HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/30/2018 - INCOME QUALIFIED RATE (IQR)/LOW-INCOME EFFICIENCYDATE:
STAFF:
January 30, 2018
Lisa Rosintoski, Utilities Customer Connections Manager
Randy Reuscher, Utility Rate Analyst
WORK SESSION ITEM
City Council
SUBJECT FOR DISCUSSION
Income Qualified Rate (IQR)/Low-Income Efficiency Programs.
EXECUTIVE SUMMARY
The purpose of this item is to receive feedback and direction from City Council on a proposed Income-Qualified
Rate (IQR) that provides a discount utility rate to income-qualified customers. The IQR will position Utilities to
increase adoption of efficiency and conservation actions with low-income customers in both rental and owner
households.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does Council have the information to support a phased approach as recommended by staff?
2. Does Council support the establishment and launch of the IQR, in line with Time of Use launch, on October 1,
2018?
BACKGROUND / DISCUSSION
IQR was presented to City Council as part of the August 16, 2016 City Council Regular Meeting. The item’s First
Reading was postponed to the September 6, 2016 Regular Meeting, at which point it was postponed from
consideration indefinitely. On November 21, 2017, stemming from discussions of time-of-use (TOU)
implementation’s potential impact on low-income customers, City Council directed staff to bring a discussion item
on IQR and low-income efficiency forward for a City Council Work Session.
Staff recommends a three-year phased approach to gather and analyze data before determining long term
participation. Key deliverables of a three-year phased approach include:
The desired outcome of an IQR is to create a system of bill payment assistance that provides a large-scale
platform for low-income targeted efficiency and conservation results to be attained.
Based on Larimer County participation in the Low-income Energy Assistance Program (LEAP) it is estimated that
initially approximately 16-25% of eligible households may participate in the IQR at an annual cost of $300-500K
between the three utility Enterprise Funds. As a mid-cycle appropriation request would be required to start this
program in late 2018, initial funding would be from each utility enterprise’s Reserves. It is being recommended
that the long-term funding source be from the portion of operating revenues that come from late bill
January 30, 2018 Page 2
payments rather than from increasing fixed or variable consumption charges. In 2017, late fee payments
exceeded $600K.
Income Qualified Rate Design Characteristics:
1. Adopt IQR in line with Time of Use rate implementation, October 1, 2018
2. Use a three-year phased approach to implement IQR
a. Implement IQR discount based on LEAP qualification criteria.
b. Gather data from IQR participants and other stakeholders to understand where the demographic lives in
order to create efficiency and conservation strategies and tactics.
c. Expand existing, and develop new, long-term low-income segment efficiency and conservation strategies
and tactics that leverage IQR to increase participation.
3. Key policy and administrative design features staff recommendations:
a. Funding: Operating revenues (specifically late fees) with a variable budget and annual true up.
b. Discount applied to fixed and variable charges for each utility
c. Benefit amount pegged to 2.6% of income, which is the utility burden of households earning the Area
Median Income (AMI)
d. Annual eligibility based on “opt out” process.
e. Customer driven integration of efficiency programs.
f. Outreach direct to customer and through service provider collaborations.
g. Integrate Medical Assistance Program (MAP) customers, whose condition and eligibility is likely to persist,
into IQR and dissolve MAP.
h. Success Criteria:
i. Percent of participants participating in efficiency programs
ii. Percent of estimated low-income population participating in IQR.
Community Need
Many Fort Collins residents are cost-burdened in their housing expenses (Rent/mortgage and utility bills).
According to American Community Survey (ACS) 2015 data, 47% of Fort Collins households earn less than
$50,000 annually. In 2017 only 51% of homes sold were affordable to households earning area median income
($76,800). Resident who will qualify for Income Qualified Rate (IQR) at 165% of the Federal Poverty Level (FPL),
which is the Low-Income Energy Assistance Program (LEAP) qualification level, earn much less than that.
A household that is cost burdened has less to spend on childcare, healthcare, transportation, food, phone service,
education, and other services that higher income earners take for granted, such as having internet access at
home. IQR, as proposed, addresses a chronic income shortfall through both payment and efficiency assistance,
expecting to place an additional ~$49 in the pockets of low-income households each month. Furthermore, an IQR
may contribute to housing stability, which is linked to positive physical and mental health outcomes.
