PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17105-3265

Public Meeting held August 3, 2017

Commissioners Present: Gladys M. Brown, Chairman Andrew G. Place, Vice Chairman Robert F. Powelson David W. Sweet John F. Coleman, Jr.

National Fuel Gas Distribution Corporation’s Docket No. M-2016-2573847 Universal Service and Energy Conservation Plan for 20172020 Submitted in Compliance with 52 Pa. Code § 62.4

TENTATIVE ORDER BY THE COMMISSION

On October 28, 2016, National Fuel Gas Distribution Corporation’s (NFG or Company) filed a proposed Universal Service and Energy Conservation Plan for 2017- 2020 (Proposed 2017-2020 Plan or USECP) in compliance with 52 Pa. Code § 62.4. By this Tentative Order, we indicate issues that require further attention on the record before approving NFG’s USECP. We invite parties to comment on any provision of the Proposed 2017-2020 USECP regardless of whether the provision has been addressed in this Tentative Order.

I. BACKGROUND

This Commission and various stakeholders began to address formally low-income policies, practices, and services at least as early as 1984. See Recommendations for Dealing with Payment Troubled Customers, Docket No. M-840403. As a result of that proceeding, the energy utilities began filing low-income usage reduction plans (LIURPs) and considering how to address arrearages for low-income customers.

The Commission’s Customer Assistance Programs (CAP) Policy Statement at 52 Pa. Code §§ 69.261-69.267 (adopted in 1992 and amended it in 1999 and 2010) applies to class A electric distribution companies (EDCs) and natural gas distribution companies (NGDCs) with gross annual operating revenue in excess of $40 million. It provides guidance on affordable payments and arrearages and establishes a process for utilities to work with the Commission’s Bureau of Consumer Services (BCS) to develop CAPs. The Commission balances the interests of customers who benefit from CAPs with the interests of the other residential customers who pay for such programs. See Final Investigatory Order on CAPs: Funding Levels and Cost Recovery Mechanisms, Docket No. M-00051923 (Dec. 18, 2006), (Final CAP Investigatory Order), at 6-7.

The Commission’s LIURP regulations at 52 Pa. Code §§ 58.1 – 58.18 (adopted in 1993 and last amended in 1998) require covered utilities to establish fair, effective, and efficient energy usage reduction programs for their low-income customers. The programs are intended to assist low income customers conserve energy and reduce residential energy bills. The Commission is currently reviewing its LIURP regulations at Initiative to Review and Revise the Existing LIURP Regulations at 52 Pa. Code §§ 58.1 – 58.18, Docket No. L-2016-2557886.

The Natural Gas Choice and Competition Act (Competition Act), effective July 1, 1999, opened the natural gas supply market to competition. The universal service provisions of the Competition Act tie the affordability of gas service to a customer’s ability to maintain utility service. “Universal service and energy conservation” is defined as “policies, practices, and services that help low-income customers maintain their natural gas service” and includes CAPs, usage reduction programs, service termination protections, and consumer education. 66 Pa. C.S. §§ 2202 and 2203. The Competition

2 Act mandates that the Commission “ensure [that] universal service and energy conservation policies, activities and services for residential natural gas customers are appropriately funded and available in each NGDC territory.” 66 Pa. C.S, § 2203(8). Universal service programs are subject to the administrative oversight of the Commission, which must ensure that the utilities run the programs in a cost-effective manner and that services are appropriately funded and available in each utility distribution territory. 66 Pa. C.S. § 2203(8).

The Commission’s Universal Service and Energy Conservation Reporting Requirements (Reporting Requirements or USRR) at 52 Pa. Code §§ 62.1-62.8 (2000) require each NGDC serving more than 100,000 residential accounts to submit an updated USECP every three years to the Commission for approval. Section 62.4 provides that universal service and energy conservation may include a CAP, LIURP, customer assistance and referral evaluation services (CARES) program, and hardship fund as well as other programs, policies, and protections. 52 Pa. Code § 62.4. As an NGDC serving over 199,000 customers,1 NFG is required to maintain an approved triennial USECP and obtain an independent third-party review at least every six years.

II. HISTORY

1. 2014-2016 USECP

NFG’s current USECP is its 2014-2016 Plan at Docket No. M-2013-2366232. On May 22, 2014, the Commission entered its Final Order, directing NFG to amend its 20142016 Plan and to make a compliance filing within 30 days. On June 6, 2014, the Pennsylvania Utility Law Project (PULP) filed a Petition for Reconsideration and/or

1 NFG reported serving 199,061 customers in 2015. 2015 Report on Universal Service Programs & Collections Performance at 6. http://www.puc.pa.gov/General/publications_reports/pdf/EDC_NGDC_UniServ_Rpt2015.pdf

3 Clarification (Petition for Reconsideration), which requested clarification and reconsideration of issues allegedly overlooked by the Commission in the Final Order. On June 16, 2014, NFG filed an Answer to the Petition. On June 19, 2014, the Commission granted the PULP Petition for Reconsideration pending a review on the merits. On June 23, 2014, NFG filed a letter requesting a stay of the requirement to file a revised 2014- 2016 USECP (i.e., the compliance filing), pending the outcome of the PULP Petition. On July 24, 2014, the Commission granted NFG a stay on submitting its compliance filing until the Commission addressed the PULP Petition for Reconsideration on its merits.

On June 30, 2014, the Pennsylvania Department of Public Welfare, nka the Department of Human Services (DHS), filed a letter (DHS Letter) at the above docket but did not serve any of the parties. DHS did not petition to intervene. DHS questioned whether NFG use of LIHEAP in customer resource calculations was a violation of the LIHEAP statutes and vendor agreement with DHS. On July 16, 2014, NFG filed a Motion to Strike the DHS Letter and/or Allow Time for Response.

