Testimony of the National Consumer Law Center on Behalf of Our Low-Income Clients Before the House Subcommittee on Labor, Health and Human Services, Education U.S. House Committee on Appropriations

FY 2005 Appropriations for the Low Income Home Energy Assistance Program (LIHEAP)

The National Consumer Law Center (NCLC),1 on behalf of our low-income clients,2 respectfully submits this testimony regarding the appropriation of funds for the Low Income Home Energy Assistance Program (LIHEAP)3 for FY 2005. NCLC is a strong supporter of LIHEAP, the primary safety net between low-income consumers and the disconnection of vital utility service. The high energy prices that squeeze the budgets of low-income households to the breaking point show no sign of abating. The recent National Energy Assistance Directors’ Association (NEADA) national study on LIHEAP recipients documents the tremendous value of LIHEAP to low-income families as well as the severe sacrifices made by the poor to pay their home energy bills.4 There is a growing gap between LIHEAP funding and benefit levels, and actual bills that poor people pay. Low-income families and fixed-income elderly clients continue to fall further behind as energy prices have reached a new, higher baseline. There are also a high number of unemployed and underemployed people, struggling to get back on their feet. LIHEAP is essential for their safety and well being. We thank the Subcommittee for its strong support of the LIHEAP program in the FY 2004 appropriations process and, in light of the forecasted continued high energy prices, urge the Subcommittee to consider appropriating at least $3.4 billion in regular LIHEAP funds for FY 2005 with advance appropriations of the same amount for FY 2006.

Home Energy Prices Continue to Rise. As illustrated in the chart below, home heating fuel bills have increased dramatically over the past three out of four heating seasons when compared to the 1997 to 1999 average. According to the Energy Information Administration (EIA) data,5 in three out of the past four winters, residential natural gas expenditures in the Midwest were 72% (2000-2001), 45% (2002-2003) and 63%(2003-2004 base forecast) higher than the average for natural gas prices in that region from 1997 to 1999. In three out of the past four winters, heating oil expenditures in the Northeast were 62%, 61% and 59% higher than the average heating oil expenditures for that region from 1997 to 1999. In three out of the past four winters, propane expenditures in the Midwest were 73%, 45% and 55% higher than the average propane expenditures for that region from1997 to 1999. This marked increase in expenditures demonstrates that home energy prices have reached a new, higher baseline, one which experts agree will not decline for the foreseeable future.

Based on EIA’s Residential Energy Consumption Survey, approximately 53% of LIHEAP eligible households heat with natural gas and 30% heat with electricity. According to EIA’s January 2004 projections for residential natural gas prices, prices through 2025 (on an inflation-adjusted basis) are expected to exceed the average prices that prevailed during the 1990s. EIA also expects crude oil prices to remain close to recent near-record levels. The vast majority of newer electric generation plants rely on natural gas, thus tying electricity prices to the sharply rising natural gas prices. Residential electricity customers exposed to wholesale market costs of electricity are facing fuel adjustment rate increases in their bills. For example, electricity customers in Texas are facing increases this summer in the “Price to Beat” rate that range from 22.7% to 34.45%.

In order for clients to have more comparable purchasing power to what LIHEAP had in the past (e.g., to purchase comparable amounts of kWhs or ccfs or gallons of oil), we urge the Subcommittee to appropriate at least $3.4 billion for the regular program.

More Low Income Households Cannot Keep Up With Rising Energy Costs. Consumers are now having a hard time affording their energy bills even when weather conditions are not extreme. Initial indications from a handful of states that track natural gas and electricity arrearages and disconnections show that low-income families have been battered by their energy bills.

Iowa: More low income households are falling further behind on their energy bills. Following a relatively mild winter in Iowa, the number of LIHEAP households with past due accounts is at a record high for any March in the last 6 years. The amount owed by LIHEAP customers is also at the highest ever in the past 6 years. Jerry McKim, Chief, Iowa Bureau of Energy Assistance is concerned that low income households are carrying significant energy debt from one year to the next at a time when federal funding is being reduced and energy prices are rising. According to McKim, low-income households routinely forego basic necessities in their attempts at keeping up with their energy bills.

Pennsylvania: Utilities in Pennsylvania that are regulated by the Pennsylvania Public Utility Commission (PUC) have established universal service programs that assist utility customers in paying bills and reducing energy usage. Even with these programs, electric and natural gas utility customers find it difficult to keep pace with their energy burdens. In Pennsylvania through April 14, 2004, the LIHEAP agency (Department of Public Works) has approved 11,136 more LIHEAP cash applications than the same time last year, for a total of 318,239 applications -- an increase of 4%. Through April 1, the Bureau of Consumer Services has had almost 9,000 payment arrangement requests from electric customers and over 5,000 requests from natural gas customers, over 10 percent higher than last year at the same time. Unlike past years, Pennsylvania will be spending its entire energy assistance budget and will not carry over any funds for an early opening next heating season.