Utilities Affordability Portfolio
In 2014 Utilities completed a comprehensive review of its low-income targeted programs. Guided by key
recommendations resulting from the review, staff structured Utilities approach to low-income assistance into a
suite of programs, today known as Utilities Affordability Portfolio (UAP). UAP strategy considers long and short
term financial assistance, basic and deep efficiency opportunities, as well as the integration of behavior change
education and renewable energy whenever possible. While portfolio programs on average reached just over 900
households in the past five years, an estimated 9,000 customers in our community are low-income, earning less
than 165% of the Federal Poverty Level (FPL). The desired outcome of an IQR is to create a system of bill
payment assistance that provides a large-scale platform for low-income targeted efficiency and conservation
results to be attained.
Serving the Low-Income Segment with Resource Conservation
IQR will serve as the platform that enables participation in Utilities programs that reduce bills, increase efficiency,
and stabilizes customer payment patterns, especially for chronic low-customers. It will also allow Utilities to gather
January 30, 2018 Page 3
primary source feedback to improve the delivery of existing programs, and craft new initiatives, sensitive to this
customer segment’s unique circumstances and consumption profile.
Existing efficiency programs can provide some immediate impact for IQR customers. In addition, Utilities will be
investigating how to scale the programs to enable more quickly reaching the estimated IQR participation of
several thousand customers.
• Larimer County Conservation Corp Energy and Water Program (LCCC). The LCCC Energy and Water
program is a conservation initiative focused on affordability for customers via direct installation of efficiency
products and education while providing young adult job training. The program is free to any Fort Collins
Utilities electric customer. Since its inception the program has served over 3,000 households (approximately
400 per season). IQR will reduce the recruitment time required by LCCC so that more time can be dedicated
to the direct installation and education elements of the program. Staff is also investigating whether the LCCC
season can be extended via the Conservation Corp.
• Colorado’s Affordable Residential Energy program (CARE). CARE, implemented by Energy Outreach
Colorado (EOC), leverages EOC funding, utility rebates, and local resources to provide free energy efficiency
services. CARE was developed to utilize prescriptive rebates from utilities to weatherize homes outside of the
Weatherization Assistance Program’s (WAP) reach. The CARE program is now provided in Fort Collins and
other Platte River cities through a partnership with EOC. The parties are investigating strategies to enable
scaling the program to reach greater numbers of households.
• Weatherization Assistance Program (WAP). The WAP provides comprehensive weatherization services to
eligible low-income customers using federal funds administered by the State of Colorado. The program has
prescriptive measure qualifications and is implemented by Long’s Peak Energy Conservation in Larimer
County. The program has historically been able to improve 20-40 homes annually for Fort Collins Utilities
customers.
• Solar Affordability Program (SAP). The SAP utilizes a 64-kW solar system located in Fort Collins on the
rooftop of a City Building at 518 Loomis to provide direct solar bill benefits to income-qualified customers. The
SAP output is virtually net metered to a set of recipients whose program involvement includes a commitment
to a structured efficiency process to reduce long term energy conservation. The solar benefit accrues for one
year, and is then offered to a new set of eligible customers. SAP is in its first year of pilot operation serving
approximately 20 income-qualified customers. The program review will help determine how best to integrate
the SAP with IQR should the rate move forward.
• Conservation Education: Utilities provides conservation education for both energy and water to both adults
and youth through a range of strategies. Programs with specific education components include the Larimer
County Conservation Corp, Solar Affordability Program and Efficiency Works Home. The IQR implementation
will incorporate a structured efficiency and conservation education plan to include communications to all
participants as well as opportunities for more detail, such as classes. In addition, the programmatic tools can
leverage newly tailored conservation educational materials for IQR participants.
There are several critical barriers which limit the effectiveness of Utilities efficiency efforts for the low-income
segment. IQR linkage to improving efficiency results is directly related to reducing these barriers.
• Identification of specific income-qualified customers with associated housing (single family, multi-family and
mobile). With a specific list of customers, Utilities can better target actions specific to the housing type and
recruit participation more effectively. For example, the Larimer County Conservation Corp direct install
program could spend less time recruiting participation and more time completing household upgrades.
• Identification of ownership and rental characteristics for low-income customers. Many, if not most, low-income
customers reside in rental properties. IQR will enable staff to better characterize these patterns and focus
resources on reaching owners with efficiency programs and services.
New initiatives which will enable improved efficiency outcomes in tandem with the IQR include:
• On-Bill Financing (OBF) 2.0. Staff is in the early phases of developing external sources of capital to be able
to restart the on-bill financing program. Because this financing mechanism is available to property owners of
rental housing, it could be a helpful tool to improve efficiency in this segment.
