Affordable Payment PlansDesign Options and Lessons Learned

NLIECJune 13, 2006

David Carroll

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How to design a lowincome payment program…• Document needs• Set goals• Understand existing programs• Update goals• Understand existing policies and practices• Update goals

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How to design a lowincome payment program…• Identify program options• Consider how options relate to goals• Select program options• Update goals• Design program procedures• Update goals ….

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Program Options

• Program Administrator– State/Local Government– Utility/Contractor– Nonprofit Organization

• Relationship to LIHEAP– None– Screening/Eligibility– Coordination of Benefits

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Program Options

• Benefit Determination– Fixed Amount– Percent of Income– Rate Discount

• Subsidy Distribution– Fixed Payment– Rate Discount– Fixed Credit

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Program Options

• Preprogram Arrears– Up Front Forgiveness– Earned Forgiveness– Partial Earned Forgiveness

• Benefit Period– Unlimited– Fixed Period– Conditional Period

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Why it matters…

• Example: – Gas Bill = $1000– Subsidy = $500

• Gas Price Increase = 50%– Gas Bill = $1,500– Fixed Payment Subsidy = $1,000– Rate Discount Subsidy = $750– Fixed Credit Subsidy = $500

Affordable Payment PlansTop Five Lessons

NLIECJune 13, 2006

David CarrollJackie Berger

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Lesson #1

• Low-income customers want and need consistent monthly utility bills. Equal monthly bills result in the highest rate of coverage for the customer’s portion of the retail bill and the greatest perceived level of affordability for low-income customers.

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Lesson #2

• The most effective approach to program design within a service territory is to coordinate all energy assistance benefits, including LIHEAP, gas programs, electric programs, and fuel fund programs. Other approaches encourage customers to make suboptimal decisions.

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Lesson #3

• Low income customers want and need better information on their responsibilities and opportunities with respect to low-income payment programs. Mailings and bill messages, while preferred by customers, do not result in understanding.

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Lesson #4

• Energy is not the only budget issue. While offering the same benefit to each household is the “fairest” approach, programs need some mechanism for addressing individual budgetary circumstances.

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Lesson #5

• Low-income customers who participate in payment programs do not change their usage … unless they have one fuel subsidized and one fuel that is not subsidized.