The following is an executive summary of the testimony of Roger Colton, a national expert on issues relating to universal service programs for low-income consumers, filed on July 7, 2000 on behalf of the Division of the Ratepayer Advocate, in proceedings before the New Jersey Board of Public Utilities to consider the establishment of a Universal Service Fund for the State’s electric and natural gas consumers. Mr. Colton’s testimony includes both a proposal for a permanent Universal Service program, and an interim proposal to be implemented for a 12-month period commencing with the 2000-01 heating season.

I. PROPOSED UNIVERSAL SERVICE PROGRAM

• Over 1.4 million persons live with incomes at or below 200 percent of the federal Poverty Level in New Jersey. Of these low-income persons, nearly 300,000 live below 50% of the federal Poverty Level, while another 290,000 live between 50% and 100% of the federal Poverty Level. The needs of low-income consumers are great in New Jersey, both in terms of dollars and in terms of the number of households in need. The energy problems of New Jersey's low-income customers are not household budgeting problems but instead, an absolute mismatch between household resources and expenses.
  
• Low-income consumers are forced to make unreasonable budget decisions between competing household necessities (e.g., heat or eat), and be forced to engage in a wide variety of dangerous and/or unhealthy activities in an effort to keep paying their utility bills.
  
• An appropriate Universal Service structure includes a rate affordability assistance program, which should be available to households with incomes at or below 150 percent of the federal Poverty Level. In addition, a reasonable amount of rate affordability assistance should be reserved for households with incomes up to 200% of Poverty having special needs. The rate affordability assistance program should consist of the following components:

• Basic rate affordability assistance. Low-income consumers should receive a fixed credit based on a percentage of household income. The percentage of income considered affordable should be based on a sliding scale, depending on household income.
  
• Arrearage forgiveness. Arrearages should be forgiven over a period not exceeding two years, and should be subject to affordable customer co-payments.
  
• Crisis intervention assistance. A crisis intervention fund, coordinated with existing emergency benefits, should be provided.
  
• Customer outreach and intake initiatives. Specific outreach and intake initiatives are needed, including expanded implementation of the Chronicles computer screening tool (formerly Benefits Outreach and Screening Software ("BOSS")), and outreach to be provided to all utility consumers as part of the Utility Education Program. Intake and enrollment should be automated to the extent possible.

• The rate affordability assistance program should be administered as a state-wide program by the state LIHEAP office.
  
• Rate affordability assistance programs should be available to low-income consumers who buy their commodity service from either a utility or from a competitive third-party supplier ("TPS").
  
• The Universal Service program should also include the following additional components:

• Energy efficiency assistance. To the extent not funded through the utilities’ Societal Benefits Charges ("SBCs"), the low-income energy efficiency programs recommended by the Ratepayer Advocate in the Board’s Comprehensive Resource Analysis proceeding ("CRA") should be funded through the USF.
  
• An assistance in aggregation program. New Jersey should operate an assistance in aggregation program administered by an Independent Statewide Administrator ("ISA").
  
• A low-income guarantee pool. The Board should develop a mechanism to allow third-party suppliers to transfer some of their risks of non-collection to a guarantee pool.
  
• Based on the budget estimates in this testimony, the Universal Service Charge should be set initially at $0.00061 per kWh and $0.0046 per therm. If the low-income energy-efficiency program is included in the USF, the initial charge should be $0.00081 per kWh and $0.0057 per therm.
  
• The USF should be a statewide fund, which should be funded through a non-bypassable charge. The fund should be administered by the State Treasurer's office.
  
• The utilities’s recovery of costs through the USF should be limited to incremental costs, net of savings realized as a result of the universal service program.
  
• The Board should require the utilities to submit reports tracking both the performance of the universal service program and the impact of competition upon low-income consumers.
  
• Utilities should provide outreach and education on the universal service program as one component of their overall natural gas and electric restructuring consumer education. Funding for this education should be derived from the restructuring consumer education budget.

II. INTERIM UNIVERSAL SERVICE PROGRAM

• The interim Universal Service program should assist in the development of the administrative mechanisms necessary to make a full-scale program operational. Therefore, the interim plan should be operated as a geographically discrete ramp-up to Ratepayer Advocate’s proposed permanent program.
  
• The interim program should operate in discrete communities throughout the state, including the service territories of all of the State’s electric and gas utilities, and targeting one percent of each utility’s customer base. The Ratepayer Advocate recommends that the following communities be considered for the interim program: Newark, Camden, Atlantic City, Asbury Park/Long Branch, and Elizabeth.
  
• The interim program should be implemented for a one year period commencing with the 2000-01 heating season, then expanded to the full-scale Universal Service program for the 2001-02 heating season, and thereafter.
  
• Eligibility for the interim program should be the same as proposed in the Ratepayer Advocate’s proposed permanent program, i.e. households with incomes up to 150 percent of the federal Poverty Level, with a reasonable amount of assistance reserved for households with incomes up to 200% of Poverty demonstrating special needs.
  
• The interim universal service program should contain the following components:

• Basic rate affordability assistance. Low-income consumers should receive a fixed credit based on a percentage of household income. This credit would be determined in the same manner as proposed in the Ratepayer Advocate’s proposed permanent Universal Service program.
  
• Arrearage forgiveness. Consumers receiving basic rate affordability assistance would also be eligible for arrearage forgiveness credits up to $10 per month.

• The interim Universal Service program should be administered by the state’s LIHEAP office.
  
• The intake and enrollment process should include outreach efforts to target current LIHEAP recipients, customers with payment difficulties, and customers identified through a network of community-based organizations.
  
• The interim program should be funded through a Universal Service Charge of $0.000133 per kWh for electric customers and $0.001062 per therm for natural gas customers.

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