On August 5, 2014, by Secretarial Letter, the Commission provided an opportunity for the parties to provide comments and reply comments relative to the DHS Letter. On August 18, 2014, NFG, the Office of Consumer Advocate (OCA), and PULP individually filed comments relative to the substance of the DHS Letter. On August 25, 2014, NFG and PULP individually filed reply comments.

On February 12, 2015, the Commission issued an Order on Reconsideration (Reconsideration Order) granting the PULP Petition for Reconsideration to clarify that parties would be permitted to file comments on (1) the new information to be included in NFG’s compliance filing and (2) whether the compliance filing met the requirements of the May 22, 2014 Final Order. We directed NFG to submit its compliance filing within 30 days of the entry date of the February Order. Reconsideration Order at 22.

4 On March 16, 2015, NFG submitted a compliance filing. On March 26, 2015, PULP filed comments. On March 31, 2015, NFG filed reply comments and a Second Revised 2014-2016 Plan.

On April 23, 2015, the Commission issued an Order approving the Second Revised 2014-2016 Plan. Thereafter, the Second Revised 2014-2016 Plan was implemented.

2. Proposed 2017-2020 USECP

In compliance with Commission regulations, NFG, submitted its Proposed 2017- 2020 Plan on October 28, 2016, and served the Office of the Consumer Advocate (OCA), the Office of Small Business Advocate (OSBA) and the Commission’s Bureau of Investigation and Enforcement (BIE). The proposed Plan contains four major components that help low income customers maintain utility service. The four major components are as follows: (1) NFG’s CAP or Low-Income Rate Assistance (LIRA)2 program, which provides “discounted rates” for low-income residential customers; (2) LIURP, which provides weatherization and usage reduction services to help low-income customers reduce their utility bills; (3) CARES program, which provides referral services for low-income, special needs customers; and (4) NFG’s Hardship Fund or Neighbor for Neighbor Heat Fund (NFN), which provides grants to customers who have had their utility service terminated or are threatened with termination.

NFG’s Proposed 2017-2020 Plan appears to substantially comply with Title 66, Commission regulations, and Commission policy statements. The Amended Proposed 2017-2020 Plan appears to contain all of the components included in the definition of

2 While NFG speaks in terms of “discounted rates” for low-income customers, the correct construction is that qualifying low-income customers receive a discount off of NFG’s residential tariff rate. Low-income customers are part of the residential customer class and not a separate rate class.

5 universal service at 66 Pa. C.S. § 2202. The Amended Proposed 2017-2020 Plan also tentatively appears to meet the requirements mandating that universal service programs be available in each large NGDC’s service territory and that the programs be appropriately funded. 66 Pa. C.S. § 2203(8). The Amended Proposed 2017-2020 Plan also appears to meet the submission and content obligations of the USEC Reporting Requirements and the CAP Policy Statement. The Amended Proposed 2017-2020 Plan also partially meets the submission and content requirements of the LIURP regulations at Sections 58.1-58.18. We shall discuss each program in greater detail below.

I. DISCUSSION

A. USECP Modifications for the 2017-2020 Plan

The Company has not identified any changes for 2017-2020 compared to its last three-year plan. We nevertheless have questions and concerns about the Proposed USECP for 2017-2020. Accordingly, several aspects that we did not question relative to the 2015-2017 USECP we are now questioning in this proceeding.

B. Program Descriptions as Proposed for 2017-2020

1. LIRA ( i.e., NFG’s CAP)

NFG’s LIRA program offers “discounted rates” to payment-troubled heating customers whose income is less than 150% of the Federal Poverty Income Guidelines (FPIG) and who are unable to pay their regular monthly bills. The program is intended to increase payments from low-income customers while decreasing the company’s collections costs. LIRA is funded by the company’s residential ratepayers via a LIRA Discount Charge rider in the Company’s tariff.

6 The primary features of NFG’s program include:

* Reduced monthly gas bills.

* Complete arrearage forgiveness over a period of 24 months.

* Referrals to other community programs and services.

To participate in LIRA, households must agree to enroll in budget billing, provide income and identification for all household members, participate in LIURP (if eligible), and apply for LIHEAP annually. In addition, all adult members of the household must agree to become ratepayers and are responsible for the balance accrued while enrolled in LIRA. Dependent household members (i.e., children of ratepayers and residents age 65 or older, under federal tax rules) are not counted as ratepayers.

LIRA customers receive monthly bills discounted by 10%-40% depending on the customer’s household size, income, and anticipated grant from the Low Income Home Energy Assistance Program (LIHEAP). This method has been in place for several years. All customers enrolled in LIRA are required to apply annually for LIHEAP. However, customers are not removed from the LIRA program if their LIHEAP cash grant is not designated to NFG.

NFG calculates the amount of the LIRA discounts to ensure that households pay only a targeted percentage of household income (energy burden level) over the course of a year, based on the CAP Policy Statement at Section 69.265 (2)(i)(B). As shown in Table 1, the energy burden level is based on the poverty threshold of each household:

Table 1 Percent of Income Target Based on Income Maximum % of Poverty Bill Target as % of Income 50% 6.5% 100% 8.0%

7 150% 9.0%

Once the annual energy burden level for the household is determined, NFG calculates the annual discount amount by subtracting the total of the household annual payments and anticipated LIHEAP grant from the estimated annual bill. NFG uses the annual discount amount to determine the appropriate rate discount amount for the LIRA household (rounding up to the nearest 10%). An illustration of a LIRA rate discount calculation is provided in Table 2.

