Low-income Ohioans are charged higher rates for electricity than other consumers
Ohio electric utility customers who sign up for a public program that promises to cut utility costs for low-income people are charged a rate higher than the rates higher-income consumers are charged.
Ohio’s Percentage of Income Payment Plan Plus program, known as PIPP, is for people making at or below 175% of the federal poverty rate. That amounts to about $48,000 a year for a family of four or $22,000 a year for a single person.
People enrolled in the program for electric users only have to pay 5% of their income toward their bill, or 10% of their income if they use electricity for heat.
The state takes care of the rest of the bill, but the full amount accumulates in the ledger and in certain circumstances the user can receive bills for the entire amount.
The program can be a lifesaver, said Andrew Tinkham, senior outreach and education program specialist with Ohio’s residential utility watchdog, the Office of the Ohio Consumers’ Counsel.
But there’s a problem, he said.
“The problem is that the recent electricity markets have resulted in higher electricity bills for consumers than the standard electric offer they could otherwise obtain from their electric utility,” Tinkham said.
It has to do with the way electric rates are set going into winter each year. During annual electricity rate auctions, the rates for the customers in the PIPP program are auctioned off separately from the standard rates other users who aren’t in the program pay.
And lately, those auctions have resulted in rates that are higher for low-income consumers.
Tinkham said the OCC believes it is “unlawful” for low-income users to be charged a higher rate than their standard customer peers. OCC filings in an open case before the Public Utilities Commission of Ohio (PUCO) call the practice “illogical” and “discriminatory.”
The rates for the PIPP electric users began to rise above the standard rates in the 2017 auctions. The trend continued, and now, for the 2022/2023 winter season, rates for all four electric distributors are higher for low-income customers, according to a spokesperson for the PUCO.
The rates vary, depending on whether the user has AEP Ohio, AES Ohio, Duke, or First Energy.
The difference is less than a tenth of a cent per kilowatt hour, but that adds up to between $300 to $1,500 more a year for the customers.
The OCC states in filings “it is counter-intuitive and illogical that signing up for government assistance will cost them more than if they decline assistance.”
If the consumer leaves the program or falls behind, they end up owing the utility the total that’s been accumulating.
“We think that result is unlawful. Another problem is that the higher bills could result in all other consumers paying having to pay more to support the PIPP program,” Tinkham said.
That’s because all electric users pay to fund this program through a rider attached to their utility bill, called the Universal Service Fund. So, all electric customers are on the hook to pay for the uncovered portion of these higher bills, Tinkham said.
The amount of the Universal Service Fund is set each year when the Ohio Department of Development goes before the Public Utilities Commission of Ohio. The consumers’ counsel is attempting to intervene in that process.
But all of the electric providers and the department of development say this issue is outside the scope of this particular process and they want the PUCO to ignore the consumers’ counsel concerns and approve their agreed-upon rates for the rider.
The consumers’ counsel has been arguing that the PUCO should protect consumers from these higher rates and shouldn’t allow the rider to be charged to the PIPP customers at the higher rate. The cost of the rider is tied to the rate customers pay, so the OCC is arguing that the PIPP customers should only have to pay the amount for the rider they’d be charged if they had the standard rate.
Electric companies say they shouldn’t be left to fill that gap themselves and that the auctions for this winter season have already been held and approved.
The OCC says this is the place for the battle because the proposed agreement violates laws requiring the protection of at-risk populations by requiring them to pay more for the rider, and so shouldn’t move forward.
The PUCO staff decided not to weigh in on the matter – they didn’t criticize the agreement the department of development reached with the providers or endorse it.
The earliest the PUCO would make a decision on the issue is at their Oct. 5 meeting. The rates take effect in January.
The OCC also wants to change the way auctions are held so that the rate for lower-income customers can’t be higher than the rate for standard customers. They’ve argued the department of development has the administrative tools to solve the problem of low-income users paying higher rates than others.
State regulations put the decision on how to handle these types of auctions in the hands of the director of the department of development, Lydia Mihalik. Those regulations state the director can use separate auctions for the PIPP rate and the standard rate if it leads to savings, and that a feasibility study should be conducted to review the process. But that hasn’t happened.
The department of development refused to answer questions about the program’s auction policies. They cited the open case before the PUCO.
“The case is currently pending before the PUCO. We look forward to a decision in the case and continuing to assist eligible Ohioans to pay their utility bill,” spokesperson Todd Walker states in an email.
The response ignored questions from WOSU about how the department would handle these auctions in the future and why the department didn’t adjust the process when the PIPP rates started rising above the standard rate.
Tinkham said that with the recent expansion of the PIPP program, to include people making 175% of the poverty level instead of the previous threshold of 150% of the poverty level, even more people will be charged the higher rates and even more will need to be collected from all users to pay the electric companies the difference.
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