Analysts: CA, TX Paying Other States' Energy Bills

As Californians continue to wrestle with their own staggering electricity and natural gas bills, they are probably unaware that they are also contributing millions of dollars to help people in other states pay their energy bills through the Low Income Home Energy Assistance Program (LIHEAP), according to analysts with Reston, VA-based Energy Market & Policy Analysis Inc.(EMPA).

LIHEAP funds, which are collected from taxpayers and spread among states based on an "old formula" developed in the 1980s, are expected to reach $1.7 billion to $2 billion in 2001. The formula is weighted so that people in certain states that tend to be heavily dependent on oil for heating are favored, normally northeastern and north central states, the group said. Even though the regions in which high energy bills are experienced have changed, the formula has remained the same.

"Californians are now burdened with high gas and electricity bills," the EMPA said in a report. "True, the high bills are due largely to the fact that facilities were not built in California to generate enough electricity or deliver enough natural gas. Nevertheless, because of LIHEAP, Californians and others with high energy bills are seeing their tax dollars flow to states with lower energy bills."

The EMPA constructed a chart classifying the states that will be "winners" or "losers" for 2001. Since LIHEAP funds come principally from income tax revenues, winners are states that receive a share of LIHEAP funds that is larger than the state's share of federal income taxes. Losing states have a share of LIHEAP that is less than their percentage share of federal income tax.

Based on the more conservative $1.7 billion 2001 LIHEAP estimate, the EMPA said California is the largest loser, with $137 million lost, followed by Texas ($80 million), Florida ($77 million), Georgia ($25 million) and Arizona ($18 million). New York is the state that is considered the biggest winner, gaining over $74 million, followed by Pennsylvania ($43 million), Minnesota ($36 million), Michigan ($32 million) and Wisconsin ($30 million).

Even though there are obvious flaws, the group said that it does not expect the LIHEAP program to be changed because it has attracted a very strong constituency that "lobbies furiously" to preserve the program and increase appropriations.

The group said some actions could be taken to fix the system, including:

  • Change the formula to remove gross disparities among states in the distribution of funds;
  • Insist that states incorporate LIHEAP administration with other wellfare programs and do away with the separate LIHEAP bureaucracies and their Washington lobbyists;
  • Provide for automatic reductions in funding when energy prices drop;
  • Restrict access to funds by states where public utility commissions are too lax with rules that prevent utilities from cutting service when bills go unpaid; and
  • Restrict access to funds by utilities that have a history of relying on LIHEAP rather than making a reasonable effort to assure that customers pay their bills.

"Neither the President nor Members of Congress are likely to try reforming the LIHEAP program because of the fear that the army of lobbying groups that have sprung up around LIHEAP will charge them with 'abandoning the poor,'" the EMPA said. "Such demagoguery works."

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