Table 2 Example of a LIRA Rate Discount Calculation 1 person household - $5,000 annual income

1. Average [Annual] LIRA Residential Bill for 1 person household = $899

2. Annual Energy Burden

Income x % Income Target = A $5,000.00 x 6.50% = $325

If A<$144 ($12 minimum per month x 12 months) then B, otherwise C

No B = $12/month x 12 months + LIHEAP$

Yes C = A + LIHEAP$ C = $325 + $342 = $667

8 3. Required Discount $899 - $667 = $232

4. Discount $232 / $899 = 25.81%

5. Round up to nearest 10% 30.00%

LIRA customers receive 1/24th arrearage forgiveness for each monthly bill paid on-time and in-full, regardless of any existing LIRA arrears. Customers that fail to pay LIRA bills in-full can receive arrearage forgiveness retroactively for any missed months when they achieve a zero LIRA balance. Customers have up to 36 months to earn full arrearage forgiveness. Any pre-program arrears remaining after 36 months are added to the current LIRA balance.

LIRA customers must re-verify eligibility for LIRA every two years unless their household situation changes, they report zero income, their consumption increases, or they have not received LIHEAP. Households in these situations must re-verify eligibility upon request. Customers reporting zero income must, at a minimum, re-verify every three months.

A LIRA account is placed into collections after the first missed payment.

a. Energy Burden Levels for LIRA Participants – Clarification Requested

NFG reports that it tracks the energy burden levels of LIRA participants on a daily basis to ensure they do not exceed the Commission’s CAP Policy Statement guidelines in Section 69.265(2)(i)(B). If a LIRA account is found to have an energy burden exceeding these guidelines, it is reviewed for LIHEAP and weatherization. Proposed 2017-2020 9 Plan at 21. The 2013 Popovich Evaluation3, an independent third-party review, found that less than two percent of LIRA participants in 2011 had energy burden levels out of tolerance of Commission guidelines. 2013 Popovich Evaluation at 28.

We support NFG’s efforts to monitor and address instances when LIRA accounts exceed the maximum energy burden levels in the CAP Policy statement. However, we would like the Company to provide additional information on the energy burden levels and payment behavior of LIRA participants.

Proposed Resolution: In its response to this Tentative Order, NFG should provide the following information for LIRA participants in 2014, 2015, and 2016:

 Average energy burden levels broken out by FPIG level (i.e., 0-50%, 51-100%, and 101-150%)  On-time and in-full payment rates  Amount of average and total in-program arrears4 broken out by FPIG level (i.e., 0- 50%, 51-100%, and 101-150%) b. Use of LIHEAP in Determining the LIRA Discount Rate – Clarification Requested

As described above, NFG’s discounts for a LIRA customer isdetermined by totaling the customer’s energy burden level and the amount of anticipated LIHEAP grant (based on income, household size, and county of residence) and subtracting this total amount from the household’s anticipated annual usage to determine the discount needed.

3 The 2013 Popovich Evaluation can be viewed on the Commission website at: http://www.puc.pa.gov/general/pdf/USP_Evaluation-NFG.pdf.

4 In-program arrears consist of debt accrued while enrolled in LIRA and should not include deferred pre-program arrears.

10 The discount is designed to ensure that customers pay their energy burden level over the course of one year.

In NFG’s 2014-2016 USECP proceeding, the Commission questioned the use of a seasonal LIHEAP grant when calculating the LIRA discount. We noted that counting LIHEAP as part of the customer’s anticipated payment appears disadvantageous to the lowest income customers because larger anticipated LIHEAP payments result in smaller monthly discounts. See NFG 2014-2016 USECP Final Order, at 11-16. As illustrated on the NFG discount chart on page 10 in the Proposed Plan, a household with an annual income between $0 to $1,000 – regardless of household size – receives a monthly discount of 10%, while a household earning $4,000 to $5,000 annually could receive a monthly discount as high as 40%. Proposed 2017-2020 Plan at 10.

NFG has explained that a customer’s LIRA budget bill is recalculated when the customer receives a LIHEAP grant. The Company applies a LIHEAP cash grant to the current LIRA balance and any remaining monies are applied to the budget bill calculation for the next 12 months. NFG maintains this procedure is consistent with DHS’ LIHEAP Vendor Agreement. Proposed 2017-2020 Plan at 12.

We continue to have concerns about NFG’s use of LIHEAP in its LIRA discount calculation. In essence, the LIHEAP grant is used to reduce the amount of a discount the LIRA participant could qualify for. Customers with lower incomes that qualify for larger LIHEAP grants receive smaller discounts in LIRA. Therefore, LIRA participants who do not apply for LIHEAP – or assign their grant to another utility – may pay more than the program’s targeted percent of income over the course of a year. These customers may find the LIRA program less affordable and could be more vulnerable to collections procedures. We need more information to determine the impact of this policy on LIRA participants.

11 Proposed Resolution: In its response to this Tentative Order, NFG should identify the number of full year LIRA participants in 2014, 2015, and 2016 and the percentage that assigned their LIHEAP grants to NFG during those years. Participant information should be broken out by FPIG level (i.e., 0-50%, 51-100%, and 101-150%). The Company should also identify how many of these customers (LIHEAP recipients vs. non-LIHEAP recipients) were placed into collections for not making full LIRA payments. c. Potential Violations of Federal Law and State LIHEAP Requirements – Clarification Requested

In NFG’s 2014-2016 USECP proceeding, DHS questioned whether the Company’s use of LIHEAP in its LIRA discount calculation is in compliance with Section 2605(b)(5) of the Low-Income Home Energy Assistance Act (42 U.S.C. § 8624(b)(5)), which states that the highest level of assistance must be provided to households with the lowest incomes and highest energy costs, taking into consideration household size.

