Seeking Equity On Electricity Bills

Advancing Equity in Utility Regulation

Chandra Farley, Partnership for Southern Equity; John Howat and Jenifer Bosco, National Consumer Law Center; Nidhi Thakar and Jake Wise, Portland General Electric; Jean Su, Center for Biological Diversity; November 2021 (Lawrence Berkeley National Laboratory)

Executive Summary

According to the Partnership for Southern Equity, equity is just and fair inclusion, and energy equity is the fair distribution of the benefits and burdens of energy production and consumption. 1 In the context of electric utility regulation, equity can be a goal, tool, or metric. For example, the primary goal of electricity affordability programs, disconnection moratoriums, and rate discounts is to advance equity. Public participation and intervenor compensation are critical equity tools. Appropriate metrics are needed to track and evaluate results of policies, regulations, and programs intended to deliver equitable outcomes. All of these approaches are needed for successful energy equity initiatives.

States are increasingly recognizing equity as a goal of utility regulation, going beyond the traditionally stated objectives to ensure that electricity systems are reliable, safe, and fairly priced. State initiatives are critical not only to address historical inequities, but to ensure equitable benefits and burdens in the transition to net-zero emissions by 2050. 2 Several states have enacted legislation to require or explicitly authorize utility regulators to consider equity, for all decision-making or for specific types of decisions— for example:

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• California adopted legislation two decades ago (SB 89, 2000) requiring environmental justice achievements to be part of the state’s mission. The state subsequently adopted several statutes directing the Public Utilities Commission to incorporate environmental and social justice objectives into various types of decisions, including prioritizing disadvantaged communities in integrated resource planning (SB 350, 2015) and implementing new approaches to reach communities affected by commission decisions (SB 512, 2016). A commission working group is identifying equity metrics for energy efficiency programs for customers of regulated utilities. 3

• Colorado (SB 21-272, 2021) requires the Public Utilities Commission to adopt rules for “all of its work” to “…consider how best to provide equity, minimize impacts, and prioritize benefits to disproportionately impacted communities and address historical inequalities.” Another bill (SB 21-103, 2021) gives the Colorado Office of the Utility Consumer Advocate expanded authority to intervene before the commission on environmental justice, just transition, and decarbonization issues.

• Among its provisions to advance equity and environmental justice, Illinois’ Climate and Equitable Jobs Act (SB 2408, 2021) requires the Commerce Commission to conduct a comprehensive study and submit a report to the General Assembly by January 1, 2023, assessing whether low-income discount rates for electric (and natural gas) residential customers are appropriate and potential design and implementation. Upon completion of the study, the commission is authorized to permit or require utilities to file a tariff establishing low-income discount rates. The bill also significantly increased minimum spending levels for low-income energy efficiency programs.

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• Maine (HP 1251, 2021) requires equity considerations to be incorporated in decision-making for state agencies, including the Public Utilities Commission.

• In Massachusetts (Bill S.9, 2021), the Department of Public Utilities must include equity among six priorities for meeting statewide greenhouse gas (GHG) emission limits, in addition to safety, security, reliability of service, affordability, and reductions in GHG emissions.

• In New York, the Climate Leadership and Community Protection Act (S6599, 2019) includes several energy justice provisions, including a requirement to direct at least 35%–40% of the program’s benefits to historically disadvantaged communities.

• Oregon (HB 2475, 2021) recently added the following factors the Public Utility Commission may consider for classifying utility services for retail rates: “differential energy burdens on lowincome customers and other economic, social equity or environmental justice factors that affect affordability for certain classes of utility customers.”

• Washington’s Clean Energy Transformation Act (SB 5116, 2019) charges the Washington Utilities and Transportation Commission with “Ensuring that all customers are benefiting from the transition to clean energy…[t]hrough the equitable distribution of energy and non-energy benefits and the reduction of burdens to vulnerable populations and highly impacted communities….”

