IV. Discussion

Several factors must be weighed in addressing the four issues before us: 1) the clarity and simplicity of program eligibility requirements, and the corresponding ease of understanding and administration; 2) who should get CARE discounts and LIEE services (i.e. what income level and what utility services); 3) how large of a CARE discount is appropriate under the present conditions; and 4) the cost of CARE discounts and LIEE programs to non-participating customers. While there is little disagreement about what needs to be considered, there is considerable disagreement among parties as to the weight given to various factors, particularly the costs to non-CARE ratepayers.

The degree to which each of these factors is implicated varies with the issue being considered. The worst problems with clarity and simplicity arise from inconsistent CARE eligibility standards for electric and gas customers. It would be very difficult to explain to customers why they are considered low income for electricity, but not for gas. It simply makes no sense. Furthermore, the differing eligibility criteria would provide an incentive for fuel switching, as customers who can get a discount on their electric bill but not on their gas bills might take actions such as using an electric space heater rather than a gas furnace.

PG&E, as a combined gas and electric utility, also presents a credible problem, as it would need to restructure its tracking databases to separately track customer income qualifications by commodity. This would add cost and complexity, with no obvious countervailing benefit.³

Accordingly, there is only one reason not to make the income levels for CARE eligibility consistent across the board: the cost to non-CARE ratepayers. All other considerations indicate that we should adopt a single income level, applicable to both gas and electric utilities, for determining CARE eligibility.

Inconsistent eligibility between the CARE and LIEE programs is somewhat less disturbing. First, the administration problem identified by PG&E above is not present, as CARE and LIEE already have differences in how eligible customers qualify to participate in each program. Also, LIEE already has differential qualifying levels within the program itself, as customers with a senior or disabled head of household are eligible at 200% of federal poverty guidelines.⁴

Nevertheless, it is still difficult to justify categorizing a customer as low- income for purposes of CARE, but not for purposes of LIEE. While not identical, the programs do have related purposes, and there is no inherent reason to set a higher income hurdle for one program than the other. Furthermore, to the extent that LIEE achieves energy savings, it results in a benefit to all ratepayers, so expanding LIEE does have benefits that can contribute toward its costs, especially in these times of high energy prices. Those customers who get the direct benefits of the LIEE program will be better able to reduce their energy usage and energy bill, which will reduce the size of their CARE subsidy as well. Accordingly, increasing LIEE coverage, while adding some cost to ratepayers, may also reduce other costs. Again, consistency between programs is preferable, and as discussed above, the only real reason not to make the income level for LIEE eligibility generally the same as that for CARE eligibility is the potential cost to non-participating ratepayers.

Determining the appropriate level for the CARE discount is more difficult. The clarity, simplicity and ease of administration do not vary significantly whether the discount is 15% or 20% or even 40%. The only real factor to be considered here is cost, with our duty being to strike the appropriate balance between the burdens to be borne by CARE ratepayers and non-CARE ratepayers, particularly in this time of high energy prices. In examining the record before us on the costs of each proposal, we acknowledge that we do not have exhaustive numerical evidence, but we have enough to understand the scope of our actions.

Among the utilities, SDG&E and SoCalGas have provided the only real cost information. According to SDG&E, its current annual cost of its electric CARE program is $9,200,000. Moving the eligibility level from 150% of federal poverty guidelines to 175% would raise that number to $10,615,000 at the same participation level, and would increase the CARE surcharge from 0.055 cents per kWh to 0.063 cents per kWh. (Joint Utilities, Appendix A.)⁵ For SDG&E's gas CARE program, the same change would result in its current cost of $5,689,000 increasing to $6,563,000, and the CARE surcharge increasing from 1.106 cents per therm to 1.288 cents per therm. (Id.) SoCalGas' current CARE cost is $41,222,000, and with the change in eligibility it would increase to $52,279,000, and the CARE surcharge would increase from 0.90 cents per therm to 1.16 cents per therm.

ORA indicates that the current cost of the CARE discount to non-CARE ratepayers of all four utilities was $140.67 million in January 2001. (ORA, p.4.) However, in calculating the possible increased costs of expanding eligibility for the program, ORA (using SDG&E data) assumes that the 98% participation goal of ABX1 13 is reached. While that may be a reasonable assumption, ORA has neither provided the cost of the current program at a 98% participation level, nor has it provided the cost of the proposed program at current participation levels. By focusing on a worst-case scenario and combining many variables, ORA has not helped to provide a basis for evaluating the proposal that is before us.