In 2004 average arrearages have increased slightly, from last year’s significant 17% increase. The average electric arrearage is $289, up 2.34% from 2003 and the average natural gas arrearage is $456, up 4.25% from 2003. This indicates that when customers fall behind, it may take several years to catch up. It also appears that the trend of increased terminations is likely to continue. Utility terminations in Pennsylvania have increased more than 50 percent over the years.

Massachusetts: According to Charlie Harak, a senior staff attorney in NCLC's Boston office, as a result of three of the past four years having unprecedented heating oil and natural gas prices, Massachusetts’ residential consumers have higher arrearages than they have ever faced. Community action agencies are reporting more aggressive collection activities from some utilities as well as encountering greater difficulty negotiating payment plans for low-income customers.

LIHEAP Helps These Vulnerable Households. Growing utility arrearages for low-income households will only place these fragile households on a downward spiral towards disconnections. Adequate LIHEAP assistance can help families facing terminations, but even more important, adequate LIHEAP appropriations can help struggling families maintain vital energy services and protect the health and safety of vulnerable seniors, families with young children or disabled family members. The recent NEADA national energy assistance survey found that 48% of LIHEAP recipients would have had their electricity or home heating fuel discontinued if LIHEAP had not been available.6

The Need for LIHEAP Has Grown. The number of households receiving LIHEAP assistance has increased an estimated 15.6% in 2004 compared to households served in 2002.7 According to NEADA estimates, around 4.9 million households will receive LIHEAP assistance in FY 2004. However, this translates roughly into only 14% of the income-eligible population receiving LIHEAP assistance. LIHEAP has always been a critical component of the patchwork safety net.

Employment: While there are recent signs that the economy is improving, there were still 8.4 million people unemployed in March 2004.8 Particularly troubling is the historically high level of long-term unemployment, with over 1.9 million people unemployed for half a year or longer, according to the Bureau of Labor Statistics.9 In addition, there are over 4.7 million workers desiring full-time work, but only finding part-time jobs.10 Millions of households have been harmed by the sluggish labor market and it will take over 150,000 jobs created per month to pick up those that lost jobs as well as the new entrants into the job market.11 Full-time, year-round employment significantly reduces the chances than a household will be in jeopardy of losing housing due to failure to pay rent or utilities.12 The recent NEADA National Energy Assistance Survey found that 28% of the LIHEAP recipients they surveyed missed one or more rent or mortgage payments in 2003; 9% reported that they moved in with friends; 4% were evicted.13

Rising Number of Poor: The number of poor has increased by 3 million between 2000 and 2002 and the severity of poverty was greater in 2002 than any other year on record according to the Center on Budget and Policy Priorities analysis of recent Census data.14

The Consequences of Unaffordable Energy Bills are Dire. Those who cannot afford their winter heating bill often face dire choices such as sacrificing food, medical care or prescription medicine.15 The loss of essential utility services can be devastating, especially for poor families that can find themselves facing the prospects of hypothermia in the winter, hyperthermia in the summer,16 eviction, property damage from frozen pipes, the use of dangerous alternative sources of heat,17 and the potential threat of the intervention of child welfare agencies.18 Studies have also demonstrated the clear links between homelessness and utility disconnections, as well as the connections between unaffordable utility service and the disruption to families and children’s education. LIHEAP works to bring fuel costs within a manageable range for low-income households. There are other societal benefits to a strong LIHEAP. A recent study documents an association between receipt of LIHEAP assistance and a reduced incidence of undernutrition in young children.19

LIHEAP Appropriations Have Not Kept Up With Inflation. To keep the purchasing power for LIHEAP equal to its 1982 level on an inflation-adjusted basis, the program would need to be appropriated at $3.4 billion for the regular program. To keep the purchasing power constant with the 1985 appropriation would require an appropriation of $3.66 billion for the regular program. The need for LIHEAP assistance during this current period of high fuel prices and high levels of long-term unemployment requires a similar level of commitment to the program as when it was created.

The Need for Advance Appropriations is Critical. The timing of the release of the LIHEAP block grant to the states is critical for the effective and efficient operation of their programs. The normal appropriations process leaves very little time between enactment of the Labor-HHS-Education spending bill and the start of most states’ heating programs. An advance appropriation is essential for states to determine income guidelines and benefit levels well ahead of time and for properly planning the components of their program year (e.g., amounts set aside for heating, cooling and emergency assistance, weatherization, self sufficiency and leveraging activities). Without advance appropriations, delayed passage of the spending bill can force states to open their winter heating program without knowledge of their final grant amount. Advance appropriations shield states from disruption of the start-up of their winter heating programs if there is a delay in the passage of the Labor-HHS-Education spending bill.

