PENNSYLVANIA

PUBLIC UTILITY COMMISSION

Harrisburg, PA 17105-3265

Public Meeting held August 3, 2017

Commissioners Present:Gladys M. Brown, ChairmanAndrew G. Place, Vice ChairmanRobert F. PowelsonDavid W. Sweet John F. Coleman, Jr.

National Fuel Gas Distribution Corporation’s Universal Service and Energy Conservation Plan for 2017-2020 Submitted in Compliance with 52 Pa. Code § 62.4

Docket No. M-2016-2573847

TENTATIVE ORDER

BY THE COMMISSION

On October 28, 2016, National Fuel Gas Distribution Corporation’s (NFG or

Company) filed a proposed Universal Service and Energy Conservation Plan for 2017-

2020 (Proposed 2017-2020 Plan or USECP) in compliance with 52 Pa. Code § 62.4. By

this Tentative Order, we indicate issues that require further attention on the record before

approving NFG’s USECP. We invite parties to comment on any provision of the

Proposed 2017-2020 USECP regardless of whether the provision has been addressed in

this Tentative Order.

I. BACKGROUND

This Commission and various stakeholders began to address formally low-income

policies, practices, and services at least as early as 1984. See Recommendations for

Dealing with Payment Troubled Customers, Docket No. M-840403. As a result of that

proceeding, the energy utilities began filing low-income usage reduction plans (LIURPs)

and considering how to address arrearages for low-income customers.

The Commission’s Customer Assistance Programs (CAP) Policy Statement at

52 Pa. Code §§ 69.261-69.267 (adopted in 1992 and amended it in 1999 and 2010)

applies to class A electric distribution companies (EDCs) and natural gas distribution

companies (NGDCs) with gross annual operating revenue in excess of $40 million. It

provides guidance on affordable payments and arrearages and establishes a process for

utilities to work with the Commission’s Bureau of Consumer Services (BCS) to develop

CAPs. The Commission balances the interests of customers who benefit from CAPs with

the interests of the other residential customers who pay for such programs. See Final

Investigatory Order on CAPs: Funding Levels and Cost Recovery Mechanisms, Docket

No. M-00051923 (Dec. 18, 2006), (Final CAP Investigatory Order), at 6-7.

The Commission’s LIURP regulations at 52 Pa. Code §§ 58.1 – 58.18 (adopted in

1993 and last amended in 1998) require covered utilities to establish fair, effective, and

efficient energy usage reduction programs for their low-income customers. The

programs are intended to assist low income customers conserve energy and reduce

residential energy bills. The Commission is currently reviewing its LIURP regulations at

Initiative to Review and Revise the Existing LIURP Regulations at 52 Pa. Code §§ 58.1 –

58.18, Docket No. L-2016-2557886.

The Natural Gas Choice and Competition Act (Competition Act), effective July 1,

1999, opened the natural gas supply market to competition. The universal service

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provisions of the Competition Act tie the affordability of gas service to a customer’s

ability to maintain utility service. “Universal service and energy conservation” is defined

as “policies, practices, and services that help low-income customers maintain their

natural gas service” and includes CAPs, usage reduction programs, service termination

protections, and consumer education. 66 Pa. C.S. §§ 2202 and 2203. The Competition

Act mandates that the Commission “ensure [that] universal service and energy

conservation policies, activities and services for residential natural gas customers are

appropriately funded and available in each NGDC territory.” 66 Pa. C.S, § 2203(8).

Universal service programs are subject to the administrative oversight of the

Commission, which must ensure that the utilities run the programs in a cost-effective

manner and that services are appropriately funded and available in each utility

distribution territory. 66 Pa. C.S. § 2203(8).

The Commission’s Universal Service and Energy Conservation Reporting

Requirements (Reporting Requirements or USRR) at 52 Pa. Code §§ 62.1-62.8 (2000)

require each NGDC serving more than 100,000 residential accounts to submit an updated

USECP every three years to the Commission for approval. Section 62.4 provides that

universal service and energy conservation may include a CAP, LIURP, customer

assistance and referral evaluation services (CARES) program, and hardship fund as well

as other programs, policies, and protections. 52 Pa. Code § 62.4. As an NGDC serving

over 199,000 customers,1 NFG is required to maintain an approved triennial USECP and

obtain an independent third-party review at least every six years.

II. HISTORY

1. 2014-2016 USECP

1 NFG reported serving 199,061 customers in 2015. 2015 Report on Universal Service Programs & Collections Performance at 6. http://www.puc.pa.gov/General/publications_reports/pdf/EDC_NGDC_UniServ_Rpt2015.pdf

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NFG’s current USECP is its 2014-2016 Plan at Docket No. M-2013-2366232. On

May 22, 2014, the Commission entered its Final Order, directing NFG to amend its

2014-2016 Plan and to make a compliance filing within 30 days. On June 6, 2014, the

Pennsylvania Utility Law Project (PULP) filed a Petition for Reconsideration and/or

Clarification (Petition for Reconsideration), which requested clarification and

reconsideration of issues allegedly overlooked by the Commission in the Final Order. On

June 16, 2014, NFG filed an Answer to the Petition. On June 19, 2014, the Commission

granted the PULP Petition for Reconsideration pending a review on the merits. On June

23, 2014, NFG filed a letter requesting a stay of the requirement to file a revised 2014-

2016 USECP (i.e., the compliance filing), pending the outcome of the PULP Petition. On

July 24, 2014, the Commission granted NFG a stay on submitting its compliance filing

until the Commission addressed the PULP Petition for Reconsideration on its merits.

On June 30, 2014, the Pennsylvania Department of Public Welfare, nka the

Department of Human Services (DHS), filed a letter (DHS Letter) at the above docket but

did not serve any of the parties. DHS did not petition to intervene. DHS questioned

whether NFG use of LIHEAP in customer resource calculations was a violation of the

LIHEAP statutes and vendor agreement with DHS. On July 16, 2014, NFG filed a

Motion to Strike the DHS Letter and/or Allow Time for Response.

On August 5, 2014, by Secretarial Letter, the Commission provided an opportunity

for the parties to provide comments and reply comments relative to the DHS Letter. On

August 18, 2014, NFG, the Office of Consumer Advocate (OCA), and PULP individually

filed comments relative to the substance of the DHS Letter. On August 25, 2014, NFG

and PULP individually filed reply comments.

