Editor’s note: This is the first piece in a series on what utilities and others are doing to increase equity in the U.S. power system, the challenges they face, and what more consumer advocates say needs to be done.
Utility company commitments to customer equity, energy affordability and equitable access to clean energy resources are becoming more common, but energy justice advocates say they’re not enough. Investor-owned utilities need to do more, these advocates say, to help low-income customers, customers of color and residents of traditionally underserved communities.
To assess these efforts, Utility Dive contacted 20 major investor-owned utilities around the country to request details on their customer equity initiatives, including goals and challenges as well as what type of customer data they collect. Eleven utilities responded, sketching out a range of programs that stretch beyond traditional energy efficiency and bill assistance efforts to include expanded access to renewables, new approaches to energy affordability, weatherization offerings and commitments to community partnerships.
Examples of recent efforts include the following:
- In Massachusetts, Eversource Energy is developing an equity index metric as part of its performance-based rates and an enhanced communication outreach plan for projects in environmental justice communities.
- In Virginia, Dominion Energy is installing fiber-optic cable in rural communities to expand broadband access and is in the process of implementing a new program, at the direction of state lawmakers, to cap eligible households’ electric bill payments at a percentage of income.
- Arizona Public Service has asked state regulators to approve a $144 million package to support coal communities with economic development, electrification and renewables development as the utility exits its coal portfolio in 2031.
- Consolidated Edison has worked with the New York City Housing Authority to expand access to solar, and it provides greater levels of incentives for electric vehicle charging stations installed within a mile of disadvantaged communities.
- Wisconsin Electric Power has announced a 10-year, $700 million storm hardening and grid resiliency plan that directs a third of the total investment into the city of Milwaukee, “including the 12 lowest median income zip codes.”
Utility responses also highlighted the challenges they face — including struggling to connect with target customers and a lack of sufficient funding for these efforts — that have perpetuated energy system inequities for years.
“This is not a new problem. It's been happening for a long time,” said Sharonda Williams-Tack, associate director for Sierra Club’s Energy Justice Campaign, Healthy Communities.
Why are utilities showing interest now?
Recent events, including the global pandemic and the racial reckoning in the United States since the murder of George Floyd, have forced regulators to acknowledge issues of energy affordability and equity, say experts. And they have created an opportunity for community-based organizations and consumer advocates to press for utilities to include more formal equity goals and commitments in their planning documents.
The focus on equity isn’t coming from utilities, said Grant Smith, senior energy policy advisor at Environmental Working Group. ”I don't see that they're excessively interested in it. ... It's advocates [and] state legislators that champion these issues and get support,” he said.
COVID-19 set the stage
There is broad recognition among consumer advocates that COVID-19 and its devastating societal and economic impacts helped draw attention to equity issues that have existed for years.
“The combination of COVID and the amount of shutoffs we were seeing, and the combination of the racial reckoning and there being a real focus on how race and racism intersect in all parts of our society ... I think that coming together in a very public, national way was what lit the match,” said Williams-Tack. “Since then, it's been a lot easier to get the utility to listen. We're able to open up COVID dockets, we're talking more about affordability and tracking shutoffs. That just wasn't happening before.”
“The rash of [utility] disconnections during the COVID crisis was pretty abhorrent,” Smith said. “It emphasized the exacerbated affordability issue and actually lent this equity effort a higher profile.”
There have been more than 3.5 million electric service shutoffs since the beginning of the COVID-19 pandemic, according to data in an April report from the Center for Biological Diversity and BailoutWatch.
“Here in the state of California, the conversations shifted drastically because of COVID,” said Michele Knab Hasson, who manages California policy efforts within the Natural Resources Defense Council’s Energy Efficiency for All program. “Because what we saw was that, outside of utility shutoff moratoriums, there was no relief for the increasing burden that utility debt was placing on low-income folks in particular.”
What the problem looks like
Data from the National Energy Assistance Directors Association shows U.S. families fell further behind on electric and gas utility bills during the pandemic. Arrearages rose to $16 billion in August, roughly doubling since the end of 2019, according to the group, which represents state directors of the federal government’s Low Income Home Energy Assistance Program, or LIHEAP.
