In late 2006, the state decided to switch administration of the USF from the DHS to the Department of Community Affairs (DCA). This change followed the transfer of LIHEAP administration from DHS to DCA.

During 2006, the USF program's first evaluation was completed. It analyzed the program's operations and results from its start in October 2003 through FY 2005.

Among positive aspects of the program, the evaluation found the following:

• The impact of the USF is significant for those who receive it. It covers about 40 percent of the total energy bill for eligible clients.
• The program's standard of energy affordability, i.e., six percent of income, is one of the most progressive in the country. Similar programs in Ohio and Pennsylvania required low-income households to pay up to 17 percent of their income on energy bills.
• About 41 percent of participants had incomes at or below $10,000, and 37 percent of households had an elderly member.
• The majority of USF customers, 67 percent, were able to pay 100 percent of their annual utility bills.
• The USF program eliminated about 90 percent of pre-program arrears for USF customers.
• Compared to LIHEAP recipients in other Northeastern states, USF participants had a lower rate of utility shutoffs.

The evaluation provided recommendations for improving client outreach to overcome identified barriers and to better reach vulnerable populations. It also contained programmatic recommendations to increase client bill payment.

Since the evaluation, the state has made changes in processes to streamline enrollment and increase outreach. One of these, adopted in July 2008, affected some households receiving Lifeline. These households were required to reapply based on a new application form that eliminated discrepancies between the LIHEAP/USF and the Lifeline income eligibility requirements.

Another change, which increased enrollment in both LIHEAP and the USF, was the automatic enrollment into LIHEAP of households receiving Medicare Part D benefits, a process that began in FY 2009. Because LIHEAP and USF have a joint application, those households approved for LIHEAP are then screened as to whether they meet the USF energy burden criteria. Furthermore, households that received LIHEAP or USF benefits the previous season and have not moved are allowed to apply again using a shortened re-certification form rather than the full application.

Energy Efficiency

The 1999 restructuring legislation designated the SBC as the funding source for energy efficiency programs. This included the continuation of existing demand side management and low-income energy efficiency programs, consumer protections, and other social programs as approved by the BPU.

The low-income energy efficiency program, called New Jersey Comfort Partners, in which the major electric and gas utilities participate, was funded at about $32 million for FY 2014 and served 6,054 households. The program is targeted at USF participants and prioritizes those participants with the highest energy usage. Households with incomes at or below 225 percent of federal poverty guidelines are eligible.

Measures include efficient lighting, water heater replacement and water conservation measures; refrigerator and freezer replacements; thermostats, insulation upgrades, air sealing, duct sealing and repair, heating/cooling equipment repair and replacement, and custom measures.

APRRISE performed a comprehensive evaluation of the New Jersey Comfort Program to determine if program goals had been accomplished, where opportunities exist for increased effectiveness and/or reduced costs, and how identified improvements can be accomplished. "The evaluation found that the program was not achieving the savings that were expected, that there were weaknesses in the audit and installation procedures, and that there were many missed opportunities for installing the most cost-effective measures. Many of these missed opportunities would not result in greater expenditures, as they would require re-prioritizing or better quality work done." The 2014 evaluation report provides detailed recommendations for the data tracking system, program procedures, training, customer targeting, quality control, and the program improvement process.

History

In March 2001, the BPU ordered a three-year, $358 million program, called New Jersey Clean Energy, to develop energy efficiency and renewable energy sources, including a low-income energy efficiency program, all funded through the SBC. Comfort Partners was initially funded at $15 million yearly and expected to serve about 6,100 households yearly. It replaced the low-income energy efficiency programs previously operated by New Jersey's utilities.

Since then Comfort Partners funding level has increased yearly along with that of other Clean Energy programs. Effective in 2009, the income eligibility level for the program was increased from 175 percent of federal poverty guidelines to 225 percent in order to better align it with the Lifeline and Pharmaceutical Assistance to the Aged and Disabled programs, both of which have income eligibility at 225 percent of federal poverty guidelines.

In setting the program's 2009 through 2012 budgets, the BPU reviewed past program performance and noted the following:

• Between 2001 and 2006, 66 percent of the energy-efficiency funding was expended on the residential programs, and of that, about 29 percent was spent on Comfort Partners and other low-income pilots.
• The low-income programs achieved 11 percent of the residential electric savings and 1.8 percent of the residential natural gas savings. However, the utilities that manage Comfort Partners indicated that the reported savings for the low-income programs were artificially low, because the protocols that were in place prior to 2008 capped savings. They said the protocols approved in December 2007 should result in higher savings being reported for the low-income programs.
• While these programs may not be as cost effective as other Clean Energy programs, they are necessary and needed programs from a societal perspective and are consistent with the Electric Discount and Energy Competition Act, the enabling legislation.

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