Substantive Issues and Discussion

All affected jurisdictional utilities and interested parties were directed to respond to four items.

1. Should the changes to the CARE and LIEE income eligibility requirements made in D.01-06-010 be applied to all other jurisdictional gas and electric utilities that currently offer these programs?

Avista, Sierra Pacific, Southern California Water, and Southwest Gas all agree to this proposed extension of the income eligibility requirements adopted in D.01-06-010. PacifiCorp alone disagrees, at least as applied to itself. We do not find PacifiCorp's arguments persuasive on this issue, and we resolve the issue consistently with the positions of the majority of utility comments, and consistently with our previous decision, as we discuss below.

Avista states that it would support a change in income eligibility for low-income programs to 175% of the federal poverty guidelines as long as that change was also applicable to adjacent natural gas utilities and overlapping electric companies. Avista concurs with D.01-06-010 that clarity and simplicity of program eligibility requirements is important, and that the Commission should avoid inconsistent eligibility standards for gas and electric customers.

Sierra Pacific agrees that eliminating inconsistencies in CARE income-eligibility requirements would improve customer understanding and eliminate perceptions of inequity, and stated that the changes to income eligibility levels made in D.01-06-010 should be applied to Sierra Pacific.

Southern California Water also agrees that it is reasonable for the Commission to adopt the same eligibility criteria across utilities.

Southwest Gas believes that CARE and LIEE eligibility requirements should be the same for all energy utilities. In fact, Southwest Gas filed an advice letter requesting that its CARE eligibility and discount levels be made consistent with those adopted in D.01-06-010.

PacifiCorp is the lone exception to this consistent agreement among the utilities. PacifiCorp argues that the income eligibility requirements adopted in D.01-06-010 should not be applied to PacifiCorp's California service territory. PacifiCorp states that the Commission, in D.89-07-062, allowed it to maintain a CARE eligibility level of 130% of the federal poverty level, even when other utilities were uniformly using an eligibility level of 150%. Accordingly, PacifiCorp argues that if any increase is required, for PacifiCorp the result should be a CARE eligibility level of 150%, rather than the 175% adopted in D.01-06-010 and proposed here.⁴

According to PacifiCorp, 34% of the population in its service territory is currently eligible for CARE, and raising the eligibility level to 150% of the federal poverty level would make 37% of the population eligible, while raising it to 175% would increase the eligible portion of the residential population to 46%. PacifiCorp argues that it would be too significant of an impact to have the remaining 54% of its customers carry the burden of its CARE program.

PacifiCorp provides no data as to the income levels of the 54% of its customers who would not qualify for the CARE program, so we cannot tell if a large proportion of customers would fall just above the 175% eligibility level, or if most are significantly over that level. The income levels of the non-CARE customers would help indicate how heavy the rate burden would be upon those customers. Furthermore, despite the ALJ's express request for detailed rate impacts, PacifiCorp provided no such information.

From the numbers that PacifiCorp does provide, however, it is clear that PacifiCorp's counter-proposal would provide relief to very few customers while increasing the burden on relatively low-income ratepayers. Increasing the eligibility level from 130% to 150% of the federal poverty level adds only 3% to the percentage of eligible PacifiCorp customers. However, raising the eligibility level from 150% to 175% results in an additional 9% of PacifiCorp's customers becoming eligible for CARE. This group of customers appears to have an income that falls between 150% and 175% of the federal poverty level. While those customers would be eligible for CARE if the eligibility level is set at 175%, they would just miss being eligible if the level is set at 150%, as proposed by PacifiCorp. PacifiCorp's proposal would provide benefits to few, but costs to many, by putting 9% of its customers just outside of its eligibility level, where the cost burden is the greatest, while providing actual benefits to only 3% of its customers.⁵

PacifiCorp does not address the potential confusion and inequity of having eligibility criteria for the CARE program differ between adjacent utilities. Other utilities, such as Avista and Sierra Pacific, identified this as a key concern. In fact, we must question PacifiCorp's commitment to the CARE program. PacifiCorp's pleading indicates that its current penetration rate is only 19%. Notably, the Commission decision relied upon by PacifiCorp also indicates a history of resistance to the CARE program on the part of PacifiCorp's predecessor, Pacific Power & Light Company (PP&L):

PP&L originally sought to be exempted from the Commission's implementation of a low-income assistance program. It now concurs that SB 987 mandates the establishment of an assistance program, but points out that the bill has no deadline for compliance. PP&L requests that implementation of a rate discount program of assistance be postponed for its customers. (D.89-07-062, 32 CPUC2d 342.)