On February 12, 2015, the Commission issued an Order on Reconsideration

(Reconsideration Order) granting the PULP Petition for Reconsideration to clarify that

parties would be permitted to file comments on (1) the new information to be included in

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NFG’s compliance filing and (2) whether the compliance filing met the requirements of

the May 22, 2014 Final Order. We directed NFG to submit its compliance filing within

30 days of the entry date of the February Order. Reconsideration Order at 22.

On March 16, 2015, NFG submitted a compliance filing. On March 26, 2015,

PULP filed comments. On March 31, 2015, NFG filed reply comments and a Second

Revised 2014-2016 Plan.

On April 23, 2015, the Commission issued an Order approving the Second

Revised 2014-2016 Plan. Thereafter, the Second Revised 2014-2016 Plan was

implemented.

2. Proposed 2017-2020 USECP

In compliance with Commission regulations, NFG, submitted its Proposed 2017-

2020 Plan on October 28, 2016, and served the Office of the Consumer Advocate (OCA),

the Office of Small Business Advocate (OSBA) and the Commission’s Bureau of

Investigation and Enforcement (BIE). The proposed Plan contains four major

components that help low income customers maintain utility service. The four major

components are as follows: (1) NFG’s CAP or Low-Income Rate Assistance (LIRA)2

program, which provides “discounted rates” for low-income residential customers; (2)

LIURP, which provides weatherization and usage reduction services to help low-income

customers reduce their utility bills; (3) CARES program, which provides referral services

for low-income, special needs customers; and (4) NFG’s Hardship Fund or Neighbor for

Neighbor Heat Fund (NFN), which provides grants to customers who have had their

utility service terminated or are threatened with termination.

2 While NFG speaks in terms of “discounted rates” for low-income customers, the correct construction is that qualifying low-income customers receive a discount off of NFG’s residential tariff rate. Low-income customers are part of the residential customer class and not a separate rate class.

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NFG’s Proposed 2017-2020 Plan appears to substantially comply with Title 66,

Commission regulations, and Commission policy statements. The Amended Proposed

2017-2020 Plan appears to contain all of the components included in the definition of

universal service at 66 Pa. C.S. § 2202. The Amended Proposed 2017-2020 Plan also

tentatively appears to meet the requirements mandating that universal service programs

be available in each large NGDC’s service territory and that the programs be

appropriately funded. 66 Pa. C.S. § 2203(8). The Amended Proposed 2017-2020 Plan

also appears to meet the submission and content obligations of the USEC Reporting

Requirements and the CAP Policy Statement. The Amended Proposed 2017-2020 Plan

also partially meets the submission and content requirements of the LIURP regulations at

Sections 58.1-58.18. We shall discuss each program in greater detail below.

I. DISCUSSION

A. USECP Modifications for the 2017-2020 Plan

The Company has not identified any changes for 2017-2020 compared to its last

three-year plan. We nevertheless have questions and concerns about the Proposed

USECP for 2017-2020. Accordingly, several aspects that we did not question relative to

the 2015-2017 USECP we are now questioning in this proceeding.

B. Program Descriptions as Proposed for 2017-2020

1. LIRA ( i.e., NFG’s CAP)

NFG’s LIRA program offers “discounted rates” to payment-troubled heating

customers whose income is less than 150% of the Federal Poverty Income Guidelines

(FPIG) and who are unable to pay their regular monthly bills. The program is intended to

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increase payments from low-income customers while decreasing the company’s

collections costs. LIRA is funded by the company’s residential ratepayers via a LIRA

Discount Charge rider in the Company’s tariff.

The primary features of NFG’s program include:

Reduced monthly gas bills.

Complete arrearage forgiveness over a period of 24 months.

Referrals to other community programs and services.

To participate in LIRA, households must agree to enroll in budget billing, provide

income and identification for all household members, participate in LIURP (if eligible),

and apply for LIHEAP annually. In addition, all adult members of the household must

agree to become ratepayers and are responsible for the balance accrued while enrolled in

LIRA. Dependent household members (i.e., children of ratepayers and residents age

65 or older, under federal tax rules) are not counted as ratepayers.

LIRA customers receive monthly bills discounted by 10%-40% depending on the

customer’s household size, income, and anticipated grant from the Low Income Home

Energy Assistance Program (LIHEAP). This method has been in place for several years.

All customers enrolled in LIRA are required to apply annually for LIHEAP. However,

customers are not removed from the LIRA program if their LIHEAP cash grant is not

designated to NFG.

NFG calculates the amount of the LIRA discounts to ensure that households pay

only a targeted percentage of household income (energy burden level) over the course of

a year, based on the CAP Policy Statement at Section 69.265 (2)(i)(B). As shown in

Table 1, the energy burden level is based on the poverty threshold of each household:

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Table 1Percent of Income Target Based on Income

Maximum % of Poverty Bill Target as % of Income50% 6.5%

100% 8.0%150% 9.0%

Once the annual energy burden level for the household is determined, NFG

calculates the annual discount amount by subtracting the total of the household annual

payments and anticipated LIHEAP grant from the estimated annual bill. NFG uses the

annual discount amount to determine the appropriate rate discount amount for the LIRA

household (rounding up to the nearest 10%). An illustration of a LIRA rate discount

calculation is provided in Table 2.

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Table 2Example of a LIRA Rate Discount Calculation

1 person household - $5,000 annual income

1. Average [Annual] LIRA Residential Bill for 1 person household = $899

2. Annual Energy Burden

Income x % Income Target = A

$5,000.00 x 6.50% = $325

If A<$144 ($12 minimum per month x 12 months) then B,

otherwise C

No B = $12/month x 12 months + LIHEAP$

Yes C = A + LIHEAP$

C = $325 + $342 = $667

3. Required Discount $899 - $667 = $232

4. Discount $232 / $899 = 25.81%

5. Round up to nearest 10% 30.00%

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LIRA customers receive 1/24th arrearage forgiveness for each monthly bill paid

on-time and in-full, regardless of any existing LIRA arrears. Customers that fail to pay

LIRA bills in-full can receive arrearage forgiveness retroactively for any missed months

when they achieve a zero LIRA balance. Customers have up to 36 months to earn full

arrearage forgiveness. Any pre-program arrears remaining after 36 months are added to

the current LIRA balance.