January 30, 2018 Page 4
• Income qualified rebate structures. Staff is researching whether enhanced rebates for income-qualified
utility customers could make a significant difference in deployment of efficiency retrofits in this segment.
• Rental registration. As described in a Council memo from November (Attachment 1), a rental licensing or
registration approach would address the information and split incentive barriers to efficiency improvements.
Note that efficiency is a secondary benefit to a rental licensing initiative; the primary purpose would be to
ensure minimum health and safety standards.
The anticipated result of an integrated IQR and efficiency initiative are financial relief and reduced energy
consumption by participating customers. Over time, improvements in the housing stock will occur through the
deeper efficiency retrofit programs for both tenants and owners. Increasing results of such efforts to improve
housing stock efficiency serves the broader utility purpose of promoting energy and resource conservation for all
rate payers.
Engagement with customers will focus on increased resource conservation and educational activities. Specifically,
by:
1. Establishing participation baselines by both premise and customer, allowing staff to better utilize several
years of activity data across multiple programs.
2. Conducting participant surveys to understand barriers to resource conservation for this customer segment
3. Targeted communication on Utilities Affordability Portfolio programs.
IQR Program Design
Foundational to the proposed IQR is the concept that offering electric, water and wastewater rate discounts to
income-qualified households can drive conservation behavior change and efficiency measure installation among a
demographic that has been traditionally difficult to engage in conservation strategies.
There are several important considerations when designing an IQR. Below are key policy and administrative
design features staff recommends and are prepared to discuss in detail.
Funding:
Operating revenues (specifically late fees) with a variable budget and annual true up
It is important the rate is supported with a stable, on-going funding source. Potential funding sources for an IQR
include:
• Utilities operating revenues – Use of late fee revenues could support the initial 25% of eligible customers
without adjusting fixed or variable rate charges.
• Utilities rates - Rate increase appropriation for residential and commercial customers. Rate increase applied
to both fixed and variable rate charges.
• General Fund - Funding through annual BFO appropriation.
• Combination – Determine appropriate funding split and system of distribution.
A variable budget will encourage maximum participation in the IQR, and will not cut off any eligible customers.
Providing a rate on this scale will enable wide communication on efficiency and conservation opportunities.
Staff recommends funds from each utility Enterprise Reserve be appropriated beginning in 2018, with possible
rate modifications needed through the 2021-22 budget cycle specifically for this program.
Discount applied to fixed and variable charges for each utility
This ensures the same price signals are communicated to this segment of residential customers as are to the
entire residential rate class.
Benefit amount pegged to 2.6%, which is the utility burden of households earning the AMI
January 30, 2018 Page 5
In our community, the average household with income less than 165% of the FPL pays at least 4.6% of their
income for electric, water and wastewater services. This compares to 2.6% of household income paid by
households earning the AMI.
Graph 1: Based on 2009-2013 US Census data.
To establish equitable cost impacts across the residential rate class, staff recommends a maximum affordable
percent of income of 2.6%. This would require a 42% discount be applied for IQR participants that have all three
services. This equates to a:
• 35% discount for electric
• 45% discount for water
• 50% discount for wastewater
The table below highlights the average bill and discount for customers expected to qualify for the IQR at 2018
rates. Customers could see a $49 per month savings if they receive all three services, which equates to a 42%
discount, on average.
Annual eligibility based on “opt out” process.
People with low incomes often have frequent application and renewal forms to complete for assistance with food,
child care, medical insurance, rent assistance, and heating assistance, among others. Opt out enrollment in IQR
based on LEAP qualification ensures IQR paperwork, transportation and overall accessibility is not a burden.
January 30, 2018 Page 6
Using LEAP as the qualifying mechanism for an opt out process does not allow us to vary the discount
amount based on individual income. LEAP qualification simply indicates the customer earns less than
165% FPL. At no point is the City collecting actual income data. This design allows Utilities to reach a
high number of customers with minimal administrative cost.
Based on the latest ACS data there are an estimated 9,000 households earning less than 165% FPL are
potentially eligible for the IQR. While up to 9,000 households are potentially eligible, not all those customers
receive all services from Fort Collins Utilities. Additionally, many of these households are receiving a utilities
subsidy through their housing arrangements and may not qualify for LEAP.
Outreach direct to customer and through service provider collaborations.