When the LIHEAP grant is anticipated and used to determine the annual affordable bill, as NFG does, the customers with the highest energy needs in relation to income could be receiving the least amount of assistance from the LIRA. If NFG plans to use LIHEAP funds consistent with its submitted USECP, DPW may have to remove NFG as LIHEAP provider for failure to comply with federal law, so [DHS] does not risk loss of federal funding under LIHEAP.

DHS (DPW) Letter at 2.

NFG claimed the concerns raised by DHS were a result of a “misunderstanding of the LIRA program.” NFG 8/25/14 Reply Comments at 2. The Company explained that

12 it would “work with [DHS] to resolve any issues and maintain its vendor status.” NFG 8/25/14 Reply Comments at 2.

In the February 12, 2015 Order on Reconsideration, we declined to determine whether NFG’s use of LIHEAP in its LIRA discount calculation is consistent with the LIHEAP state and federal regulations:

While the Commission has the authority and discretion pursuant to Title 66 to set utility rates,5 the Commission recognizes that DHS is the Commonwealth agency vested with the responsibility to disburse federal LIHEAP funds and grant utility vendor status. ……. Absent DHS challenging a utility’s application of LIHEAP funds or revoking the utility’s vendor status, we will not presume that a proposed or final plan is inconsistent with DHS policy, especially when a new plan is consistent with a prior plan that has been in place for at least the previous triennial period while the utility was on the DHS vendor list. Further, neither DHS nor HHS have asked to be parties in NFG’s USECP proceeding.

Order on Reconsideration at 19- 20.

Proposed Resolution: While we recognize that DHS has the authority to administer LIHEAP and evaluate whether an energy vendor’s application of a LIHEAP grant is consistent with state and federal LIHEAP requirements, we question whether this issue has been resolved. In its response to this Tentative Order, NFG should update the Commission on its discussions with DHS since the conclusion of the 2014-2016 USECP

5 See PCOC (ACTION) v. PA PUC, Columbia Gas and OCA, Intervenors, No. 635 C.D. 2012 (Pa. Cmwlth. Ct., 2014).

13 proceedings. Specifically, NFG should clarify whether DHS has indicated that the Company’s use of LIHEAP in the LIRA calculation comports with the Company’s commitments pursuant to the DHS vendor agreement. d. Transfer of Service – Clarification Requested

When one or more of the ratepayers in a LIRA household6 move to a new address in the NFG service territory, the Company requires the relocating household to submit a new application to re-enroll in the program. If there is an overdue balance remaining from a previous account, that balance will be included on the first LIRA bill at the new address. The ratepayer(s) will continue with the arrearage forgiveness component of the program for any of the maximum 36 months remaining. Proposed 2017-2020 Plan at 11.

We have concerns and questions about NFG’s transfer of service policy for LIRA participants. It is not clear whether LIRA households who relocate are removed from the program until a new application is approved at the new residence. If so, these households may receive unaffordable bills as they wait for NFG to re-determine their program eligibility. While relocation to a new residence may require NFG to re-calculate a customer’s LIRA discount, it is not clear why it also requires a household to re-verify income prior to its next recertification date. Further, requiring a participating household to submit a new LIRA application seems unnecessary. The Commission supports maintaining CAP enrollment when a participating household relocates. We have previously directed PPL to adopt such a policy. See PPL 2014-2016 Final Order, Docket No. M-2013-2367021 (September 11, 2014), at 24-28.

It is also unclear how this policy applies to adults who move out of a LIRA household and seek to establish program eligibility at a new residence. If there is an

6 As noted above, all non-dependent adult household members must become ratepayers to qualify for LIRA. Proposed 2017-2019 Plan at 8.

14 overdue balance in the original LIRA household account, is some of this amount transferred to the new LIRA account? And what restrictions, if any, are placed on arrearage forgiveness for the new account?

Proposed Resolution: In its response to this Tentative Order, we direct NFG to explain whether the Company will revise its policy and allow LIRA households to remain in the program when they relocate from one residence to another within NFG’s service territory. NFG should provide specific information on the increase in program costs, if any, related to this proposed revision. The Company should also address our questions related to adults who move out of a LIRA household and establish program eligibility at a new residence. e. Time Restrictions to Pre-program Arrearage Forgiveness – Change Requested

Pre-program arrearage forgiveness for NFG LIRA participants is time-limited. Customers in the LIRA program may receive a maximum of 36 months to achieve full forgiveness of their pre-program arrears. Prior to NFG’s 2014-2016 USECP, the Company limited a participant’s ability to receive arrearage forgiveness to 24 months, unless there were special circumstances (as determined by NFG) to qualify for an additional 12 months. In the 2014-2016 USECP proceeding, the Commission directed NFG to allow all LIRA customers to receive 36 months to achieve full arrearage forgiveness. See NFG 2014-2016 Final Order at 21-23. The Company’s Proposed 2017- 2020 USECP acknowledges that customers will receive 1/24th arrearage forgiveness for each full and on-time monthly LIRA payment for 36 months. Proposed 2017-2020 Plan at 11. At the end of this period, LIRA customers presumably become immediately responsible for paying the full balance of any remaining pre-program arrears in addition to their monthly LIRA payments.

15 The Commission questions NFG’s policy to limit arrearage forgiveness to 36 months. We are not aware of any other gas or electric CAPs that place time restrictions on the opportunity for participants to receive forgiveness on a deferred pre- program balance. As part of the CAP design, arrearage forgiveness acts to both reduce customer debt over time and reward healthy payment habits. Allowing ongoing arrearage forgiveness would encourage LIRA participants to continue making full payments and avoid requiring low-income customers to pay the balance of a pre-program arrearage they most likely cannot afford.

