Customers in Ohio who sign up for a public program that promises to reduce utility costs for low-income people are charged a higher rate than higher-income customers.
The Percentage of Income Payment Plan Plus (PIPP) program in Ohio is for people earning at or below 175% of the federal poverty level. This equates to approximately $48,000 per year for a family of four or $22,000 per year for a single person.
Electric users enrolled in the program must pay only 5% of their income toward their bill, or 10% of their income if they use electricity for heating.
The rest of the bill is paid by the state, but the total amount accumulates in the ledger, and in certain circumstances, the user can receive bills for the entire amount.
According to Andrew Tinkham, senior outreach and education program specialist with Ohio’s residential utility watchdog, the Office of the Ohio Consumers’ Counsel, the program can be lifesaving.
But, as he explained to WOSU radio, there’s a problem.
“The issue is that recent electricity markets have resulted in higher electricity bills for consumers than they could otherwise obtain from their electric utility,” Tinkham explained.
It has to do with how electric rates are set each year as winter approaches. During annual electricity rate auctions, the rates for PIPP program customers are auctioned off separately from the standard rates paid by other users who are not in the program.
Recently, these auctions have resulted in higher rates for low-income consumers.
According to Tinkham, the OCC believes it is “illegal” to charge low-income customers a higher rate than standard customers. In filings with the Public Utilities Commission of Ohio (PUCO), the OCC describes the practice as “illogical” and “discriminatory.”
In the 2017 auctions, the rates for PIPP electric users began to rise above the standard rates. According to a PUCO spokesperson, rates for all four electric distributors are now higher for low-income customers starting with the 2022/2023 winter season and now into the devastating heat of summer.
Rates differ depending on whether the user is a customer of AEP Ohio, AES Ohio, Duke, or First Energy.
The difference is less than a tenth of a cent per kilowatt hour, but it adds up to $300 to $1,500 more in annual savings for customers.
In filings, the OCC states that “it is counter-intuitive and illogical that signing up for government assistance will cost them more than declining assistance.”
If the customer abandons the program or falls behind, they will owe the utility the total that has accumulated.
“We believe that result is illegal.” Another issue is that the higher bills may force all other consumers to pay more to support the PIPP program, according to Tinkham.
This is because all electric users contribute to the program’s funding through a rider attached to their utility bill known as the Universal Service Fund. According to Tinkham, all-electric customers are responsible for the uncovered portion of these higher bills.
Each year, the Ohio Department of Development goes before the Public Utilities Commission of Ohio to set the amount of the Universal Service Fund. The consumer advocates are attempting to intervene in that process.
However, all of the electric providers and the Department of Development argue that this issue is outside the scope of this process and that the PUCO should disregard the consumers’ counsel concerns and approve their agreed-upon rider rates.
Consumer advocates have argued that the PUCO should protect consumers from these higher rates and should not allow the rider to be charged to PIPP customers at the higher rate. Because the cost of the rider is linked to the rate customers pay, the OCC contends that PIPP customers should only be charged the amount for the rider they would be charged if they had the standard rate.
Electric companies argue that they should not be left to fill the void on their own and that auctions for the upcoming winter season have already been held and approved.
The OCC claims that this is the proper venue for the fight because the proposed agreement violates laws requiring the protection of vulnerable populations by requiring them to pay more for the rider, and thus should not be implemented.
The PUCO staff decided not to comment on the matter; they did not criticize or support the agreement reached by the department of development with the providers.
The PUCO’s decision on the issue would be made at their Oct. 5 meeting. The new rates went into effect in January.
The OCC also wants to change the way auctions are conducted so that lower-income customers’ rates cannot be higher than standard customers’ rates. They claim that the Department of Development has the administrative tools to address the issue of low-income users paying higher rates than others.
State regulations place the decision on how to handle these types of auctions in the hands of Lydia Mihalik, the director of the department of development. According to the regulations, the director may use separate auctions for the PIPP rate and the standard rate if it results in savings, and a feasibility study should be conducted to review the process. But this has not occurred.
The department of development refused to answer questions about the auction policies of the program. They referred to the ongoing case before the PUCO.
“The case is currently being heard by the PUCO.” In an email, spokesperson Todd Walker says, “We look forward to a decision in the case and will continue to assist eligible Ohioans in paying their utility bill.”
The response ignored questions about how the department would handle future auctions and why the department did not adjust the process when PIPP rates began to rise above the standard rate.
Tinkham stated that with the recent expansion of the PIPP program to include people earning 175% of the poverty level rather than the previous threshold of 150% of the poverty level, even more people will be charged higher rates, and even more money will need to be collected from all users to pay the difference to the electric companies.