In the 2017 program year, 2318 households in Fort Collins zip codes qualified for LEAP. Utilizing Utilities
Affordability Portfolio customer information, staff will steer customers to LEAP who may not be participating in that
program yet. This will boost the number of customers participating in IQR.
Outreach will be conducted in collaboration with time of use communication efforts, working with both internal and
external partners. Outreach will include widely accessible mass communication tactics such as website and social
media and targeted direct mail. Materials will be made available in Spanish and otherwise follow City language
access guidelines.
Notice of the proposed change to the Municipal Code will be published in the Coloradoan and a mailing will be
sent to City electric customers outside of the city limits thirty days before Second reading, in the same manner as
provided to annual rate update ordinances.
Integrate Medical Assistance Program (MAP) customers, whose condition and eligibility is likely to
persist, into IQR and dissolve MAP.
The ~120 MAP customers will have communications specific to them and their unique circumstances. They are
often on a fixed income, are elderly or disabled, and have a condition that is likely to persist. To continue to assist
the small number of MAP customers who may earn more than 165% FPL, staff recommends migrating MAP
customers to IQR without a need for recertification, and the MAP program be dissolved. Through primary
research, staff estimates 10 MAP customers fit this profile.
Success Criteria:
• Percent of participants also participating in energy efficiency programs
• Percent of estimated low-income population participating in IQR.
Phased Implementation
January 30, 2018 Page 7
Key information a phased IQR implementation will provide City Council in determining rate-payer benefits are:
• Learn information in first year that guide affordability program development or enhancements opportunities.
• Impact on adoption of conservation behaviors among income-qualified customers, measured through
aggregate actual usage data and IQR participant survey information.
• Impact on efficiency measure installation among income-qualified customers, measured through before and
after program participation comparison; and
CITY FINANCIAL IMPACTS
Based on Larimer County participation in the Low-income Energy Assistance Program (LEAP) it is estimated that
initially approximately 16-25% of eligible households may participate in the IQR at an annual cost of $300-500K
between the three utility Enterprise Funds. As a mid-cycle appropriation request would be required to start this
program in late 2018, initial funding would be from each utility enterprise’s Reserves. It is being recommended
that the long-term funding source be from the portion of operating revenues that come from late bill payments
rather than from increasing fixed or variable consumption charges. This funding approach is the same approach
that the Colorado Public Utility Commission requires of Xcel Energy. In 2017, late fee payments exceeded
$600K.
Unique Households that receive any one service
(Electric OR Water OR Wastewater)
9,000
Number of Customers that receive ALL 3 services 1,120
Service
Total Number of
Households per Service
in Ft Collins
Number of
households that may
qualify for IQR
Customers Enrolled
assuming 25%
Enrollment
Average 2018
Discount
$ Impact
Electric 57,913 6,955 1,738.75 $ 17.65 $ 368,267
Water 22,283 1,486 371.50 $ 14.67 $ 65,399
Wastewater 27,543 1,930 482.50 $ 16.73 $ 96,867
Total $ 530,533
If enrollment increases significantly, it may be necessary to consider other operating revenues or funding sources
for supplemental funds. Research shows enrollment of 75% or more in rate assistance programs is challenging
to achieve. It is in consideration of these variables staff estimates the long term financial impact an IQR. If
participation levels ultimately reached 65%, at 2018 rates the impact would be roughly $1.35 million, as shown by
fund in the table below.
January 30, 2018 Page 8
ATTACHMENTS
1. Memo November 16, 2017 (PDF)
2. PowerPoint Presentation (PDF)
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
1
Income-Qualified Rate (IQR) and
Low-Income Efficiency and Conservation
January 30, 2018
ATTACHMENT 2
Low Income Program Alignment
2
Strategic Alignment
• Neighborhood Livability & Social Health
• High-Performing Government
Service Delivery
• Efficiency and Conservation
• Financial Assistance
ATTACHMENT 2
Questions to City Council
Does Council support the phased
approach, as recommended by staff?
Does Council support the establishment
and launch of IQR, in line with Time-of-Use
(TOU) launch Oct. 1?