Proposed Resolution: In its response to this Tentative Order, NFG should identify how many LIRA customers had pre-program arrears remaining after 36 months in 2015, 2016, and 2017, the average arrears for these customers, and how many had service terminated for non-payment after pre-program arrears were placed back onto the LIRA account.

NFG should also explain whether the Company would revise its policy and eliminate its time restrictions for LIRA customers to receive monthly arrearage forgiveness and continue to reduce pre-program arrears by 1/24th for each on-time and in- full LIRA payment until the pre-program arrearage balance is completely forgiven. Please provide specific comments on the program costs, if any, related to this proposed revision. f. Forms of Identification Accepted at Application – Clarification Requested

NFG’s Proposed 2017-2020 Plan states that a LIRA applicant “must provide the name and Social Security numbers or other verifiable form of identification of all persons residing with the applicant.” Plan at 9. The Company does not identify what other types of identification it will accept in lieu of a household member’s Social Security number.

16 Proposed Resolution: In its response to this Tentative Order, NFG should explain what documentation it accepts as proof of identity if the household is unable or unwilling to provide Social Security numbers for any of its household members. g. Re-enrollment Requirements for Former CRP Participants – Clarification Requested

The Proposed 2017-2020 Plan does not describe what requirements or restrictions are placed on customers seeking to re-enroll in LIRA if they are voluntarily or involuntarily removed from the program. For example, some energy utilities require customers to pay all CAP and non-CAP arrears (with the exception of the originally deferred balance) prior to re-enrollment.7 Other utilities require customers to pay any CAP arrears and the CAP amount for the months spent out of the program.8 Some utilities also require customers to “stay out” of its CAP for a year if they leave the program voluntarily when it remains the most affordable payment option.9

Proposed Resolution: In its response to this Tentative Order, NFG should explain what amounts it will require a customer to pay prior to re-enroll into LIRA and whether the company has any stay-out provisions for customers who leave the program voluntarily or involuntarily.

7 See West Penn Power (WPP), Metropolitan Edison Company (Met-Ed), Pennsylvania Electric Company (Penelec), and Pennsylvania Power Company (Penn Power) 2015-2018 USECPs at 15. Docket Nos. M-2014-2407728, M-2014-2407729, M-2014-2407730, and M2014-2407731, respectively.

8 See Columbia Gas 2015-2018 USECP at 23, Docket No. M-2014-2424462.

9 See PGW 2014-2016 USECP at 13-14, Docket No. M-2013-2366301.

17 h. Termination Notices – Clarification Requested

NFG explains that it initiates the collection process when a LIRA customer fails to pay one monthly LIRA bill. These customers are sent a termination notice with the amount required to pay to avoid termination of service. Proposed 2017-2020 Plan at 12- 13. NFG does not explain whether this termination amount is based only on missed CAP bills or other charges.

Proposed Resolution: In its response to this Tentative Order, NFG should clarify how it determines the required payment amount on a LIRA customer’s termination notice. The Company should also identify how it determines the amount requested for reconnection of service for disconnected LIRA customers. i. Re-verifying Customer Data – Clarification Requested

NFG explains that LIRA participants who are due for re-verification are contacted by telephone to obtain verbal confirmation of their household income and composition. If the customer cannot be contacted by phone, a letter is sent requesting the customer to call NFG. In instances where personal contact is unsuccessful, or the data is considered “questionable,” the Company will send the customer a re-verification packet to complete and return. Proposed 2017-2020 Plan at 14. The Plan does not identify in what situations a LIRA customer’s data is considered “questionable” or how often LIRA participants are required to document income eligibility (i.e., Is verbal confirmation of household income accepted at every re-verification? Or are participants only allowed to re-verify verbally a certain number of times before documentation is required?).

Proposed Resolution: In its response to this Tentative Order, NFG should explain in what situations it would consider a LIRA customer’s data “questionable” and require the customer to complete and return a re-verification packet. The Company should also

18 specify whether or when other LIRA participants are also mandated to provide income documentation at re-verification. j. LIRA Bills

In NFG’s 2014-2016 USECP proceeding, PULP raised concerns about the clarity of LIRA bills. NFG 2014-2016 USECP, PULP Comments at 7-8. NFG noted that it had revised its LIRA bill in consultation with BCS, but it was willing to engage in discussions with PULP about making billing enhancements. NFG 2014-2016 USECP, NFG Reply Comments at 10-11. In the Final Order, we encouraged NFG “to work with PULP and OCA to determine if further enhancements to its current billing formats could be made to improve the clarity of the bill for its customers without a significant and costly overhaul of its current billing system.” NFG 2014-2016 USECP Final Order at 17-18. We are not aware whether NFG has met with PULP and OCA to discuss the LIRA bill format since the conclusion of that proceeding.

Proposed Resolution: In its response to this Tentative Order, NFG should explain whether it has engaged in discussions with stakeholders regarding its LIRA bill format. If so, please summarize the results of this discussion and any changes made to the LIRA bill. The Company should also provide samples of current LIRA bills at the various discount levels as an attachment to its response.

2. LIURP

NFG’s LIURP is designed to assist low-income customers in reducing their energy usage and bills. NFG’s eligibility criteria for the LIURP program include income below 150% of FPIG, residency at the premises for at least one year with 12 months of continuous service, annual consumption in excess of 130 MCF, and substantial arrearage. Up to 20% of its annual budget may be spent on households with income in the 151%-

19 200% FPIG range. Customers using less than 130 MCF may still be eligible for a LIURP program providing furnace or water heater repair or replacement.