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In other states, public utility commissions are taking action to ensure energy equity under existing authorities. For example, the New Jersey Board of Public Utilities created an Office of Clean Energy Equity, charged with ensuring the state’s clean energy future is accessible to all residents.4 As part of its new performance-based regulatory framework, the Hawaii Public Utilities Commission approved an energy efficiency performance incentive mechanism to encourage increased collaboration between the utility and the third-party efficiency program administrator to provide low-to-moderate income customers with opportunities to better manage energy consumption.5 The Connecticut Public Utilities Regulatory Authority embedded equity throughout its Framework for an Equitable Modern Grid, 6 such as planning to deploy 40% of residential storage installations for low-income households statewide and low-to-moderate income households in underserved communities. The agency also is prioritizing increased resilience for these households, as well as for environmental justice and economically distressed communities, customers with medical hardships, and public housing authorities.7

To formalize its promotion of diversity, equity, and inclusion (DEI), the Michigan Public Service Commission updated its bylaws to include a nondiscrimination policy as an employer and a regulator. Further, commissioners and staff comprehensively examined commission practices and identified opportunities to meaningfully promote DEI, including development of an official DEI policy statement, review of existing hiring and advancement practices, consideration of DEI in regulatory strategies, promoting DEI education and awareness, and surveying employees about diversity issues. 89 In addition, the commission will coordinate with and provide data10 for the Department of Environment, Great Lakes, and Energy as the department considers environmental justice and public health in advisory opinions in utility integrated resource planning proceedings. 11

Utilities also are targeting new energy programs to address historical inequities, with support of state policy and regulatory actions.12

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At the national level, the Biden Administration issued an Executive Order13 and created the Justice40 initiative14 to ensure that federal agencies work with state and local governments to “deliver at least 40 percent of the overall benefits from federal investments in climate and clean energy to disadvantaged communities.”

All of these activities are important steps toward ensuring an equitable transition to a clean energy future.

Earlier reports in the Future Electric Utility Regulation series15 considered equity issues for low-income households with respect to recovery of utility fixed costs and transportation electrification. This report provides four perspectives on systemic changes to advance equity in electric utility regulation, from representatives of energy justice and consumer organizations and a leading utility in this area.

Chandra Farley, Partnership for Southern Equity (chapter 1), begins the conversation by examining energy equity and explaining why it is a crucial goal of utility regulation. She examines current inequities through a regional lens and provides practical steps toward energy justice, listed further below.

John Howat and Jenifer Bosco, National Consumer Law Center (chapter 2), use data from the U.S. Energy Information Administration to develop a series of graphs that illustrate historical inequities in the allocation of energy system costs and benefits based on household income, race, and ethnicity. The Center’s “Equity Enhancement Toolbox” includes: (1) regular filing of granular utility data on residential customer counts, billing, receipts, arrearages, disconnections, and related credit and collections protocols to make visible the challenges and consequences of home energy affordability; and (2) bill affordability programs that meet key objectives for home energy security. They also make the case for additional consumer protections; programs that extend access to energy efficiency, solar, and electrification for disadvantaged households; and improved public participation in regulatory decisions for electric utilities.

Nidhi Thakar and Jake Wise, Portland General Electric (chapter 3), describe “the need to address historic and systemic barriers that have prevented and continue to prevent the progress and participation of historically underrepresented groups, in support of fostering equitable outcomes for all.” Their essay explores how the utility is working to address three core energy justice principles—procedural justice, distributive justice, and restorative justice—in regulatory relationships and service to utility customers and communities. They provide examples in the context of state legislation, responses to the COVID-19 pandemic and wildfires, a new multi-year planning process for utility investments in distribution infrastructure, a community-based smart grid test bed, engagement with community-based organizations and Tribes, and workforce initiatives. Jean Su, Center for Biological Diversity (chapter 4), lays out the injustices of the current energy system disproportionately experienced by communities of color and low-wealth communities due to fossil fuel pollution and health impacts; energy burden, energy insecurity, and energy poverty; climate disasters; and ecocide. She then focuses on legal and regulatory pathways toward addressing chronic energy injustices.