LIRA customers must re-verify eligibility for LIRA every two years unless their

household situation changes, they report zero income, their consumption increases, or

they have not received LIHEAP. Households in these situations must re-verify eligibility

upon request. Customers reporting zero income must, at a minimum, re-verify every

three months.

A LIRA account is placed into collections after the first missed payment.

a. Energy Burden Levels for LIRA Participants – Clarification Requested

NFG reports that it tracks the energy burden levels of LIRA participants on a daily

basis to ensure they do not exceed the Commission’s CAP Policy Statement guidelines in

Section 69.265(2)(i)(B). If a LIRA account is found to have an energy burden exceeding

these guidelines, it is reviewed for LIHEAP and weatherization. Proposed 2017-2020

Plan at 21. The 2013 Popovich Evaluation3, an independent third-party review, found

that less than two percent of LIRA participants in 2011 had energy burden levels out of

tolerance of Commission guidelines. 2013 Popovich Evaluation at 28.

We support NFG’s efforts to monitor and address instances when LIRA accounts

exceed the maximum energy burden levels in the CAP Policy statement. However, we

3 The 2013 Popovich Evaluation can be viewed on the Commission website at: http://www.puc.pa.gov/general/pdf/USP_Evaluation-NFG.pdf .

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would like the Company to provide additional information on the energy burden levels

and payment behavior of LIRA participants.

Proposed Resolution: In its response to this Tentative Order, NFG should provide the

following information for LIRA participants in 2014, 2015, and 2016:

Average energy burden levels broken out by FPIG level (i.e., 0-50%, 51-100%,

and 101-150%)

On-time and in-full payment rates

Amount of average and total in-program arrears4 broken out by FPIG level (i.e., 0-

50%, 51-100%, and 101-150%)

b. Use of LIHEAP in Determining the LIRA Discount Rate – Clarification Requested

As described above, NFG’s discounts for a LIRA customer isdetermined by

totaling the customer’s energy burden level and the amount of anticipated LIHEAP grant

(based on income, household size, and county of residence) and subtracting this total

amount from the household’s anticipated annual usage to determine the discount needed.

The discount is designed to ensure that customers pay their energy burden level over the

course of one year.

In NFG’s 2014-2016 USECP proceeding, the Commission questioned the use of a

seasonal LIHEAP grant when calculating the LIRA discount. We noted that counting

LIHEAP as part of the customer’s anticipated payment appears disadvantageous to the

lowest income customers because larger anticipated LIHEAP payments result in smaller

monthly discounts. See NFG 2014-2016 USECP Final Order, at 11-16. As illustrated on

the NFG discount chart on page 10 in the Proposed Plan, a household with an annual

4 In-program arrears consist of debt accrued while enrolled in LIRA and should not include deferred pre-program arrears.

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income between $0 to $1,000 – regardless of household size – receives a monthly

discount of 10%, while a household earning $4,000 to $5,000 annually could receive a

monthly discount as high as 40%. Proposed 2017-2020 Plan at 10.

NFG has explained that a customer’s LIRA budget bill is recalculated when the

customer receives a LIHEAP grant. The Company applies a LIHEAP cash grant to the

current LIRA balance and any remaining monies are applied to the budget bill calculation

for the next 12 months. NFG maintains this procedure is consistent with DHS’ LIHEAP

Vendor Agreement. Proposed 2017-2020 Plan at 12.

We continue to have concerns about NFG’s use of LIHEAP in its LIRA discount

calculation. In essence, the LIHEAP grant is used to reduce the amount of a discount the

LIRA participant could qualify for. Customers with lower incomes that qualify for larger

LIHEAP grants receive smaller discounts in LIRA. Therefore, LIRA participants who do

not apply for LIHEAP – or assign their grant to another utility – may pay more than the

program’s targeted percent of income over the course of a year. These customers may

find the LIRA program less affordable and could be more vulnerable to collections

procedures. We need more information to determine the impact of this policy on LIRA

participants.

Proposed Resolution: In its response to this Tentative Order, NFG should identify the

number of full year LIRA participants in 2014, 2015, and 2016 and the percentage that

assigned their LIHEAP grants to NFG during those years. Participant information should

be broken out by FPIG level (i.e., 0-50%, 51-100%, and 101-150%). The Company

should also identify how many of these customers (LIHEAP recipients vs. non-LIHEAP

recipients) were placed into collections for not making full LIRA payments.

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c. Potential Violations of Federal Law and State LIHEAP Requirements – Clarification

Requested

In NFG’s 2014-2016 USECP proceeding, DHS questioned whether the

Company’s use of LIHEAP in its LIRA discount calculation is in compliance with

Section 2605(b)(5) of the Low-Income Home Energy Assistance Act (42 U.S.C.

§ 8624(b)(5)), which states that the highest level of assistance must be provided to

households with the lowest incomes and highest energy costs, taking into consideration

household size.

When the LIHEAP grant is anticipated and used to determine the annual

affordable bill, as NFG does, the customers with the highest energy needs

in relation to income could be receiving the least amount of assistance from

the LIRA. If NFG plans to use LIHEAP funds consistent with its submitted

USECP, DPW may have to remove NFG as LIHEAP provider for failure to

comply with federal law, so [DHS] does not risk loss of federal funding

under LIHEAP.

DHS (DPW) Letter at 2.

NFG claimed the concerns raised by DHS were a result of a “misunderstanding of

the LIRA program.” NFG 8/25/14 Reply Comments at 2. The Company explained that

it would “work with [DHS] to resolve any issues and maintain its vendor status.” NFG

8/25/14 Reply Comments at 2.

In the February 12, 2015 Order on Reconsideration, we declined to determine

whether NFG’s use of LIHEAP in its LIRA discount calculation is consistent with the

LIHEAP state and federal regulations:

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While the Commission has the authority and discretion pursuant to Title 66

to set utility rates,5 the Commission recognizes that DHS is the

Commonwealth agency vested with the responsibility to disburse federal

LIHEAP funds and grant utility vendor status.

…….

Absent DHS challenging a utility’s application of LIHEAP funds or

revoking the utility’s vendor status, we will not presume that a proposed or

final plan is inconsistent with DHS policy, especially when a new plan is

consistent with a prior plan that has been in place for at least the previous

triennial period while the utility was on the DHS vendor list. Further,

neither DHS nor HHS have asked to be parties in NFG’s USECP

proceeding.

Order on Reconsideration at 19- 20.