Services provided through NFG’s LIURP include home energy audits, energy education, heating system inspections, air sealing, and other weatherization measures, as needed. a. Eligibility Criteria - Change Requested

NFG listed “substantial arrearage” in the criteria for its LIURP program. Proposed 2017-2020 Plan at 27. We addressed this point in NFG’s 20142016 USECP Final Order but did not direct NFG to edit that language in its USECP. 2014-2016 Final Order at 28.

Section 58.10(a)(1) is clear that the primary eligibility criterion for LIURP is “largest usage.” Only when the remaining customers have equal usage should the secondary criterion regarding “greatest arrearage,” listed in Section 58.10(a)(2), be applied. NFG has identified 16,411 customers who meet the usage threshold and are potentially eligible for LIURP but completes an average of less than 200 jobs per year. Proposed 2017-2020 Plan at 28, 37. At this pace, it is highly unlikely that NFG would need to apply a secondary screening criterion.

Proposed Resolution: We suggest that NFG modify or remove the language regarding “substantial arrearage” from its list of eligibility criteria. In particular, the word “substantial” is never mentioned in the applicable LIURP regulations, and its use may cause confusion for potential customers and/or inadvertently disqualify an otherwise eligible customer. Alternately, NFG could add language regarding the “arrearages” to clarify that it would only be used as a secondary screening criterion.

20 b. Special Needs Customers – Clarification Requested

NFG states that 20% of the LIURP budget could be used for “customers” whose incomes fall between 151%-200% of the FPIG. Proposed 2017-2020 Plan at 27. We addressed this point in the 2014-2016 USECP proceeding but did not direct NFG to edit the language in its Plan. We want to ensure that anyone reading the 2017-2020 USECP understands that it is “special needs” customers whose income falls within the 151%- 200% range that may be considered for LIURP eligibility.

Proposed Resolution: We consider that the term “special needs” applies to seniors, customers with medical needs or disabilities, and/or customers with young children in the home. We suggest NFG add this, or similar, clarifying language to the LIURP eligibility section of the 2017-2020 USECP. c. Health and Safety – Change Requested

Based upon BCS’ recent review of annual LIURP reporting by the energy utilities to the Commission, we note that an increasing number of Pennsylvania households are being disqualified from LIURP based on health and/or safety conditions in a residence (e.g., mold, moisture, or structural issues). The Commission has previously encouraged the development of an allowance for the installation of health and safety measures, such as smoke detectors and carbon monoxide alarms, and for minor repairs that could be done to potentially remedy disqualification. The Commission has also requested that utilities identify their recommended parameters for performing incidental repairs (i.e., repairs that would allow LIURP measures to function properly or more efficiently).10

10 See, e.g., PECO 2016-2018 USECP Tentative Order, Docket No. M-2015-2507139 (Order entered February 25, 2016), at 21-22.

21 While LIURP is not designed to support rehabilitation or major repairs, there are often situations that would justify small repairs, as permitted in Section 58.12 of the LIURP regulations, in order to perform deeper or more comprehensive weatherization treatments. In addition, the Commission has previously directed utilities without a health and safety protocol to develop such guidelines that include installation of smoke and/or carbon monoxide detectors and combustion safety testing on all gas appliances, if not already part of the LIURP auditing process.

Proposed Resolution: In its response to this Tentative Order, we request that NFG clarify its incidental repair protocols and indicate whether it has developed any health and safety guidelines and/or an allowance or threshold to give contractors some flexibility when encountering situations involving household disqualifications.

3. CARES

NFG’s CARES program provides assistance to low-income, payment-troubled, and special needs customers who are experiencing short-term financial hardships. When appropriate, the customer is temporarily protected from service termination while Company representatives try to find financial assistance or establish customer payment arrangements. CARES also provides case management to customers with physical or mental disabilities and households experiencing a family crisis (e.g., loss of income, divorce). Company representatives also make referrals to other social service agencies and provide information regarding available programs. The maximum time a customer should remain in the CARES program is four months, but NFG can make exceptions if there are unusual circumstances. Low-income payment troubled customers who are experiencing long-term financial hardships are not eligible for CARES, but can qualify for LIRA. NFG’s CARES program appears to provide the outreach and casework approach necessary to help customers secure energy assistance funds and other needed services as described in Section 62.2 and 62.4.

22 Proposed Resolution: We find that NFG’s CARES program continues to comply with Commission regulations. See 52 Pa. Code § 62.4(b)(1). Accordingly, we are proposing no changes to this aspect of NFG’s Proposed 2017-2020 Plan.

4. NFN ( i.e., NFG’s Hardship Fund)

NFN provides financial assistance to individuals who need help in meeting basic energy needs. The Fund provides assistance for paying overdue bills, purchasing any type of heating fuel, repairing or replacing heating equipment, and preventing the disconnection of utility service. The individual must be a resident in the NFG service territory, but does not have to be an NFG customer. NFG matches public and employee donations to NFN up to $100,000 per year. The Company reports available grant monies have exceeded $100,000 per year and it expects this trend to continue through 2020.

Applicants must be:  Age 55 and older; or  On a disabled, handicapped, or unemployment income; or  Able to demonstrate a certified medical emergency; and  Have made at least three “good” payments within the last 12 months and a fourth within the last 90 days.

Natural gas heating customers can receive grants of up to $400 while non-natural gas heating customers can receive up to $200. Grants are paid directly to the energy vendor.

NFN payment requirements – Clarification Requested

As described above, to qualify for an NFN grant, NFG requires eligible customers to have made three “good” payments within the last 12 months and a fourth within the

23 last 90 days. Proposed 2017-2020 Plan at 30. The Company does not explain how it qualifies a payment as “good” (e.g., a full or partial monthly payment). NFG also does not explain how a recipient who is not an NFG customer satisfies this requirement.