LIHEAP Works. LIHEAP is a targeted block grant that assists vulnerable low-income households with the costs of home energy. According to the U.S. Department of Health and Human Services, one-third of households receiving LIHEAP heating and cooling assistance had an elderly member; over 30 percent of households receiving heating and cooling assistance had a member with a disability; and almost a third of households receiving heating assistance and around a fifth of households receiving cooling assistance had young children. In FY 2001, LIHEAP recipient households had a mean individual energy burden almost five times the energy burden for non-low income households.20 While there are broad federal guidelines for LIHEAP, states have the flexibility to tailor their programs to best meet their needs. Administrative costs are minimal – capped at 10 percent. This ensures that the vast majority of LIHEAP dollars are directed to energy assistance for low-income families.

Conclusion. In light of LIHEAP’s continued demonstrated success in helping low-income families maintain access to vital energy service, we urge the Subcommittee to appropriate, at a minimum, $3.4 billion for the regular LIHEAP program in FY 2005 as well as advance appropriations for FY 2006 of at least $3.4 billion for the regular program.

Thank you for consideration of our testimony.

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1 The National Consumer Law Center (NCLC) is a nonprofit organization that represents the interests of low-income consumers on a broad range of issues, including access to adequate and affordable supplies of utility service for home heating and cooling. This testimony was prepared by Olivia Wein, staff attorney in NCLC’s Washington, DC office.
2 Iowa Community Action Association and the Massachusetts Union of Public Housing Tenants.
3 42 U.S.C. §8621 et seq.
4 NEADA, “National Energy Assistance Survey” (April 2004) (NEADA survey) available at www.neada.org.
5 EIA, Short-Term Energy Outlook, March 2004, Fig. 4.
6 NEADA Survey, Table 47.
7 NEADA, “States Report That Low Income Home Energy Assistance Programs Rapidly Increase Adding Almost 661,000 New Families,” March 10, 2004. The press release also lists the following states as having marked increases in enrollment since 2002: Alabama (29.4%), Arkansas (20.2%), California (105.8%), Indiana (23.9%, ), Kansas (31.9%), Maryland (23.5%), Minnesota (22.7%), Mississippi (31.9%), Nebraska (25.3%), New Hampshire (25.4%), New Jersey (38.3%), New Mexico (33%), North Carolina (21.1%), Ohio (27.5%), Oklahoma (67.0%), Oregon (25%) and Texas (35.8%).
8 U.S. Department of Labor, Bureau of Labor Statistics, “The Employment Situation: March 2004”, April 2, 2004.
9 Id. at Household Data, Table A-9.
10 Id. at Household Data, Table A-5.
11 Jared Bernstein, “Jobs Picture,” Economic Policy Institute, April 2, 2004; Lee Price and Yulia Fungard, “Understanding the Severity of the Current Economic Labor Slump,” Economic Policy Institute Briefing Paper, Updated on Feb 19, 2004.
12 Heather Boushey et. al, “Hardship in America: The Real Story of Working Families,” Economic Policy Institute, 2001, ch.2. See also Kurt Bauman, “Direct Measures of Poverty as Indicators of Economic Need,” US Census Bureau Population Division Technical Working Paper No. 30, Nov. 1998(strong relationship between income and hardship, including inability to pay full utility bill or rent).
13 NEADA Survey, Table 36.
14 Center on Budget and Policy Priorities, “Poverty Increases and Median Income Declines for Second Consecutive Year,” Sept. 29, 2003.
15 NEADA Survey, Table 39. To pay their energy bills, 22% of LIHEAP recipients went without food, 38% went without medical or dental care, 30% did not fill or took less than the full dose of a prescribed medicine.
16 From 2000 to 2003, approximately 50% - 68% of heat-related deaths were 60 years old or older. Office of Climate, Water and Weather Services, Heat Related Fatalities by Age and Gender, reports for 2000 - 2003.
17 In 1998 there were over 49,000 heating-equipment related home fires resulting in 388 deaths and 1,445 injuries and $515 million in property damage. National Fire Protection Association Fact Sheets on Home Heating from the report, “U.S. Home Heating Fire Patterns and Trends,” John H. Hall, Jr., NFPA, June 2001
18 Robert B. Swift, “Rising Costs for Home Heating Fuel Could Spawn More Problems,” Sunbury (PA) Item, Jan.29, 2000.
19 Pediatric Academic Societies, Publication #921, Platform Presentation, Epidemiology Session, May 6, 2003, Seattle, WA: Children’s Sentinel Nutrition Assessment Program: Heat or Eat: Low Income Home Energy Assistance Program and Nutritional Risk Among Children < 3.
20 U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services, Division of Family Assistance, “LIHEAP Home Energy Notebook for Fiscal Year 2001” (February 2003) at Table A-2b, page 49.