Proposed Resolution: While we recognize that DHS has the authority to administer

LIHEAP and evaluate whether an energy vendor’s application of a LIHEAP grant is

consistent with state and federal LIHEAP requirements, we question whether this issue

has been resolved. In its response to this Tentative Order, NFG should update the

Commission on its discussions with DHS since the conclusion of the 2014-2016 USECP

proceedings. Specifically, NFG should clarify whether DHS has indicated that the

Company’s use of LIHEAP in the LIRA calculation comports with the Company’s

commitments pursuant to the DHS vendor agreement.

5 See PCOC (ACTION) v. PA PUC, Columbia Gas and OCA, Intervenors, No. 635 C.D. 2012 (Pa. Cmwlth. Ct., 2014).

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d. Transfer of Service – Clarification Requested

When one or more of the ratepayers in a LIRA household6 move to a new address

in the NFG service territory, the Company requires the relocating household to submit a

new application to re-enroll in the program. If there is an overdue balance remaining

from a previous account, that balance will be included on the first LIRA bill at the new

address. The ratepayer(s) will continue with the arrearage forgiveness component of the

program for any of the maximum 36 months remaining. Proposed 2017-2020 Plan at 11.

We have concerns and questions about NFG’s transfer of service policy for LIRA

participants. It is not clear whether LIRA households who relocate are removed from the

program until a new application is approved at the new residence. If so, these households

may receive unaffordable bills as they wait for NFG to re-determine their program

eligibility. While relocation to a new residence may require NFG to re-calculate a

customer’s LIRA discount, it is not clear why it also requires a household to re-verify

income prior to its next recertification date. Further, requiring a participating household

to submit a new LIRA application seems unnecessary. The Commission supports

maintaining CAP enrollment when a participating household relocates. We have

previously directed PPL to adopt such a policy. See PPL 2014-2016 Final Order, Docket

No. M-2013-2367021 (September 11, 2014), at 24-28.

It is also unclear how this policy applies to adults who move out of a LIRA

household and seek to establish program eligibility at a new residence. If there is an

overdue balance in the original LIRA household account, is some of this amount

transferred to the new LIRA account? And what restrictions, if any, are placed on

arrearage forgiveness for the new account?

6 As noted above, all non-dependent adult household members must become ratepayers to qualify for LIRA. Proposed 2017-2019 Plan at 8.

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Proposed Resolution: In its response to this Tentative Order, we direct NFG to explain

whether the Company will revise its policy and allow LIRA households to remain in the

program when they relocate from one residence to another within NFG’s service

territory. NFG should provide specific information on the increase in program costs, if

any, related to this proposed revision. The Company should also address our questions

related to adults who move out of a LIRA household and establish program eligibility at a

new residence.

e. Time Restrictions to Pre-program Arrearage Forgiveness – Change Requested

Pre-program arrearage forgiveness for NFG LIRA participants is time-limited.

Customers in the LIRA program may receive a maximum of 36 months to achieve full

forgiveness of their pre-program arrears. Prior to NFG’s 2014-2016 USECP, the

Company limited a participant’s ability to receive arrearage forgiveness to 24 months,

unless there were special circumstances (as determined by NFG) to qualify for an

additional 12 months. In the 2014-2016 USECP proceeding, the Commission directed

NFG to allow all LIRA customers to receive 36 months to achieve full arrearage

forgiveness. See NFG 2014-2016 Final Order at 21-23. The Company’s Proposed 2017-

2020 USECP acknowledges that customers will receive 1/24th arrearage forgiveness for

each full and on-time monthly LIRA payment for 36 months. Proposed 2017-2020 Plan

at 11. At the end of this period, LIRA customers presumably become immediately

responsible for paying the full balance of any remaining pre-program arrears in addition

to their monthly LIRA payments.

The Commission questions NFG’s policy to limit arrearage forgiveness to

36 months. We are not aware of any other gas or electric CAPs that place time

restrictions on the opportunity for participants to receive forgiveness on a deferred pre-

program balance. As part of the CAP design, arrearage forgiveness acts to both reduce

customer debt over time and reward healthy payment habits. Allowing ongoing arrearage

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forgiveness would encourage LIRA participants to continue making full payments and

avoid requiring low-income customers to pay the balance of a pre-program arrearage they

most likely cannot afford.

Proposed Resolution: In its response to this Tentative Order, NFG should identify how

many LIRA customers had pre-program arrears remaining after 36 months in 2015, 2016,

and 2017, the average arrears for these customers, and how many had service terminated

for non-payment after pre-program arrears were placed back onto the LIRA account.

NFG should also explain whether the Company would revise its policy and

eliminate its time restrictions for LIRA customers to receive monthly arrearage

forgiveness and continue to reduce pre-program arrears by 1/24th for each on-time and in-

full LIRA payment until the pre-program arrearage balance is completely forgiven.

Please provide specific comments on the program costs, if any, related to this proposed

revision.

f. Forms of Identification Accepted at Application – Clarification Requested

NFG’s Proposed 2017-2020 Plan states that a LIRA applicant “must provide the

name and Social Security numbers or other verifiable form of identification of all persons

residing with the applicant.” Plan at 9. The Company does not identify what other types

of identification it will accept in lieu of a household member’s Social Security number.

Proposed Resolution: In its response to this Tentative Order, NFG should explain what

documentation it accepts as proof of identity if the household is unable or unwilling to

provide Social Security numbers for any of its household members.

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g. Re-enrollment Requirements for Former CRP Participants – Clarification Requested

The Proposed 2017-2020 Plan does not describe what requirements or restrictions

are placed on customers seeking to re-enroll in LIRA if they are voluntarily or

involuntarily removed from the program. For example, some energy utilities require

customers to pay all CAP and non-CAP arrears (with the exception of the originally

deferred balance) prior to re-enrollment.7 Other utilities require customers to pay any

CAP arrears and the CAP amount for the months spent out of the program.8 Some

utilities also require customers to “stay out” of its CAP for a year if they leave the

program voluntarily when it remains the most affordable payment option.9

Proposed Resolution: In its response to this Tentative Order, NFG should explain what

amounts it will require a customer to pay prior to re-enroll into LIRA and whether the

company has any stay-out provisions for customers who leave the program voluntarily or

involuntarily.

h. Termination Notices – Clarification Requested

NFG explains that it initiates the collection process when a LIRA customer fails to

pay one monthly LIRA bill. These customers are sent a termination notice with the

amount required to pay to avoid termination of service. Proposed 2017-2020 Plan at 12-

13. NFG does not explain whether this termination amount is based only on missed CAP

bills or other charges.