Proposed Resolution: In its response to this Tentative Order, NFG should explain what criteria it uses to determine whether a customer payment counts toward NFN eligibility.

C. Eligibility Criteria

NFG’s various programs have slightly different eligibility criteria as shown in Table 3 below. These criteria appear to be consistent with 52 Pa. Code § 69.265(4):

Table 3 Eligibility Criteria Program Income Criteria Other Criteria CAP (LIRA) . 150% FPIG or less . Must be a residential heating customer . Must be payment-troubled LIURP . 150% FPIG or less . Annual usage must exceed 130 (Note: 20% of the budget Mcf (customers with lower usage may be allocated to may qualify for furnace or water customers with incomes heater repair/replacement) of 151-200% FPIG) . Must be a resident at the property for at least one year and 12 months of continuous gas service . Must have a substantial arrearage CARES . No specific income . Must be payment-troubled criteria. Usually low . Special needs, elderly, people with income disabilities . Circumstances must be temporary, otherwise the customer is considered for the LIRA program

24 Hardship . No specific income . Must be at least 55 years old Fund (NFN) criteria . Must be on a disabled, handicapped, or unemployed income or have a medical emergency . Resident in NFG service territory, but not necessarily a customer. . Customer must have made 3 good payments within the past 12 months and a fourth one within the last 90 days

Proposed Resolution: We have addressed our concerns and requested changes regarding NFG’s LIURP eligibility requirements and Hardship Fund eligibility requirements elsewhere in this Order.

D. Projected Needs Assessments

52 Pa. Code § 62.4(b)(3) requires NFG to submit a needs assessment for each program component.

1. LIRA – Clarification Requested

Based on the number of LIHEAP grants the company receives and low-income customers enrolled in payment agreements, NFG estimates that 22,565 households in its service territory may be payment-troubled and have incomes below 150% of the FPIG. Based on historical averages, NFG anticipates that 45% (10,154) of this population may be enrolled in LIRA at any given time.

NFG utilizes only information from its own ratepayers to estimate the total number of customers who may qualify for LIRA. Most other utilities, however, gather

25 information from the U.S. Census Bureau to determine the total number of households below 150% of the FPIG in their service territories.

NFG did use 2012-2013 U.S. Census Bureau data in its LIURP needs assessment. That data show that 30.41% of customers in the counties within the NFG service territory have incomes at or below 150% of the FPIG. Proposed 2017-2020 Plan at 28. Based on the NFG customer population at the time of the filing of the Proposed 2017-2020 Plan (196,814), we estimate that approximately 59,851 (30.41%) could be low-income. This is significantly more than the 27,151 low-income customer population identified in the LIRA needs assessment. Proposed 2017-2020 Plan at 18. We have concerns NFG is underestimating the customer population that need LIRA outreach. We also question why NFG would use Census Bureau data for one program (i.e., LIURP) but not another program (i.e., LIRA/CAP).

We had previously addressed this issue in NFG’s 2014-2016 USECP proceeding. See NFG 2014-2016 USECP Final Order at 36-37. In that proceeding, NFG agreed to examine whether using Census Bureau data to estimate the number of households potentially eligible for LIRA and its other Universal Service programs would help to increase enrollments. NFG Comments to the 2014-2016 USECP Tentative Order at 15.

Proposed Resolution: In its response to this Tentative Order, NFG should explain why it has determined that its system information is more accurate in determining its low- income population than the U.S. Census Bureau data. NFG should also explain why it uses Census Bureau data only for LIURP.

2. LIURP – Clarification Requested

Based on the 2012-2013 U.S. Census data, NFG estimates there are approximately 86,376 households who are income-eligible for LIURP (i.e., household income at or

26 below 200% of the FPIG). Of these households, Company data suggests approximately 16,411 have usage equal to or greater than 130 MCF. Proposed 2017-2020 Plan at 28.

We note that NFG has not used the latest Census data (2015) that was provided to the companies for the Universal Service reporting but acknowledge it was not available at the time the Proposed 2017-2020 Plan was submitted to the Commission.

Further, Section 62.4(b)(3) requires utilities to provide needs assessments that identify, inter alia, “the number of customers who still need LIURP services and the cost to serve that number.” NFG has not identified the cost of serving all LIURP-eligible customers.

Proposed Resolution: In its response to this Tentative Order, NFG should update the LIURP needs assessment using the latest Census data and identify the estimated total cost of serving all LIURP-eligible households.

3. CARES and NFN

NFG’s CARES and NFN programs target those payment troubled customers that are low-income, elderly, or special needs. NFN also serves households receiving unemployment income. According to U.S. Census data, approximately 59,851 NFG households have been identified as having incomes of less than 150% of the FPIG, 60,142 households have members age 55 and older, 15,928 households have members with a disability, and 9,855 households are receiving unemployment benefits. Some households may belong to more than one of these categories. Proposed 2017-2020 Plan at 28, 31-32. We are satisfied that NFG has identified potentially eligible households for these programs.

27 Proposed Resolution: We see no need for changes to this aspect of NFG’s Proposed 2017-2020 Plan.

E. Projected Enrollment Levels

NFG’s Proposed 2017-2020 Plan projected enrollment levels are as shown in Table 4 below.

Table 4 Projected Enrollment Levels Program 2017 2018 2019 2020 CAP (LIRA) 9,777 9,777 9,777 9,7777 LIURP* 189 189 189 189 CARES 50 50 50 50 Hardship Fund (NFN) 417 417 417 417 * The LIURP enrollment levels do not reflect any of the jobs performed under the emergency furnace and water heater repair/replacement program.