The short-term government spending bill that passed last month included an additional $1 billion in emergency funding for LIHEAP, a formula assistance program Congress created in 1981. But the goal of advocates’ equity work is “to get away from bill assistance,” said Williams-Tack. “It’s a Band-Aid.”
The problems of energy affordability and equity are structural, Williams-Tack and others say.
“People are stuck in these really inefficient homes, which goes back to a whole host of structural issues and structural racism. And as a result of that, there's general economic disempowerment,” said Justin Schott, project manager of the Energy Equity Project, which is housed within the Urban Energy Justice Lab at the University of Michigan’s School for Environment and Sustainability.
“You have a significant portion of the population who can't make ends meet,” said Smith. About a third of the country “can’t afford their electric bill.”
Beyond efficiency: What advocates say a successful approach looks like
Advocates say creating an equitable energy system means reevaluating traditional utility approaches, such as their reliance on energy efficiency programs that may generate little in the way of bill savings.
“A lot of the efficiency programs that have touched lower-income and Black and Brown households have been light bulbs, have been very light-touch stuff that’s not really going to get to the disparities in energy burden,” said Laura Goldberg, Natural Resources Defense Council’s Midwest director for energy equity and affordability.
“Energy efficiency retrofits alone will not give the kind of a utility bill savings that will really impact low-income families,” Hasson agreed.
Instead, Hasson said, a “deep” efficiency approach — potentially including electrification investments and home weatherization and structural improvements necessary to facilitate other energy-saving upgrades — must be combined with rate reform and access to clean-energy resources like community solar and storage.
“To focus only on one solution has been to the real detriment of a lot of the efficiency work,” said Hasson. “Before COVID, we saw this idea that efficiency could really bring the savings that low-income people need. And efficiency is a huge part of that — it is an integral component — but if we only focus on efficiency, it really won't get anywhere for low-income people.”
New approaches to bill management must be developed, say experts.
One concept a growing number of states are adopting is a percentage-of-income payment plan, or PIPP, which caps eligible customer bill payments based on how much they money they take home. “California is really leading the way on this,” said Goldberg. The California Public Utilities Commission last year directed investor-owned utilities to implement PIPP pilot programs to reduce residential disconnections of electric and natural gas service, capping bills at 4% of the household’s monthly income.
Virginia is “kind of at the forefront” among southeastern states for its work to tackle issues of energy equity, said Williams-Tack. The Virginia General Assembly in 2020 directed the State Corporation Commission to implement a PIPP, and Dominion Energy said it is now working to put the program in place.
Dominion, Virginia’s largest utility, identified the PIPP in its response to Utility Dive’s equity survey as one of its equity initiatives, saying that once it is fully implemented, the program “will limit eligible households’ electric bill payments to either 6% of annual household income (if not using electricity for heating) or 10% of annual household income (if using electricity as the primary heating source).”
Williams-Tack said she advocates for PIPPs to be designed to allow customers to opt into utility programs that help them use less energy. Other new rate approaches utilities are experimenting with include offering a separate low-income customer rate and lowering or eliminating fixed charges on monthly bills.
“I don't want people to stay on PIPPs or stay on bill assistance,” Williams-Tack said. “I want them to get to the point where bills are just affordable because they’re paying for the energy they’re using and not the energy they’re wasting.”
How much should utilities be spending?
Utility programs are funded by ratepayers, but advocates say utilities often spend less on low-income customers, by some metrics, than they do on broader programs.
“At a bare minimum, we should at least be spending proportionally to the percentage of low-income customers,” Schott said. However, spending has been “disproportionately in the favor of non-low-income households for a decade or more of energy-efficiency programs. So we should really adjust it significantly higher, based on the need.”
“We're dealing with an energy system that's inherently racist,” said Williams-Tack, pointing as an example to disparities in spending on major energy efficiency measures, like furnace replacements, in DTE Energy’s territory of Detroit.