7 See West Penn Power (WPP), Metropolitan Edison Company (Met-Ed), Pennsylvania Electric Company (Penelec), and Pennsylvania Power Company (Penn Power) 2015-2018 USECPs at 15. Docket Nos. M-2014-2407728, M-2014-2407729, M-2014-2407730, and M-2014-2407731, respectively.8 See Columbia Gas 2015-2018 USECP at 23, Docket No. M-2014-2424462.9 See PGW 2014-2016 USECP at 13-14, Docket No. M-2013-2366301.

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Proposed Resolution: In its response to this Tentative Order, NFG should clarify how it

determines the required payment amount on a LIRA customer’s termination notice. The

Company should also identify how it determines the amount requested for reconnection

of service for disconnected LIRA customers.

i. Re-verifying Customer Data – Clarification Requested

NFG explains that LIRA participants who are due for re-verification are contacted

by telephone to obtain verbal confirmation of their household income and composition.

If the customer cannot be contacted by phone, a letter is sent requesting the customer to

call NFG. In instances where personal contact is unsuccessful, or the data is considered

“questionable,” the Company will send the customer a re-verification packet to complete

and return. Proposed 2017-2020 Plan at 14. The Plan does not identify in what situations

a LIRA customer’s data is considered “questionable” or how often LIRA participants are

required to document income eligibility (i.e., Is verbal confirmation of household income

accepted at every re-verification? Or are participants only allowed to re-verify verbally a

certain number of times before documentation is required?).

Proposed Resolution: In its response to this Tentative Order, NFG should explain in

what situations it would consider a LIRA customer’s data “questionable” and require the

customer to complete and return a re-verification packet. The Company should also

specify whether or when other LIRA participants are also mandated to provide income

documentation at re-verification.

j. LIRA Bills

In NFG’s 2014-2016 USECP proceeding, PULP raised concerns about the clarity

of LIRA bills. NFG 2014-2016 USECP, PULP Comments at 7-8. NFG noted that it had

revised its LIRA bill in consultation with BCS, but it was willing to engage in discussions

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with PULP about making billing enhancements. NFG 2014-2016 USECP, NFG Reply

Comments at 10-11. In the Final Order, we encouraged NFG “to work with PULP and

OCA to determine if further enhancements to its current billing formats could be made to

improve the clarity of the bill for its customers without a significant and costly overhaul

of its current billing system.” NFG 2014-2016 USECP Final Order at 17-18. We are not

aware whether NFG has met with PULP and OCA to discuss the LIRA bill format since

the conclusion of that proceeding.

Proposed Resolution: In its response to this Tentative Order, NFG should explain

whether it has engaged in discussions with stakeholders regarding its LIRA bill format.

If so, please summarize the results of this discussion and any changes made to the LIRA

bill. The Company should also provide samples of current LIRA bills at the various

discount levels as an attachment to its response.

2. LIURP

NFG’s LIURP is designed to assist low-income customers in reducing their energy

usage and bills. NFG’s eligibility criteria for the LIURP program include income below

150% of FPIG, residency at the premises for at least one year with 12 months of

continuous service, annual consumption in excess of 130 MCF, and substantial arrearage.

Up to 20% of its annual budget may be spent on households with income in the 151%-

200% FPIG range. Customers using less than 130 MCF may still be eligible for a LIURP

program providing furnace or water heater repair or replacement.

Services provided through NFG’s LIURP include home energy audits, energy

education, heating system inspections, air sealing, and other weatherization measures, as

needed.

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a. Eligibility Criteria - Change Requested

NFG listed “substantial arrearage” in the criteria for its LIURP program. Proposed

2017-2020 Plan at 27. We addressed this point in NFG’s 2014-2016 USECP Final Order

but did not direct NFG to edit that language in its USECP. 2014-2016 Final Order at 28.

Section 58.10(a)(1) is clear that the primary eligibility criterion for LIURP is

“largest usage.” Only when the remaining customers have equal usage should the

secondary criterion regarding “greatest arrearage,” listed in Section 58.10(a)(2), be

applied. NFG has identified 16,411 customers who meet the usage threshold and are

potentially eligible for LIURP but completes an average of less than 200 jobs per year.

Proposed 2017-2020 Plan at 28, 37. At this pace, it is highly unlikely that NFG would

need to apply a secondary screening criterion.

Proposed Resolution: We suggest that NFG modify or remove the language regarding

“substantial arrearage” from its list of eligibility criteria. In particular, the word

“substantial” is never mentioned in the applicable LIURP regulations, and its use may

cause confusion for potential customers and/or inadvertently disqualify an otherwise

eligible customer. Alternately, NFG could add language regarding the “arrearages” to

clarify that it would only be used as a secondary screening criterion.

b. Special Needs Customers – Clarification Requested

NFG states that 20% of the LIURP budget could be used for “customers” whose

incomes fall between 151%-200% of the FPIG. Proposed 2017-2020 Plan at 27. We

addressed this point in the 2014-2016 USECP proceeding but did not direct NFG to edit

the language in its Plan. We want to ensure that anyone reading the 2017-2020 USECP

understands that it is “special needs” customers whose income falls within the 151%-

200% range that may be considered for LIURP eligibility.

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Proposed Resolution: We consider that the term “special needs” applies to seniors,

customers with medical needs or disabilities, and/or customers with young children in the

home. We suggest NFG add this, or similar, clarifying language to the LIURP eligibility

section of the 2017-2020 USECP.

c. Health and Safety – Change Requested

Based upon BCS’ recent review of annual LIURP reporting by the energy utilities

to the Commission, we note that an increasing number of Pennsylvania households are

being disqualified from LIURP based on health and/or safety conditions in a residence

(e.g., mold, moisture, or structural issues). The Commission has previously encouraged

the development of an allowance for the installation of health and safety measures, such

as smoke detectors and carbon monoxide alarms, and for minor repairs that could be done

to potentially remedy disqualification. The Commission has also requested that utilities

identify their recommended parameters for performing incidental repairs (i.e., repairs that

would allow LIURP measures to function properly or more efficiently).10

While LIURP is not designed to support rehabilitation or major repairs, there are

often situations that would justify small repairs, as permitted in Section 58.12 of the

LIURP regulations, in order to perform deeper or more comprehensive weatherization

treatments. In addition, the Commission has previously directed utilities without a health

and safety protocol to develop such guidelines that include installation of smoke and/or

carbon monoxide detectors and combustion safety testing on all gas appliances, if not

already part of the LIURP auditing process.

