North Carolina lawmakers had a chance this year to help address one of the biggest problems facing low-income families: the big hit their incomes take from the cost of keeping the lights, heat and other power on. But the newly passed state energy bill left them in the cold.
In 2019, 13.6 percent of North Carolina residents lived in poverty. For a family of four, poverty is defined as an annual income of less than $25,750 per year. The poverty rate was far worse for communities of color: 26 percent for Indigenous, 22 percent for Latino, and 21 percent for Black people.
Energy burden is one byproduct of poverty. It refers to the percentage of household income used to pay energy costs such as electricity, gas, and heating fuels. A high energy burden is often defined as greater than 6 percent of income, while severe energy burdens are those greater than 10 percent of income.
Families face high energy burdens in every state but there are significant regional differences. The South Atlantic region (Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia) has the greatest number of households with high energy burdens in the United States.
According to the N.C. Justice Center, in 2019, nearly 1.4 million North Carolina households paid 6 percent or more of their income for energy. For families between 50 percent and 100 percent of the federal poverty level, 16 percent of their income went to energy bills.
High energy burden forces poor people into a nearly impossible choice between paying energy bills and buying food, medicine, and other day-to-day necessities. Policy options exist that would help reduce the energy burden problem, such as a percentage of income payment plan (PIPP) or a discounted rate program.
A PIPP program guarantees that customers won't spend more than a specific percentage of income on their electricity bills. Virginia passed a program like this earlier this year (VA House Bill 2330, “Percentage of Income Payment Program and Fund”). It would be a big step forward if North Carolina adopted a similar program, especially since the state’s poverty rate has not fallen below 13 percent in the past 20 years.
Unfortunately, North Carolina’s most recent energy legislation (House Bill 951, “Energy Solutions for North Carolina”) offers little help for low-income customers. The measure, passed by the legislature and signed by Gov. Roy Cooper this month, sets the state on a course toward Cooper’s goal of reducing carbon emissions 70 percent from 2005 by 2030.
The carbon emissions reduction goal is laudable. But HB 951 also enacts several provisions that may increase the price of energy.
First, it allows Duke Energy to seek approval from the N.C. Utilities Commission for a multi-year rate plan, with the potential for yearly rate hikes of up to 4 percent. Multi-year ratemaking creates the potential for Duke Energy to earn more at customers’ expense. The legislation allows Duke Energy to potentially overearn by up to 50 basis points (0.5%) annually before the company would have to offer refunds to customers. But there is no similar downside risk for the company. If Duke underearns by as little as a penny, it can file a new rate case. We believe that earnings risk should be fairly shared by customers and the company.
Second, Duke Energy is guaranteed 100 percent ownership of all new resources other than solar and solar combined with energy storage. This may raise costs, making customers pay a premium for resources that would have been less expensive had a competitive procurement process been required.
Finally, the law lacks meaningful protections for North Carolina ratepayers, especially those who suffer from high energy burdens. As one data point: in 2019, in one large utility’s territory alone, 225,000 people had their utility service disconnected for non-payment (N.C. Justice Center).
How one NC community is addressing the high energy burden
Improving the energy efficiency of buildings is a cost-effective way to cut energy costs. This can include weatherization such as insulating walls, ceilings, and floors; sealing a home's air leaks; improving window and door efficiency; and upgrading the heating and cooling system. In addition to saving money, weatherization offers health benefits, including lower risks from carbon monoxide leaks and better air quality for allergy sufferers. Unfortunately, low-income people often lack the resources to make energy efficiency investments, or they rent their homes.
The Roanoke Electric Membership Cooperative aims to address that dilemma with its Upgrade to $ave Program/Pay As You Save Model. Roanoke Electric Cooperative is headquartered in Aulander, NC, serving Bertie, Chowan, Gates, Halifax, Hertford, Northampton, and Perquimans counties. Most of these counties have 20 percent or more residents living in poverty, many of whom bear a high energy burden. Almost a quarter of homes in Roanoke’s territory are manufactured or mobile homes, which are generally less energy efficient than other housing.
Under the Upgrade to $ave program, a customer contacts Roanoke and signs up for a free energy audit. The audit identifies cost-effective energy efficiency upgrades, and Roanoke sends a crew to the home to make upgrades at no cost. Instead of loaning members money, Roanoke finances the upgrades and secures the investment costs by adding a fixed tariff to the meter that is lower than the estimated energy savings. The tariff for the fixed charge automatically transfers to future customers at a site until the initial investment is recovered in full. Cost-effective upgrades for each home are identified during the energy-audit process and the associated savings and payback period are calculated for each upgrade.
So far, Roanoke Electric has invested more than $2.9 million into energy-efficient upgrades through the program, including heat pump improvements, insulation, water heater wraps, LED lighting and duct and air sealing. The 465 members to date have seen their energy savings average about 50 percent over pre-improvement bills. More than 90 percent of the projects haven't required upfront investments. The community showcased its progress at the cooperative's Energy Expo on Oct. 1.
HB 951 includes a provision establishing a utility on-bill finance program for energy efficiency. But the details of how the program will work were left to the N.C. Utilities Commission to determine.
The commission has a number of questions to consider in drafting such a program, including what criteria will be required for products and services to receive regulatory approval, and what methods will be used to determine what products and services can be included in on-bill financing programs.
For this and other programs, the Sierra Club will seek to ensure that the NCUC fairly balances utility profits and customer protection.
The Pay as You $ave Model has caught traction in smaller, rural cooperatives like Roanoke. The electric membership cooperative model in these communities does not depend on Duke Energy’s traditional return on equity business model. It remains to be seen whether in fact many low-income customers might meet underwriting requirements for the program yet to be developed by the NCUC.
N.C. Sierra Club stands with justice advocates in support of alleviating energy burden for our most vulnerable residents at a statewide level. We applaud community initiatives such as the one run by the Roanoke Electric Membership Cooperative that seek to help customers shoulder their energy burdens.