Regarding the proposal to change the LIEE eligibility level from 150% of federal poverty guidelines to 175%, SDG&E and SoCalGas provide estimates of the annual cost of the change of $389,268 and $9,991,974, respectively.⁶ According to ORA, the major utilities are currently authorized to collect a total of $60,706,088 annually for LIEE.⁷ Using SDG&E and SoCalGas as a rough proxy indicates that the costs of this proposal are lower than changing the eligibility levels for gas customers to correspond to those of PG&E and SCE's electric customers.⁸

Calculating the total cost of an increased CARE discount is easier. Using ORA's number of $140.67 million, for example, doubling the discount from 15% to 30%, with no other changes, would double the cost, to $281.34 million. Increasing the size of the CARE discount to 20% would result in a cost to non-CARE ratepayers of $187.56 million, or an increase of $46.89 million.⁹

At the same time, these costs, while significant, translate into benefits for other ratepayers. The costs under discussion are the costs to non-CARE ratepayers for providing benefits to CARE ratepayers. In this case, the higher the costs to one set of customers, the higher the benefits to another set of customers. This is a very different scenario than, for example, one in which increased rates only serve to improve the bottom line of out-of-state corporations. Our job here is to balance the equities between the classes of customers. Moreover, we note that some of the potential rate impacts to non-participating customers will be defrayed by the authorization of additional funding for the LIEE program using unspent, carryover funding and general funds appropriated by the Legislature. (See D.01-05-033.)

As a consequence, the proposed changes to the eligibility requirements become much easier to justify. Despite the significant price tag, it is very valuable to have eligibility criteria that are consistent, make sense to ratepayers, and that can, as a practical matter, be efficiently administered by the utilities under our jurisdiction. Accordingly, we will set the income eligibility levels for CARE and LIEE for both electric and gas customers at 175% of the federal poverty guidelines.

Increasing the level of the CARE discount is a closer call. A higher CARE discount does not make the program easier to understand, or cheaper and easier to administrate. Without these extrinsic benefits, the issue really comes down to a question of who pays, and how much. While we are sympathetic to the recommendations that further study would be appropriate, we are in the unfortunate position of needing to address a crisis that is upon us now, and which may become even more acute this summer. Doing nothing, on the grounds that the existing discount is adequate to protect low-income ratepayers even in these volatile times, is an option. However, even leaving the 15% discount in place is effectively an action. The question really becomes one of what action is most appropriate now. We take seriously the concerns stated about the significant costs that may be borne by non-CARE ratepayers, including those barely above the income threshold.¹⁰ Given the plight of low-income ratepayers, however, we feel the need to move at least somewhat, to keep the world from getting too far ahead, and low-income ratepayers from getting too far behind. Moreover, we note that at least a portion of the increased costs to non-CARE ratepayers will be defrayed by the provisions of Senate Bill 5 from the First Extraordinary Session (Stats. 2001, Ch. 7), which augments funding for the CARE program by a one-time amount of $100 million.

In weighing all the factors, we believe that raising the CARE discount for both gas and electric from 15% to 20% represents a reasonable balance between the burdens to be borne by CARE ratepayers and non-CARE ratepayers. Coupled with the fact that low-income customers enrolled in this program will also be exempt from the surcharge adopted in D.01-03-082, we believe that this change will measurably reduce the burden of high energy bills on low-income customers. At the same time, it is modest in magnitude in recognition that the costs of increasing the rate discount will be borne by non-participating ratepayers now and in the future.

In their comments, several parties raise issues that are beyond the scope of today's decision, as outlined in the ALJ's April 3, 2001 Ruling. Joint Parties recommend that the Commission consider modifying both the CARE and LIEE eligibility to 60% of state median income, where federal LIHEAP eligibility is set. (Joint Parties, pp.4-5.) According to Joint Parties, 60% of state median income is approximately 200% of federal poverty, the level at which the LIEE is set for seniors and disabled. PG&E's Reply Comments, however, show that this assertion may be inaccurate. This recommendation has significant potential ramifications, and is beyond the range of what we will consider here. Likewise, Joint Parties request for additional reporting requirements, SESCO's recommendation for a tiered rate design, PG&E's linkage of specific changes to the end of the rate freeze, and AARP's request for retroactive application of an increased CARE discount for gas customers, are beyond the scope of this decision and will neither be ordered nor addressed here. Nor will we revisit the issue of automatic enrollment in CARE and LIEE based upon a customer's participation in other assistance programs, which has already been addressed in Decision 01-05-033.

The possibility of changing the CARE and LIEE eligibility level beyond the modifications adopted for electric customers of PG&E and SCE in D.01-03-082, including consideration of making it 200% of the federal poverty level, is more appropriately addressed during future program planning cycles in R.98-07-037. As we recently directed in D.01-05-033, our focus for the coming months is to reach as many eligible customers with the low-income assistance programs currently available. We have put all other proposals for program modifications on hold so that we may focus resources and attention on implementing the rapid deployment strategy adopted in D.01-05-033.

Today's modifications to income eligibility requirements and CARE discount levels will need to be incorporated into program outreach materials as quickly as possible, and we direct the utilities to do so without delay. The utilities should reflect the increase in the CARE discount in the next billing cycle for all currently-enrolled CARE customers. In addition, we direct the assigned Commissioner and ALJ to consider the rate design implications for these actions in the next phase of this proceeding.