10 See, e.g., PECO 2016-2018 USECP Tentative Order, Docket No. M-2015-2507139 (Order entered February 25, 2016), at 21-22.

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Proposed Resolution: In its response to this Tentative Order, we request that NFG clarify

its incidental repair protocols and indicate whether it has developed any health and safety

guidelines and/or an allowance or threshold to give contractors some flexibility when

encountering situations involving household disqualifications.

3. CARES

NFG’s CARES program provides assistance to low-income, payment-troubled,

and special needs customers who are experiencing short-term financial hardships. When

appropriate, the customer is temporarily protected from service termination while

Company representatives try to find financial assistance or establish customer payment

arrangements. CARES also provides case management to customers with physical or

mental disabilities and households experiencing a family crisis (e.g., loss of income,

divorce). Company representatives also make referrals to other social service agencies

and provide information regarding available programs. The maximum time a customer

should remain in the CARES program is four months, but NFG can make exceptions if

there are unusual circumstances. Low-income payment troubled customers who are

experiencing long-term financial hardships are not eligible for CARES, but can qualify

for LIRA. NFG’s CARES program appears to provide the outreach and casework

approach necessary to help customers secure energy assistance funds and other needed

services as described in Section 62.2 and 62.4.

Proposed Resolution: We find that NFG’s CARES program continues to comply with

Commission regulations. See 52 Pa. Code § 62.4(b)(1). Accordingly, we are proposing

no changes to this aspect of NFG’s Proposed 2017-2020 Plan.

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4. NFN ( i.e., NFG’s Hardship Fund)

NFN provides financial assistance to individuals who need help in meeting basic

energy needs. The Fund provides assistance for paying overdue bills, purchasing any

type of heating fuel, repairing or replacing heating equipment, and preventing the

disconnection of utility service. The individual must be a resident in the NFG service

territory, but does not have to be an NFG customer. NFG matches public and employee

donations to NFN up to $100,000 per year. The Company reports available grant monies

have exceeded $100,000 per year and it expects this trend to continue through 2020.

Applicants must be:

Age 55 and older; or

On a disabled, handicapped, or unemployment income; or

Able to demonstrate a certified medical emergency; and

Have made at least three “good” payments within the last 12 months and a fourth

within the last 90 days.

Natural gas heating customers can receive grants of up to $400 while non-natural gas

heating customers can receive up to $200. Grants are paid directly to the energy vendor.

NFN payment requirements – Clarification Requested

As described above, to qualify for an NFN grant, NFG requires eligible customers

to have made three “good” payments within the last 12 months and a fourth within the

last 90 days. Proposed 2017-2020 Plan at 30. The Company does not explain how it

qualifies a payment as “good” (e.g., a full or partial monthly payment). NFG also does

not explain how a recipient who is not an NFG customer satisfies this requirement.

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Proposed Resolution: In its response to this Tentative Order, NFG should explain what

criteria it uses to determine whether a customer payment counts toward NFN eligibility.

C. Eligibility Criteria

NFG’s various programs have slightly different eligibility criteria as shown in

Table 3 below. These criteria appear to be consistent with 52 Pa. Code § 69.265(4):

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Table 3Eligibility Criteria

Program Income Criteria Other CriteriaCAP (LIRA) 150% FPIG or less Must be a residential heating

customer Must be payment-troubled

LIURP 150% FPIG or less (Note: 20% of the budget may be allocated to customers with incomes of 151-200% FPIG)

Annual usage must exceed 130 Mcf (customers with lower usage may qualify for furnace or water heater repair/replacement)

Must be a resident at the property for at least one year and 12 months of continuous gas service

Must have a substantial arrearageCARES No specific income

criteria. Usually low income

Must be payment-troubled Special needs, elderly, people with

disabilities Circumstances must be temporary,

otherwise the customer is considered for the LIRA program

Hardship Fund (NFN)

No specific income criteria

Must be at least 55 years old Must be on a disabled,

handicapped, or unemployed income or have a medical emergency

Resident in NFG service territory, but not necessarily a customer.

Customer must have made 3 good payments within the past 12 months and a fourth one within the last 90 days

Proposed Resolution: We have addressed our concerns and requested changes regarding

NFG’s LIURP eligibility requirements and Hardship Fund eligibility requirements

elsewhere in this Order.

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D. Projected Needs Assessments

52 Pa. Code § 62.4(b)(3) requires NFG to submit a needs assessment for each

program component.

1. LIRA – Clarification Requested

Based on the number of LIHEAP grants the company receives and low-income

customers enrolled in payment agreements, NFG estimates that 22,565 households in its

service territory may be payment-troubled and have incomes below 150% of the FPIG.

Based on historical averages, NFG anticipates that 45% (10,154) of this population may

be enrolled in LIRA at any given time.

NFG utilizes only information from its own ratepayers to estimate the total

number of customers who may qualify for LIRA. Most other utilities, however, gather

information from the U.S. Census Bureau to determine the total number of households

below 150% of the FPIG in their service territories.

NFG did use 2012-2013 U.S. Census Bureau data in its LIURP needs assessment.

That data show that 30.41% of customers in the counties within the NFG service territory

have incomes at or below 150% of the FPIG. Proposed 2017-2020 Plan at 28. Based on

the NFG customer population at the time of the filing of the Proposed 2017-2020 Plan

(196,814), we estimate that approximately 59,851 (30.41%) could be low-income. This

is significantly more than the 27,151 low-income customer population identified in the

LIRA needs assessment. Proposed 2017-2020 Plan at 18. We have concerns NFG is

underestimating the customer population that need LIRA outreach. We also question

why NFG would use Census Bureau data for one program (i.e., LIURP) but not another

program (i.e., LIRA/CAP).

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We had previously addressed this issue in NFG’s 2014-2016 USECP proceeding.

See NFG 2014-2016 USECP Final Order at 36-37. In that proceeding, NFG agreed to

examine whether using Census Bureau data to estimate the number of households

potentially eligible for LIRA and its other Universal Service programs would help to

increase enrollments. NFG Comments to the 2014-2016 USECP Tentative Order at 15.

