June 18, 2008
Program to Help Poor Pay for Heat May Be Cut
By Timothy C. Barmann, The Providence Journal, R.I.
Jun. 18--At a time when Rhode Islanders are facing record-high energy prices, the General Assembly is poised to eliminate a law that was established to help the poorest low-income families pay their utility bills.The House of Representatives today was scheduled to consider the state budget bill, which contains a provision that repeals the "affordable energy" legislation passed in 2006.
The reason: the state simply cannot afford the program, according to Rep. Steven M. Costantino, chairman of the House Finance Committee, which recommended the action.
"Unfortunately, we could no longer afford this tax credit," he said in a statement, responding to The Journal's request for comment.
"We had to spread the pain throughout the budget and this was one of the many items that we were able to identify for taxpayer savings."
Eliminating the legislation will save millions over the next few years: $4.2 million in fiscal year 2009; $8.6 million in 2010; $13.1 million in 2011; $17.8 million in 2012; and $18.5 million in 2013, according to an estimate by the House Finance Committee.
The timing couldn't be worse for those struggling with heating costs, which are expected to be hundreds of dollars higher next winter, compared to last.
"It's a disaster," said Henry Shelton, coordinator of the George Wiley Center, a Pawtucket agency that lobbies on behalf of low-income families. With no state legislation in place to help with high energy costs, he said, there are likely to be even more utility shutoffs this year than there were last year.
Sen. William Walaska, D-Warwick, one of the original sponsors of the law, said the news is "unfortunate."
"It's another casualty of the budget deficit," he said.
The decision to repeal the energy affordability plan comes on the heels of the most costly heating season Rhode Islanders have ever faced. The number of households that lost utility service last winter for non-payment set an all-time record. Utilities turned off service to a total of 30,144 households, according to state regulators, the highest number ever recorded.
Government forecasts call for next winter to be even more expensive as crude oil prices have skyrocketed to more than $130 a barrel.
Those who use heating oil are expected to be hit the hardest. With the current average price of heating oil at $4.619 a gallon, a typical household that uses 666 gallons over the course of a year will pay $3,083 in heating costs. That is $775, or 34 percent, more than this past year's cost of $2,308, according to calculations by The Journal, using heating oil prices provided by the state Office of Energy Resources.
Those who use natural gas are expected to pay at least 10 percent more this coming winter. The typical heating customer who uses 922 therms of gas (the same amount of energy as in 666 gallons of heating oil) will pay $1,634 for heat over the next 12 months, compared to $1,483. (These calculations assume that the Public Utilities Commission approves a 10-percent increase in natural gas rates proposed to begin July 1.)
About 42 percent of all Rhode Island households heat with oil, according to the 2000 U.S. Census. About 46 percent use natural gas.
The "affordable energy" legislation was created after several years of efforts and negotiations by community groups, legislators, state regulators and the utility companies.
The law had several components: a discount of up to 50 percent on natural gas distribution rates; a 25-percent discount on heating oil costs for "very low income" households; weatherization and energy efficiency programs; and a plan to forgive 25 percent of a customer's overdue back balance if they kept up with a three-year payment plan.
National Grid estimated that about 16,000 customers would be eligible for the distribution rate discount. This aspect of the law was to begin providing help last year. But implementation was delayed until 2009 because the General Assembly and Governor Carcieri did not appropriate money to pay for it.
The program was to be financed by diverting some of the money the state receives from an existing tax. This "gross earnings tax" is 4 percent on electric companies and 3 percent on gas companies. National Grid passes on these taxes to their customers. Another source was to be a portion of the 7-percent tax on the sale of heating oil and propane purchased by commercial customers.
The debt forgiveness program had a different financing source. Past-due bills were to be treated as "bad debt" by the utility companies. Such costs are passed along to all customers in the form of higher rates.
When Walaska introduced the legislation, he said the state could afford the program because it was benefiting from the increased tax revenue that resulted from a sharp rise in energy costs.
The cost of the program, which was estimated to be about $16 million a year, was based on the amount of extra money the state was receiving as a result of higher utility rates, the legislators said at the time.
Since the state never set aside money for the assistance program, it has not helped many. One part of the program that wasn't tied to a state appropriation -- the debt-forgiveness plan -- was put into place.
There were 1,459 natural gas customers who signed up for the 36-month payment plan, but only 288 have been able to keep up with their payments and remain on the plan, according to Thomas Kogut, a spokesman for the Division of Public Utilities and Carriers. Figures for electricity customers were not available yesterday, he said.
Shelton, of the George Wiley Center, said the existing heating-assistance law was flawed because it didn't take into account a person's income in determining the level of help to be provided. But he said the law was better than no law at all.
A better way to provide heating assistance, Shelton said, is contained in a new piece of legislation by Rep. Arthur Handy, D-Cranston, that was heard last night in the House Finance Committee.
The Home Energy Rate Affordability Act would provide aid to households at or below 150 percent of the federal poverty level. It would be paid for by a monthly surcharge of $1.40 on the bills of residential customers.
After the committee heard the details of the bill, the legislators took no action on it.
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Copyright (c) 2008, The Providence Journal, R.I.
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