Leveraging Success Story: Michigan

As the Weatherization Assistance Program (WAP) reaches the end of the American Recovery and Reinvestment Act (Recovery Act) period on March 31, 2012, States and local agencies are looking to the future.  To sustain the program and ensure the uninterrupted provision of quality services to low-income people, the network is exploring innovative partnerships and initiatives. WAP creates good, green jobs and helps reduce our reliance on foreign oil.  Additionally, no one wants to scale down the ramped up programs and lay off trained workers, especially as the effects of the recession persist.  The uncertainty of future Department of Energy (DOE) funding exacerbates these concerns. States around the nation have taken the lead in connecting with energy efficiency and low income stakeholders to find alternate means to fund the WAP in a post-Recovery Act age. Below is the second of a series of four State profiles, demonstrating how they leverage significant funds to bridge the gap between low income energy efficiency retrofit needs and the available resources, as well as to continue the pace and breadth of the Recovery Act WAP going forward.

Michigan’s utility fund leveraging netted over $10 million for WAP in PY2010. It began with The Customer Choice and Electricity Reliability Act of 2000, which authorized the creation of a Low Income and Energy Efficiency Fund (LIEEF), to be administered by the Michigan Public Service Commission (PSC).  The Act provided grants to qualifying organizations with the stated purpose to provide shut off and other protection for low-income customers and promote energy efficiency by all ratepayers. Funding varies from year to year and is determined by securitization.  Under securitization, utilities are allowed to refinance some of their most expensive debt and equity with less expensive debt and equity. Savings occurring as a result of securitization are then passed through to the company’s electric customers.

The Michigan Department of Human Services, which administers the WAP in the state, annually applies for funding through the LIEEF to provide WAP services and has been awarded funds since 2003.  Funds come directly to the State, which then distributes them to the network of 31 agencies operating the WAP using the allocation formula used for DOE WAP funds.

Additionally, Governor Jennifer Granholm signed the Energy Optimization Act of 2008 into law on October 6, 2008. This Act promotes the development of clean and renewable energy and energy optimization through the implementation of standards that cost-effectively provide greater energy security and diversify the energy resources used to meet consumers’ needs, encourage private investment in renewable energy and energy efficiency, and improve air quality. The ultimate goal of this legislation is to delay the need for constructing new electric generating facilities and thereby protect consumers from incurring the costs of such construction. The plan has a set of programs that include offerings for all consumers and uses educational programs designed to alter consumer behavior.  This led to the creation of Energy Optimization programs, offered through a team of 11 of Michigan’s electric utilities to provide energy efficiency education, programs, and rebates designed to help consumers better manage their energy usage. The Michigan Community Action Agency Association (MCAAA) received the contract to administer these funds, which allows WAP providers to stretch their funds further through sharing the costs for certain measures between different sources. James Crisp, Executive Director of MCAAA noted, “The savings these measures produce continue, month after month and year after year.  A well-insulated and energy efficient home has increased value on the market, lessons the environmental impact associated with carbon emissions and creates a healthier living environment, as just some of the benefits.”

Michigan uses leveraged funds to supplement DOE weatherization efforts.   Also, the PSC income threshold is a bit higher at 250% of the federal poverty level, which allows providers to serve slightly higher income households as well as address structural issues like roofs; appliance replacement of freezers, window air conditioning units, and microwaves; and light control and motion sensors.  Many agencies use PSC funds for client education, conducting classes as well as providing energy saving kits and tools. Since Michigan does not consistently receive LIHEAP funding, utility funding can bridge the gap between demand for services and DOE WAP funding. In PY2010, Michigan used leveraged funds for client education of 7,214 households and the weatherization of 2,206 units.

Stacie Gibson, Director of the Bureau of Community Action and Economic Opportunity within the Michigan Department of Human Services says, “PSC and Energy Optimization funds are the future. These programs started small but are designed to increase over the years. By the end of the Recovery Act period, these programs fund our Program at 80% of the Recovery Act level.” She advises other states to make themselves relevant to legislation and programs that mandate the realization of certain energy savings. Getting in on the ground floor is crucial, as is making the effort as painless as possible for the utilities and other stakeholders. Gibson notes, “just let people know ‘we’re right here, try us.’ Make sure all the players know what you do and how you do it to help them meet their goals.”