Proposed Resolution: In its response to this Tentative Order, NFG should explain why it

has determined that its system information is more accurate in determining its low-

income population than the U.S. Census Bureau data. NFG should also explain why it

uses Census Bureau data only for LIURP.

2. LIURP – Clarification Requested

Based on the 2012-2013 U.S. Census data, NFG estimates there are approximately

86,376 households who are income-eligible for LIURP (i.e., household income at or

below 200% of the FPIG). Of these households, Company data suggests approximately

16,411 have usage equal to or greater than 130 MCF. Proposed 2017-2020 Plan at 28.

We note that NFG has not used the latest Census data (2015) that was provided to

the companies for the Universal Service reporting but acknowledge it was not available at

the time the Proposed 2017-2020 Plan was submitted to the Commission.

Further, Section 62.4(b)(3) requires utilities to provide needs assessments that

identify, inter alia, “the number of customers who still need LIURP services and the cost

to serve that number.” NFG has not identified the cost of serving all LIURP-eligible

customers.

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Proposed Resolution: In its response to this Tentative Order, NFG should update the

LIURP needs assessment using the latest Census data and identify the estimated total cost

of serving all LIURP-eligible households.

3. CARES and NFN

NFG’s CARES and NFN programs target those payment troubled customers that

are low-income, elderly, or special needs. NFN also serves households receiving

unemployment income. According to U.S. Census data, approximately 59,851 NFG

households have been identified as having incomes of less than 150% of the FPIG,

60,142 households have members age 55 and older, 15,928 households have members

with a disability, and 9,855 households are receiving unemployment benefits. Some

households may belong to more than one of these categories. Proposed 2017-2020 Plan

at 28, 31-32. We are satisfied that NFG has identified potentially eligible households for

these programs.

Proposed Resolution: We see no need for changes to this aspect of NFG’s Proposed

2017-2020 Plan.

E. Projected Enrollment Levels

NFG’s Proposed 2017-2020 Plan projected enrollment levels are as shown in

Table 4 below.

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Table 4Projected Enrollment Levels

Program 2017 2018 2019 2020CAP (LIRA) 9,777 9,777 9,777 9,7777LIURP* 189 189 189 189CARES 50 50 50 50Hardship Fund (NFN) 417 417 417 417* The LIURP enrollment levels do not reflect any of the jobs performed under the

emergency furnace and water heater repair/replacement program.

LIRA Enrollment Levels – Clarification Requested

NFG reports LIRA enrollment has been consistent over the past three years with

an average of 9,777 customers annually. It expects this enrollment trend to continue

through 2020. Proposed 2017-2020 Plan at 20. However, the Company also reports an

anticipated increase in LIRA participation by 111 customers per month (1,332 customers

per year). Proposed 2017-2020 Plan at 5, 19. This expected increase in enrollment is due

to a 40% increase in the price of natural gas and additional targeted LIRA outreach.

Proposed 2017-2020 Plan at 6. These statements are contradictory, and it is not clear

how much growth in participation, if any, NFG anticipates for LIRA through 2020.

Proposed Resolution: In its response to this Tentative Order, NFG should clarify whether

it anticipates an increase in annual LIRA enrollments through 2020. The Company

should identify the projected LIRA enrollment levels for 2017, 2018, 2019, and 2020.

F. Program Budgets

Table 5 below shows the proposed budget levels for 2017-2020.

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Table 5Proposed 2017-2070 Plan Projected Budgets and Spending

Universal Service Component 2017 2018 2019 2020CAP (LIRA) $1,555,212 $1,657,457 $1,768,767 $1,869,559LIURP $1,300,000 $1,300,000 $1,300,000 $1,300,000CARES $4,125 $4,125 $4,125 $4,125Hardship Fund (NFN)* $0 $0 $0 $0Total $2,859,337 $2,961,582 $3,072,892 $3,173,684Projected Number of Residential Customers** 199,194 199,327 199,460 199,593

Average Monthly Spending per Residential Customer $1.20 $1.24 $1.28 $1.33

*Hardship Fund donations by the company are not recovered in base rates; therefore, they

are not included in the Universal Service total costs or the “Spending per Residential

Customer.”

**Based on an average of 199,061 residential customers in 2015 and an annual

0.07% increase in NFG residential customers from 2012 through 2015. 2012 Report on

Universal Service Programs & Collections Performance at 7 and 2013-2015 Reports on

Universal Service Programs & Collections Performance at 6.

a. LIURP Budget – Clarification Requested

Since the 2014 Program Year, NFG has underspent its annual LIURP budgets.

While NFG is rolling the unspent funds from one program year into the next program

year, we are concerned and would like to know what steps NFG is taking to address the

issue and to ensure that the trend does not continue.

Proposed Resolution: In its response to this Tentative Order, the Company should explain

what steps it is taking to address the underspending of its LIURP budget.

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G. Use of Community-Based Organizations (CBOs)

The Competition Act directs the Commission to “encourage the use of [CBOs]

that have the necessary technical and administrative experience to be the direct providers

of services or programs which reduce energy consumption or otherwise assist low income

retail gas customers to afford natural gas service.” 66 Pa. C.S. § 2203(8). NFG’s LIRA

program deals primarily with the Department of Human Services and the Social Security

Administration. The Company contracts with seven CBOs to perform LIURP jobs and

11 organizations for its Neighbor for Neighbor program. Finally, NFG utilizes

approximately 54 community agencies throughout the Company’s service territory as

referrals for its CARES program.

Proposed Resolution: We tentatively find that NFG’s use of CBOs complies with the

intent of the Competition Act.

H. Organizational Structure – Clarification Requested

The Proposed 2017-2020 Plan identifies 13 management staff, 67 supplemental

staff, and 5 part-time staff assigned to NFG’s universal service programs. Proposed

2017-2020 Plan at 39. However, the Plan does not explain which programs these staff

directly work in and what responsibilities they have. Three of the Management staff are

identified as being part of the “Barcelona Project,” which is not an aspect of NFG’s

universal service programs that we are aware of.