“I don’t think it’s intentional,” Williams-Tack added. Utilities need to collect more customer data, including race, she said, in order to know their investments are equitable.
Advocates say the energy system is embedded racism in the same way as other U.S. systems. Median energy costs for Black households are higher than for White households, the Energy Trust of Oregon notes, citing research by the American Council for an Energy-Efficient Economy. The Sierra Club has published work on the “clear links between white supremacy and the oil industry.” Greenpeace notes the disproportionate impact of energy pollution on low-income communities and people of color and calls it “fossil fuel racism.”
Utility programs should follow a “vertical equity approach,” Williams-Tack said, where customer assistance is “explicitly varied to reflect differences in needs.” Most utilities use a “horizontal” equity approach, which distributes benefits equally.
An example of a horizontal equity program is an appliance rebate program, where all customers have equal access to the energy saving incentive, Williams-Tack said, whereas DTE Energy’s new program to address high energy burdens in Detroit, particularly in African American neighborhoods, is an example of vertical equity.
“DTE is doing it as part of a legal settlement,” Williams-Tack noted. “They’re not doing this voluntarily, unfortunately.”
DTE did not respond to Utility Dive’s equity survey. The utility said it “reviewed the questions and has decided not to participate,” but did add that “DTE is committed to achieving customer equity and environmental justice.”
Schott pointed to President Biden’s Justice40 initiative, which calls for 40% of the benefits of certain federal investments to flow to disadvantaged communities that are marginalized, underserved and overburdened by pollution, as another way for utilities to balance investments.
Goldberg also named Justice40 as a force behind utility interest in energy equity issues. “It’s the lens in which we're seeing a lot of federal dollars be viewed now, and how they get implemented at the state level,” she said.
Money coming from the federal government can also help further utility equity efforts and reduce customer costs, said Williams-Tack. ”Though it's not enough money, we have grants and loan programs under the infrastructure bill as well as the [Inflation Reduction Act] that utilities can access.”
The Inflation Reduction Act, which President Biden signed in August, contains about $369 billion in incentives for renewables, energy storage, electric vehicles and other clean-energy efforts.
Schott warned, however, that there is a risk that much of the clean energy funds in recent legislation “are not going to reach disadvantaged communities” because of difficulties in applying for programs, less ability to purchase an electric vehicle, or a lack of qualified contractors to do some kinds of efficiency work
The federal funds are “not going to reach individuals because of the starting bar, whether that's credit score requirements, whether that's having qualified contractors in the middle of Detroit ... there are all kinds of barriers that I think are perpetuating injustices,” Schott said.
Barriers to implementing equity initiatives
Asked about the challenges to implementing equity-focused initiatives, utilities raised issues of finance and communication.
Southern California Edison said its service territory is “incredibly diverse,” and “reaching underserved communities, and gaining their trust to adopt new technologies or enroll in available programs takes sustained work and effective partnerships.” The utility serves about 15 million customers.
Farther north in California, Pacific Gas & Electric Co. also said one of its biggest challenges in implementing equity-focused programs “is reaching customers due to outreach barriers.” The utility said it partners with about 4,000 community-based organizations in Northern and Central California to overcome the barrier.
Those partnerships are essential to reaching families who may best know their utility for raising rates or shutting off service and are hesitant to respond to outreach attempts or program offers, say advocates.
“There's a large distrust when it comes to utilities. And so it takes advocates like Sierra Club or more community-based nonprofits ... to be the messengers,” Williams-Tack said.
Consolidated Edison referenced challenges in allocating funding. “We strive to balance the principles of the traditional cost-of-service structure with the undeniable need for equity programs, all while continuing to provide safe, reliable service,” the utility said. “Achieving the right balance is particularly important now with energy costs rising and many customers still feeling the economic effects of the pandemic.”
Con Edison said it is working with stakeholders to improve existing programs, like the utility’s Energy Affordability Program, as well as develop new offerings.
Dominion was more blunt in naming its equity challenge. “Typically the need for the programs exceeds the funding for all assistance programs, not just ours,” the utility said.