Heat Wave, Budget Cuts Strain Utility Safety Net

Faced with a July in which triple-digit temperatures and a historic drought left many of Illinois’ most vulnerable citizens struggling to keep cool, the state decided to step in. But with no regular cooling assistance program or emergency federal dollars available, options were limited.

So Illinois borrowed more than $10 million from its winter heating assistance fund to put in place a three-week cooling program for July. “We pretty much had no choice but to rob Peter to pay Paul,” says Larry Dawson, deputy director of the Office of Energy Assistance.

That cash infusion was enough to help nearly 74,000 people during the worst of the heat. But it came with another cost: Spending the $10 million in summer meant those funds won’t be there in winter. That could leave as many as 20,000 without heating assistance when temperatures drop and need rises again.

The utility assistance dollars, distributed through direct payments to enrollees, help those who receive them cover their energy bills. A portion of the money is used to pay down overdue balances and prevent utility companies from cutting a home off entirely, but for the most part the programs are intended to help when utility costs spike during extreme weather.

“It’s just a matter of trying to meet the crisis of now,” Dawson says, “and hoping that the remaining funds we have will meet the bulk of our demand in the winter.”

The recent historic heat wave across much of the country, including the hottest July on record, left many states in a similar situation: struggling to stretch dollars to meet climbing demand. And now, many fear, as Illinois does, that they may run short of funds for winter because of their needs this summer.

“Something has to give,” says Brandon Avila, of the Campaign for Home Energy Assistance, a Washington-based advocacy group. “It’s really hit our program at a time when we were trying to stop the bleeding on helping the poorest of the poor.”

In response, some states have pared back benefits, tapped their own emergency funding or, as Illinois and others did, borrowed heating assistance dollars provided under the state-federal Low Income Home Energy Assistance Program (LIHEAP). The program provides a block grant to states for weatherization and heating and cooling assistance to help poor and vulnerable people.

Funding Cutback

But the program, on the books for more than three decades, has seen its funding slashed recently. This year’s $3.4 billion is the lowest amount since 2009. And Congress didn’t approve contingency funds this year in case of a crisis, which in the past allowed states such as Illinois to offer cooling assistance without borrowing. In 2010 and 2011, nearly $700 million in emergency funds were sent to states, on top of the roughly $4.4 billion received annually. That aid wasn’t available in 2012.

The program isn’t overly generous to begin with: On average the heating assistance benefit is less than $500 per household, and cooling assistance is generally less than $200. And most states admit to reaching only a small number of those who qualify. Officials worry they can’t squeeze much more out of the dwindling funds they have available.

Taken together, that’s left a perilous situation. States are thankful for a temporary mid-August reprieve from the heat, but are praying for a mild winter, all the while hoping funds aren’t cut even further next year. But with the federal budget outlook as uncertain as the weather, some states could be left in a worst-case scenario: without the funds to meet demand in either the summer or winter, leaving needy residents lacking the assistance to keep their lights on and homes livable.

In years past, this might have spurred a congressional response, says Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. Congress would approve contingency funds or appropriate additional dollars if need be. But not this Congress, Wolfe says, and not this year. Even emergency drought assistance measures have been tied up in politics, leaving little hope for energy assistance advocates.

Hard numbers on cooling assistance demand and spending for this year are hard to come by. But many states report demand spikes from 5 percent to 15 percent on top of the heightened need of recent years. Many come forward with unpaid bills from last year, too, compounding the problem.

“Demand has never been greater,” says Timothy Bruer, an executive of Energy Services Inc., which administers energy assistance in 14 Wisconsin counties. He’s been involved in the work since 1979, before LIHEAP even existed, and says the need in his state is at historic levels.

Record Demand

Typically, Wisconsin doesn’t operate a cooling assistance program, but heat and demand forced officials to divert heating aid money this summer. Bruer says as many as 100 people per day have been coming in for assistance. “My entire career,” he says, “I’ve never seen it this bad.”

Facing a similar situation, many other states limited enrollment or scaled back benefits. California, for example, projects it will reach just 10 percent of those eligible for cooling assistance because of low funding levels. Virginia cut its cooling benefit this year to $250 from an average of around $330 over the past four years due to a projected increase in demand and falling funding.

Others, though, have managed to roll over funds from previous years to help defray the costs of this summer. New Jersey was able to offer $10 million – about $100 per beneficiary – to help amid record heat. Illinois benefited from last year’s relatively mild winter when it was forced unexpectedly to spend on cooling assistance this summer.

Both those states were also able to rely on state funds collected from utility companies to supplement federal dollars, a luxury few others have at their disposal. That backstop, though, isn’t necessarily enough to tackle the entire problem, as Illinois shows.

And eventually, accounting shifts and borrowing only go so far. After the relatively flush years of 2009 and 2010 (thanks in part to federal stimulus dollars) Texas was able to weather recent budget cuts without forcing people off energy assistance rolls to a significant degree. Now, with demand still climbing and funding continuing to slide, that arithmetic has grown more difficult. Cuts to both benefits and enrollment are looming.

“No longer can you serve every household,” says Michael De Young, the energy assistance program director in Texas. “It’s very challenging.”

And further reductions in the federal program seem likely, thanks to deficit worries in Washington and the looming threat of broad-based federal spending cuts (known as sequestration) at the start of 2013. In the meantime, state officials will be left to seek every dollar from Washington they can manage. Some hope to tuck energy assistance into any drought relief package that may clear Congress, but most admit such a scenario is unlikely.