3
ATTACHMENT 2
Community Need
4
“When I was here as a kid, Fort
Collins was reasonably priced. Now
it’s so expensive. A three-bedroom,
one-bath apartment rents for around
$1,500 a month.” – Joe, PAF recipient
Expense Type Monthly Cost
Housing $ 1,452
Child Care $ 1,457
Food $ 866
Transportation $ 496
Health Care $ 517
Miscellaneous $ 423
Taxes $ 976
TOTAL $ 6,187
ATTACHMENT 2
Community Need
5
Household Size Maximum Gross Monthly Income Annual Income
1 $ 1,658 $ 19,896
2 $ 2,233 $ 26,796
3 $ 2,808 $ 33, 696
4 $ 3,383 $ 40,596
5 $ 3,958 $ 47,496
LEAP Qualification: 165% Federal Poverty Limit
~9,000 households
ATTACHMENT 2
Affordability Portfolio Timeline
6
2004
Payment
Assistance
Fund
established
2012
Medical
Assistance
Program
established
2014
Review of
low-income
assistance
2015
Utilities Affordability
Portfolio (UAP)
implementation
2016
IQR indefinite
postponement
2017
TOU adopted;
review of IQR
2018
Introduce
IQR with
TOU
2020
IQR
recommendations
to Council
2019
Gather
IQR data
ATTACHMENT 2
Our Role as a Utility
7
Develop Energy
Efficiency
Opportunities
Support Financial
Assistance
Opportunities
Efficiency and
Conservation
Education
Funding
Administration
Efficiency and
Conservation
Education
Funding Rates
ATTACHMENT 2
Comprehensive Customer Assistance
8
Efficiency
Installations
Bill Payment
Assistance
Basic Retrofits
Renewables
Deep Retrofits
Long-Term Assistance
Renewables
Short-Term (Emergency)
Assistance
Education
and Behavior
Change
UTILITIES
AFFORDABILITY
PORTFOLIO
ATTACHMENT 2
Critical Partnerships
9
ATTACHMENT 2
Portfolio Performance
10
$85
$194
2004-2012 2013-2017
Average Assistance Per
Household
558
983
2004-2015 2016-2017
Average Households
Served Annually
$32,522
$103,738
$124,384
$225,000
2015 2016 2017 2018
projected
Payment Assistance Fund
Household Assistance
ATTACHMENT 2
Existing Efficiency Programs
11
Larimer
County
Conservation
Corps
(LCCC)
Colorado
Affordable
Residential
Energy
(CARE)
Solar
Affordability
Program
(SAP)
Medical
Assistance
Program
(MAP)
Payment
Assistance
Fund
(PAF)
ATTACHMENT 2
Potential Efficiency Programs
12
Income-
Qualified
Rebates
Expanded
LCCC
Income-
Qualified
Rate
Building
Energy
Scoring
On-Bill
Financing
2.0
Income-
Qualified
Rebates
ATTACHMENT 2
Affordability Portfolio Timeline
13
2004
Payment
Assistance
Fund
established
2012
Medical
Assistance
Program
established
2014
Review of
low-income
assistance
2015
Utilities Affordability
Portfolio (UAP)
implementation
2016
IQR indefinite
postponement
2017
TOU adopted;
review of IQR
2018
Introduce
IQR with
TOU
2020
IQR
recommendations
to Council
2019
Gather
IQR data
ATTACHMENT 2
IQR Implementation
14
2004
Payment
Assistance
Fund
established
2012
Medical
Assistance
Program
established
2014
Review of
low-income
assistance
2015
Utilities Affordability
Portfolio (UAP)
implementation
2016
IQR indefinite
postponement
2017
TOU adopted;
review of IQR
2018
Introduce
IQR with
TOU
2020
IQR
recommendations
to Council
2019
Gather
IQR data
ATTACHMENT 2
IQR Data: Utility Costs
15
AMI - Area Median Income $74K
FPL - Federal Poverty Level $24K
ATTACHMENT 2
IQR Data: Utility Costs
16
% Participation Expected Cost % Operating Revenue *
25% $530K 0.3%
50% $1.1M 0.6%
75% $1.6M 0.9%
* Combined Operating Revenues were $182.6M in 2017
ATTACHMENT 2
IQR Implementation
17
• Launch with
TOU
• “Opt out” LEAP
qualification
process
• Funded from
reserves
FALL 2018
Update Council
on program
participation and
impacts
FALL 2019
• Criteria to
remain in
program
adopted
• Long term
funding
identified
FALL 2020
ATTACHMENT 2
Questions to City Council
Does Council support the phased
approach, as recommended by staff?
Does Council support the establishment
and launch of IQR, in line with Time-of-Use
(TOU) launch Oct. 1?
18
ATTACHMENT 2
19
ATTACHMENT 2