Leveraging Success Stories: Onward and Upward with Weatherization
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.
The 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 are profiles of two states that leverage a significant amount of 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.
Massachusetts is a true pioneer in leveraging efforts. The state, using DOE funding, leveraged approximately $30 million in utility funds for Program Year (PY) 2010 and expects to leverage $68 million for PY2011, in a program with a DOE WAP allocation for 2010 of about $7 million, effectively increasing the funds tenfold. All investor-owned utilities in the state, both gas and electric, contribute to this impressive and hefty total.
Massachusetts’s efforts to bring in more funding began in a political climate very similar to the one we face today. In the mid-1990s, a budgetary effort was made to shut down low-income programs and the WAP was cut significantly, by up to 50%. During this period, the state and local weatherization agencies realized that if they did not pursue alternative funds, the program would be in serious jeopardy. A coalition of energy efficiency advocates promoted a plan to the utilities and the state legislature to firm up policies and lay down standards and levels of funding that would be reserved for energy efficiency in general, as well as specifically for low-income energy people. In 1997, the legislature passed a law mandating that investor-owned utilities provide funds for the WAP through an energy efficiency fund with dollars collected from ratepayers. The current charge is $0.50 a month on utility bills, with 13% of this total collection going to low-income programs, which the utilities use to contract directly with local agencies to provide program services. Over the last three years, this has netted in excess of $1 billion, which is divided up among residential, commercial, and industrial energy efficiency efforts.
In 2011, the total low-income allocation is $68 million. To provide services, the utility contracts with “lead vendors,” which then subcontract the utility funds with other local agencies in the utility’s service area. The state coordinates the federally funded program with utility programs, and the DOE WAP serves as the foundation, providing the framework, oversight, and operational model. Ninety percent of the services performed with utility monies are the same as those provided by WAP. To ensure comprehensive and effective services, a best practices committee is charged with standardizing and coordinating the programs with stakeholders, such as the local weatherization agencies;the Massachusetts Department of Housing and Community Development (DHCD), which runs WAP; and utility representatives, and it is facilitated by the Low Income Energy Affordability Network (LEAN) discussed below.
To spend the funds in the most effective way possible, Massachusetts uses strategies to maximize returns. Generally, utilities want to pay for efficiency measures directly connected to energy savings because the Department of Public Utilities examines programs for cost effectiveness. Thus, repairs or health and safety measures are a tougher sell. In response, agencies use DOE funding to cover allowable repairs and health and safety costs so utilities can then share in energy efficiency efforts such as insulating sidewalls and attics and replacing heating systems where needed. Ultimately, this maximizes DOE and utility dollars so clients receive the best package of services based on their requirements and needs.
So can this kind of success be replicated? Yes, but it takes a lot of work. The key to successful collaboration is fostering a mutually beneficial, positive relationship among utilities, agencies, and the state. Ken Rauseo, manager of the Energy Conservation Unit at DHCD, said of their collaboration, “We have had our bumps in the road. It takes a long time to develop these relationships, and to get to this point took a lot of negotiations and interventions.” LEAN, an entity charged with assisting in the management of the combination of utility and DOE funds for the low-income programs, includes the low-income lead utility vendors, DHCD, National Consumer Law Center, WAP agencies, Massachusetts Association for Community Action directors, Mass Energy Directors’ Association, and other energy efficiency policy and legal experts. LEAN meets monthly to discuss issues around the funds and how best to spend them. This buy-in from all parties is essential to success and can be enhanced by enlisting experts to explain the efforts and effects of the WAP to all parties. For states looking to expand existing programs or begin new utility programs, Rauseo advises making sure that you have strong legal representation and make use of consultants to ensure your concerns are heard and addressed. Stakeholders must be persistent and involved through attending hearings and meetings and bringing back information. Often, agreeing on a plan with the largest utilities encourages the smaller ones to consider similar partnerships.
Transitioning to the post–Recovery Act period in Massachusetts should be relatively seamless, as the utility funding available should offset the loss of DOE dollars. The program hopes to keep all 94 energy auditors and 130 contractors working. Elliott Jacobson, vice president for energy at Action, Inc., and chairperson of LEAN, aid, “By next year, the amount of utility funds will nearly replicate those of the Recovery Act and so we shouldn’t have any slowdown in production. We may weatherize 5% to 10% fewer units but it won’t irreparably harm the network. The challenge will be to readjust the ratio between DOE funds and utility funds in our protocols to ensure whole house weatherization. ”
Washington State’s leveraging efforts, which provided $8.3 million to the WAP in PY2010, were originally funded with Petroleum Violation Escrow (PVE) charges, or oil overcharges, comprised of the fines oil companies paid in response to their violation of federal oil price caps in the years following the OPEC oil embargo in the 1970s. The state initiated a matching program to contribute $1 for each utility dollar spent, significantly leveraging the utility funds. The state requires at least a dollar-for-dollar investment by utilities. As the program progressed, Washington realized that some flexibility would be beneficial for the program and now allows in-kind matches, such as the utility performing energy conservation work. Utilities also started to contract directly with local agencies to perform these services. Originally, the state hoped these dollars would provide an infinite revolving resource. However, due to the huge demand for matching funds far in excess of expectations, the funds did not become a permanent revolving loan fund. For the first 10 years of the initiative, efforts were funded strictly through the PVE, but as PVE funding ended by the mid- to late 1990s, the state transitioned to capital funds from a housing trust fund sustained by the sale of bonds. By 2000, capital funds became the sole source of funding for matching utility funds.
Once the amount of available funds is established each year, the state issues a county planning estimate based on heating degree days and low-income population to determine the proportional amount of funds appropriate for each jurisdiction and sets leveraging goals. The local agency in that area then works with utilities, landlords, and other interested parties to raise matching funds. The three involved partners (the state, local agency, and utility) then sign an agreement that commits the utility to providing a specified level of funding and stating that the state will match it once the utility reaches its goals. Once the contract is executed, the local agency sends in reports to confirm the funds disbursed and work done. With the utility effort confirmed, the state releases the matching funds.
The Washington WAP network uses utility funds for traditional weatherization energy efficiency services as well as repairs in support of those measures. Local agencies have flexibility within what DOE and utilities cover to provide comprehensive services. As the economy recovers, Steve Payne, managing director of the Housing Improvements & Preservation unit in the Washington Department of Commerce, which administers the WAP, hopes to expand efforts to promote additional repair and rehabilitation work.
As in Massachusetts, Payne encourages using DOE funds as allowed to pursue leveraging efforts. In Washington, DOE-funded leveraging efforts spurred the establishment of The Energy Project, which serves as an advocate for the network, works with the Utilities and Transportation Commission and utilities, and looks for untapped opportunities. For instance, if a utility wants a rate increase, The Energy Project can argue that this will adversely affect low-income ratepayers and ask for protection for those ratepayers, such as bill assistance and/or weatherization funding. Payne advises creating a similar group: “You have to be at the table. Investor-owned utilities will have advisory groups you can be a part of, especially leading up to rate cases.” Establishment of a steering committee comprised of the state and local agencies can provide oversight and approve future plans. Payne noted, “These efforts are complicated—to have someone who can be the expert and advocate on behalf of local agencies makes the likelihood of success even greater.”
Going forward, these utility funds will become more important as the Recovery Act winds down. Additionally, in Washington, a voter initiative set conservation targets for the state’s utilities to meet by 2020, which provides an opportunity for increased funding.