While it is true that expansion of CARE eligibility would result in increased costs to PacifiCorp, and specifically to non-CARE customers, that is also true of the other utilities whose eligibility levels we address today or addressed in D.01-06-010. PacifiCorp has failed to convince us that it there is a good basis for it (and its customers) to be treated differently from all of the other utilities in California that offer CARE and LIEE programs.

Consistent with the Commission's treatment of the four major California energy utilities, and the majority of utility comments received in this proceeding, we will apply the changes to the CARE and LIEE income eligibility requirements made in D.01-06-010 to all other jurisdictional gas and electric utilities.

2. Should the change in the CARE discount made in D.01-06-010 be applied to all other jurisdictional gas and electric utilities that currently offer the program?

Again, Avista, Sierra Pacific, Southern California Water, and Southwest Gas agree that the change in the CARE discount adopted in D.01-06-010 should extend to them and to other utilities as well. Again, PacifiCorp is the lone dissenter, and again we do not find PacifiCorp's arguments persuasive. We will increase the CARE discount to 20% for all utilities, consistent with the majority of comments and our previous decision.

Avista succinctly states:

"As with the income eligibility standards, Avista Utilities would support a change in CARE discount from 15% to 20% as long as this change is applicable to adjacent natural gas utilities and overlapping electric companies. Again, consistency from the perspective of customers is important."

Sierra Pacific agrees, stating that eliminating inconsistencies between adjacent utilities would improve customer understanding and eliminate perceptions of inequity.

Southern California Water, while acknowledging that there could be reasons for differentiating the CARE discount between utilities, states that a "uniform discount rate applicable to all programs is probably the most practical policy."

Southwest Gas also believes that there should be consistency between utilities, and has already submitted an advice letter to make its CARE discount rate consistent with that adopted in D.01-06-010.

PacifiCorp alone contends that its current 15% rate is adequate, and should not be changed. PacifiCorp does not directly address the need for uniformity or consistency between utilities, but notes that the rates in PacifiCorp's service territory are significantly lower than the rates in the rest of the state. PacifiCorp's low rates are commendable, but by itself this is not enough of a basis for granting a lower CARE discount. Since we are establishing a long-term default CARE discount, we must consider the possibility that PacifiCorp customers may, at some point, be subjected to rate increases. If such an event were to occur, it would be beneficial for PacifiCorp's low-income customers to already have in place at least some additional protection against the increase. By the same token, PacifiCorp's current low rates will mean that a 20% CARE discount will have a relatively lower impact on its non-CARE customers.

According to PacifiCorp, at its current penetration rates, the total impact of the increased discount is less than $25,000. PacifiCorp states that an increase in the penetration rate to 50% would result in significantly increased costs.⁶ Given PacifiCorp's current low 19% penetration rate, we are not surprised that increases in penetration to even mediocre levels would result in significant increases in costs, but we are not sympathetic to this argument. PacifiCorp cannot use its own poor performance as a basis for claiming that the statewide proposals before the Commission would somehow cause it a singular financial hardship.

Again, PacifiCorp has failed to convince us that it should be treated differently from all of the other energy utilities that offer a CARE discount. Consistent with the Commission's treatment of the four large California energy utilities, and the majority of comments received in this proceeding, the increase in the CARE discount to 20% that was approved in D.01-06-010 will be applied to all other jurisdictional gas and electric utilities.

3. Utility responses regarding detailed descriptions of the program costs and rate impact of applying the modifications made in D.01-06-010 to each utility's low-income assistance programs.

The responses to this question, regarding the cost and rate impact of the proposed changes to the CARE program, vary widely in quality and presentation, and in general are not directly comparable. In addition, only Southwest Gas addressed the costs and rate impacts of the proposed changes to the LIEE program.