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Following are top recommendations gleaned from each of these essays: 16

Chapter 1

• Extend public engagement in utility regulatory decision making to include environmental justice organizations and provide the capacity for their effective participation through intervenor funding. • Prioritize knowledge- and capacity-building on energy equity issues, both for people who may bear the brunt of inequitable outcomes and in statehouses and utility commissions. • Mobilize coalitions of “uncommon allies”—clean energy, civil rights, and equity and environmental justice groups—to inform and educate “first-person advocates” on energy issues and utility decision-making. • Expand the meaning of safe, reliable, and reasonable electricity service to include equity impacts. • Enact legislation that protects against service disconnections, eliminates predatory disconnection fees, and funds bill assistance programs like percentage of income payment plans. • Support utility programs and retail rate design that increase deployment of energy efficiency and other clean distributed resources for energy-burdened households. • Involve impacted individuals and communities and environmental justice organizations in program design and evaluation and resource planning activities. • Publicly post shutoff and arrearages data and use it to tailor programmatic solutions.

Chapter 2

• Protect vulnerable populations while also working to reduce greenhouse gas emissions by guiding utility investments and services toward achieving both equity and clean energy imperatives for electricity systems of the future. • Reverse the regressivity in the distribution of electricity system costs and benefits through comprehensive and proactive actions that at a minimum address the following inequities: o The proportion of income required to maintain basic electric service o Access to on-site energy generation, storage, and energy efficiency technologies—and the bill savings and resilience benefits they can provide o Uninterrupted and affordable access to a basic level of electricity service • Require electric service providers to report at a zip code-level the key data points needed to determine the extent to which residential customers are affordably accessing and retaining essential utility service. • Ensure that utility affordability programs: serve residential electricity customers who are incomeeligible to receive federal energy assistance; lower participants’ energy burdens to an affordable level; promote regular, timely payment of utility bills by participants; comprehensively address payment problems associated with participants’ current and past-due bills; are funded through a mechanism that is reliable while providing sufficient resources to serve all income-eligible customers and meet policy objectives over an extended time frame; and are administered efficiently and effectively. • Reexamine existing utility consumer protections to ensure that vulnerable customers who demonstrate good faith efforts to make affordable utility payments are protected from loss or degradation of service. • Design low-income energy efficiency and technology distribution programs to require no up-front payments, result in positive cash flows, and mitigate any financing risks for participants.

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Chapter 3

• Approach community engagement, in pursuit of the twin goals of equity and decarbonization, through the lens of environmental justice and in alignment with the Government Alliance on Race and Equity’s Racial Equity Toolkit: listen and communicate, use data, ensure budget, ensure relevancy, and ensure time. • Provide financial support to community-based organizations to enable their participation in utility proceedings and incorporate recommendations from these organizations in community engagement plans. • Ensure that all communities the utility serves may benefit from a clean energy future by acknowledging those hardest hit by climate change impacts—and least able to avoid them—and providing access to opportunities. • Consider distributive justice in utility program design and pricing. • Acknowledge and seek to repair past harm by working with stakeholders on resilient solutions to climate change impacts. • Partner with local cities and counties to advance their climate and sustainability action plans, work with community action agencies to deliver energy assistance to utility customers, and support state and federal legislation that assists low-income and vulnerable communities.

Chapter 4

• Expand the definition of “public interest” to encompass climate, environmental, and energy justice goals—for example: o When considering certificates of public convenience and necessity for new energy infrastructure o To protect utility customers from undue financial risk, including financial losses from stranded carbon-emitting assets, climate change-induced damages to generating facilities and delivery systems, reputational damage that may drive loss of investors, and access to insurance • Consider energy burden, energy insecurity, and energy poverty as requisite factors in rate design. • Prioritize deployment of energy efficiency, demand-side management, rooftop and communityowned solar, distributed storage, and microgrids for low-income households and energy-burdened communities…

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