Section 62.4(7) of Commission regulations require utilities to provide information

on the organizational structure of staff responsible for universal service programs in their

triennial USECPs and Section 62.3(4) directs the Commission to establish whether

universal service programs are operated in a cost effective and efficient manner. Staffing

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levels and other universal service information11 are reviewed during the USECP approval

process to determine, inter alia, whether the utility administers these programs

efficiently.

Proposed Resolution: In its response to this Tentative Order, NFG should identify the

separate organizational structures, staffing levels, and job titles for each of its universal

service programs.

II. CONCLUSION

Except as noted above, the Commission tentatively finds that NFG’s Proposed

2017-2020 Plan, in large measure, appears to comply with the universal service

requirements of the Competition Act at 66 Pa. C.S. §§ 2203(7), 2202, and 2203(8), the

reporting requirements at 52 Pa. Code § 62.4, the CAP Policy Statement at 52 Pa.

Code §§ 69.261-69.267, and the LIURP regulations at 52 Pa. Code §§ 58.1-58.18. This

Tentative Order sets forth the aspects that NFG will need to address prior to our approval

of its Proposed 2017-2020 Plan. This Tentative Order also calls for comments from

stakeholders.

In particular, we direct NFG to address the following points in a supplemental

filing consistent with the discussion and directions herein. To the extent that NFG has

responsive proposals for additional relief, those proposals, along with timelines and cost

estimates, should be described in its response to afford other parties the opportunity to

comment and reply.

1. Provide information on LIRA energy burden levels, payment rates, and in-

program arrears.11 As part of the USECP review process, we examine complaints from utility CAP customers received by BCS during the past calendar year. These complaints sometimes reveal staffing deficiencies in universal service programs.

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2. Identify the percentage of full-year LIRA participants that assigned their LIHEAP

grants to NFG and the number of LIHEAP and non-LIHEAP recipients placed into

collections.

3. Provide an update on NFG’s discussions with DHS concerning whether the

Company’s use of LIHEAP in the LIRA calculation comports with the DHS

vendor agreement.

4. Explain whether NFG will allow LIRA households to remain in the program when

they relocate from one residence to another within NFG’s service territory and

clarify the Company’s eligibility policy regarding adults who leave a LIRA

household and establish service at a new location.

5. Provide in-program arrearage and collections information for LIRA customers

who had pre-program arrears remaining after 36 months in 2015, 2016, and 2017.

6. Explain whether NFG will revise its policy and eliminate its time restrictions for

monthly arrearage forgiveness.

7. Explain what documentation NFG accepts as proof of identity if the household is

unable or unwilling to provide Social Security numbers for any of its household

members.

8. Explain what amounts NFG requires a customer to pay prior to re-enrollment into

LIRA and whether the company has any stay-out provisions for customers who

leave the program voluntarily or involuntarily.

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9. Clarify how NFG determines the required payment amount for a LIRA customer

to stop a termination or re-establish service.

10. Clarify the LIRA re-verification policy and explain in what situations NFG

considers a LIRA customer’s data “questionable.”

11. Explain whether NFG has engaged in discussions with stakeholders regarding its

LIRA bill format and provide samples of current LIRA bills at the various

discount levels.

12. Explain whether NFG will modify or remove the language regarding “substantial

arrearage” from its LIURP eligibility criteria.

13. Clarify the term “special needs” in regards to LIURP eligibility for customers

whose incomes fall between 151%-200% of the FPIG.

14. Explain what steps NFG is taking to address the annual underspending of its

LIURP budget.

15. Clarify NFG’s incidental repair protocols for LIURP and whether it has developed

any health and safety guidelines, allowance, or threshold to give contractors

flexibility.

16. Explain what criteria NFG uses to determine whether a customer payment counts

toward NFN eligibility.

17. Explain why it has determined that its system information is more accurate in

determining its low-income population than the U.S. Census Bureau data, except

for LIURP.

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18. Provide a revised LIURP needs assessment and identify the estimated cost of

serving all LIURP-eligible households.

19. Clarify whether NFG anticipates an increase in annual LIRA enrollments and

provide projected LIRA enrollment levels through 2020.

20. Identify the separate organizational structures, staffing levels, and job titles for

each of NFG’s universal service programs.

NFG’s supplemental information must be filed and served on or before

twenty (20) days after the entry of this Tentative Order. Comments are due twenty

(20) days after NFG’s supplemental information filing deadline, and reply comments are

due fifteen (15) days thereafter. If the comments and reply comments raise relevant

material factual issues, we may refer this matter, in whole or in part, to the OALJ for

hearing and decision; THEREFORE,

IT IS ORDERED:

1. That approval of the Universal Service and Energy Conservation Plan for

2017-2020 as filed by National Fuel Gas Distribution Corporation on October 28, 2016,

is withheld pending review of requested information and stakeholder comments, as set

forth in this Tentative Order.

2. That a copy of this Tentative Order be served on the National Fuel Gas

Distribution Corporation, the Department of Human Services, the Office of the Consumer

Advocate, the Office of Small Business Advocate, the Bureau of Investigation and

Enforcement, and the Pennsylvania Utility Law Project. A copy shall also be served on

the parties to Docket No. M-2013-2366232.

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3. That National Fuel Gas Distribution Corporation shall file and serve the

supplemental information requested herein within twenty (20) days of the entry of this

order:

4. That comments to this Tentative Order shall be filed within twenty (20)

days after the filing deadline for NFG’s supplemental information. Reply comments

shall be filed within fifteen (15) days thereafter.

5. That one original signed copy of comments and reply comments shall be

filed with the Commission’s Secretary at: Pennsylvania Public Utility Commission P.O.

Box 3265, Harrisburg, PA 17105-3265. Comments may also be filed electronically

through the Commission’s e-filing system, in which case no paper copy needs to be filed

with the Secretary provided that the comments are less than 250 pages.

6. That an electronic copy, in WORD® or WORD®-compatible format, of all

filed submissions, comments, and reply comments be provided to Joseph Magee, Bureau

of Consumer Services, jmagee@pa.gov, Sarah Dewey, Bureau of Consumer Services,

sdewey@pa.gov, and to Louise Fink Smith, Law Bureau, finksmith@pa.gov.

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7. That the contact person for this Tentative Order is Joseph Magee, Bureau of

Consumer Services, 717-772-1204, jmagee@pa.gov.

BY THE COMMISSION,

Rosemary Chiavetta

Secretary

(SEAL)

ORDER ADOPTED: August 3, 2017

ORDER ENTERED: August 3, 2017

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