Avista states that it has approximately 16,240 residential customers in its South Lake Tahoe service territory, and the cost of providing the current CARE discount is $66,308. According to Avista,

"Avista Utilities estimates that increasing the income eligibility standard to 175% of the federal poverty guidelines would raise the annual cost of the CARE program by $3,300. In addition, increasing the discount from 15% to 20% would raise the CARE program costs by approximately $22,250. The current CARE surcharge is approximately 0.35 cents per therm; with both modifications made in D.01-06-010, the per therm cost would increase by approximately 34% to 0.47 cents per therm."

PacifiCorp provides numbers for 50% and 95% CARE program penetration rates, but not for its current 19% penetration rate. According to PacifiCorp, at a 50% penetration rate, increasing the eligibility level would result in CARE costs increasing from $728,528⁷ at 130% of federal poverty level, to $808,110 at 150% of federal poverty level, and to $989,753 at 175% of federal poverty level. Again at a 50% penetration rate, increasing the CARE discount to 20%, while leaving eligibility unchanged, would result in CARE costs increasing from $728,528 to $760,709. A 20% discount at 150% and 175% of federal poverty eligibility levels would result in costs of $844,026 and $1,033,742, respectively.

Sierra Pacific states that it currently has approximately 1,100 customers on CARE at a cost of $107,000, and estimates a 4% increase in eligible customers if the eligibility levels are increased to 175% of federal poverty level. Increasing the CARE discount to 20% would add $35,000 in costs, while increasing the eligibility level to 175% of federal poverty would add $6,000.

Southern California Water indicates that, at its current 47% penetration rate, increasing the eligibility level to 175% of federal poverty level would result in an increase in cost of $19,419, while the increase in the discount to 20% would add $20,722 in cost at current rates. The current cost of CARE is approximately $54,000. A table prepared by Southern California Water and setting forth its cost data is attached for reference in Appendix A.

Southwest Gas estimates that changing the CARE discount to 20% and the eligibility level to 175% of the federal poverty level will result in an increase in CARE program costs of approximately $2.14 million, for a total annual cost of approximately $3.21 million.⁸ Southwest Gas conditionally estimates the cost of increasing LIEE eligibility at around $95,000. A table prepared by Southwest Gas and setting forth its cost data is attached for reference in Appendix A.

We recognize that expanded program eligibility will lead to increased costs. The utilities should seek recovery through their respective General Rate Cases, Biennial Cost Allocation Proceedings, or other appropriate proceedings. If the utilities have not established a balancing account to track such costs, they should establish such an account as of the effective date of this decision.

4. Current low-income assistance programs for multi-jurisdictional utilities and whether the changes proposed here are similar to or different from those in the other states served.

We ask for this information to determine if the differences between California's programs and those in other states could cause difficulties in implementation. While there are significant differences between the programs in the various states served, there do not appear to be any conflicts between the proposed changes in the California programs and those in other states.

Avista indicates that while it has low-income weatherization programs in Washington, Idaho, and Oregon, only in Washington does Avista have a low-income energy assistance program, funded by a 0.79% surcharge. According to Avista, Oregon recently authorized low-income rate programs similar to those in Washington, but because Avista's California and Oregon service territories are not adjacent there is no customer confusion, and Avista's administrative systems are set up to address the differences.

PacifiCorp offers low-income energy assistance programs in Oregon, Washington, and Utah. According to PacifiCorp, Washington has a pilot program with three tiers of assistance, with the lowest income customers (income equal or less than 75% of federal poverty level) receiving a higher credit in cents per kWh, but with eligibility for some level of credit extending up to 125% of federal poverty level. Certification and administration are done by community action agencies. In Utah, there is a rate discount for low-income residential customers (up to 125% of federal poverty level) that is administrated by the Utah Department of Community and Economic Development.

Sierra Pacific indicates that the Nevada State Welfare Division administers a low-income energy assistance program funded via block grants through the U.S. Department of Health and Human Services, which provides lump-sum assistance of varying amounts (paid to the energy provider) based upon income, household size, fuel type, and vulnerability.

Southwest Gas offers low-income energy efficiency programs in Arizona and Nevada, and a low-income energy bill assistance program in Arizona. According to Southwest Gas, Arizona's energy bill assistance program was modeled after that of California, and provides a 20% discount for the commodity portion of the bill for customers making up to 150% of the federal poverty level. Bill discounts are provided only during the winter months.

We conclude that the programs offered by multi-jurisdictional utilities in other states do not present any barrier to implementing the changes we are making to California's CARE and LIEE programs.