LIRA Enrollment Levels – Clarification Requested

NFG reports LIRA enrollment has been consistent over the past three years with an average of 9,777 customers annually. It expects this enrollment trend to continue through 2020. Proposed 2017-2020 Plan at 20. However, the Company also reports an anticipated increase in LIRA participation by 111 customers per month (1,332 customers per year). Proposed 2017-2020 Plan at 5, 19. This expected increase in enrollment is due to a 40% increase in the price of natural gas and additional targeted LIRA outreach. Proposed 2017-2020 Plan at 6. These statements are contradictory, and it is not clear how much growth in participation, if any, NFG anticipates for LIRA through 2020.

28 Proposed Resolution: In its response to this Tentative Order, NFG should clarify whether it anticipates an increase in annual LIRA enrollments through 2020. The Company should identify the projected LIRA enrollment levels for 2017, 2018, 2019, and 2020.

F. Program Budgets

Table 5 below shows the proposed budget levels for 2017-2020. Table 5 Proposed 2017-2070 Plan Projected Budgets and Spending Universal Service Component 2017 2018 2019 2020 CAP (LIRA) $1,555,212 $1,657,457 $1,768,767 $1,869,559 LIURP $1,300,000 $1,300,000 $1,300,000 $1,300,000 CARES $4,125 $4,125 $4,125 $4,125 Hardship Fund (NFN)* $0 $0 $0 $0 Total $2,859,337 $2,961,582 $3,072,892 $3,173,684 Projected Number of Residential 199,194 199,327 199,460 199,593 Customers** Average Monthly Spending per $1.20 $1.24 $1.28 $1.33 Residential Customer *Hardship Fund donations by the company are not recovered in base rates; therefore, they are not included in the Universal Service total costs or the “Spending per Residential Customer.” **Based on an average of 199,061 residential customers in 2015 and an annual 0.07% increase in NFG residential customers from 2012 through 2015. 2012 Report on Universal Service Programs & Collections Performance at 7 and 2013-2015 Reports on Universal Service Programs & Collections Performance at 6.

29 a. LIURP Budget – Clarification Requested

Since the 2014 Program Year, NFG has underspent its annual LIURP budgets. While NFG is rolling the unspent funds from one program year into the next program year, we are concerned and would like to know what steps NFG is taking to address the issue and to ensure that the trend does not continue.

Proposed Resolution: In its response to this Tentative Order, the Company should explain what steps it is taking to address the underspending of its LIURP budget.

G. Use of Community-Based Organizations (CBOs)

The Competition Act directs the Commission to “encourage the use of [CBOs] that have the necessary technical and administrative experience to be the direct providers of services or programs which reduce energy consumption or otherwise assist low income retail gas customers to afford natural gas service.” 66 Pa. C.S. § 2203(8). NFG’s LIRA program deals primarily with the Department of Human Services and the Social Security Administration. The Company contracts with seven CBOs to perform LIURP jobs and 11 organizations for its Neighbor for Neighbor program. Finally, NFG utilizes approximately 54 community agencies throughout the Company’s service territory as referrals for its CARES program.

Proposed Resolution: We tentatively find that NFG’s use of CBOs complies with the intent of the Competition Act.

H. Organizational Structure – Clarification Requested

The Proposed 2017-2020 Plan identifies 13 management staff, 67 supplemental staff, and 5 part-time staff assigned to NFG’s universal service programs. Proposed

30 2017-2020 Plan at 39. However, the Plan does not explain which programs these staff directly work in and what responsibilities they have. Three of the Management staff are identified as being part of the “Barcelona Project,” which is not an aspect of NFG’s universal service programs that we are aware of.

Section 62.4(7) of Commission regulations require utilities to provide information on the organizational structure of staff responsible for universal service programs in their triennial USECPs and Section 62.3(4) directs the Commission to establish whether universal service programs are operated in a cost effective and efficient manner. Staffing levels and other universal service information11 are reviewed during the USECP approval process to determine, inter alia, whether the utility administers these programs efficiently.

Proposed Resolution: In its response to this Tentative Order, NFG should identify the separate organizational structures, staffing levels, and job titles for each of its universal service programs.

II. CONCLUSION

Except as noted above, the Commission tentatively finds that NFG’s Proposed 2017-2020 Plan, in large measure, appears to comply with the universal service requirements of the Competition Act at 66 Pa. C.S. §§ 2203(7), 2202, and 2203(8), the reporting requirements at 52 Pa. Code § 62.4, the CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267, and the LIURP regulations at 52 Pa. Code §§ 58.1-58.18. This Tentative Order sets forth the aspects that NFG will need to address prior to our approval

11 As part of the USECP review process, we examine complaints from utility CAP customers received by BCS during the past calendar year. These complaints sometimes reveal staffing deficiencies in universal service programs.

31 of its Proposed 2017-2020 Plan. This Tentative Order also calls for comments from stakeholders.

In particular, we direct NFG to address the following points in a supplemental filing consistent with the discussion and directions herein. To the extent that NFG has responsive proposals for additional relief, those proposals, along with timelines and cost estimates, should be described in its response to afford other parties the opportunity to comment and reply.

1. Provide information on LIRA energy burden levels, payment rates, and in- program arrears.

2. Identify the percentage of full-year LIRA participants that assigned their LIHEAP grants to NFG and the number of LIHEAP and non-LIHEAP recipients placed into collections.

3. Provide an update on NFG’s discussions with DHS concerning whether the Company’s use of LIHEAP in the LIRA calculation comports with the DHS vendor agreement.

4. Explain whether NFG will allow LIRA households to remain in the program when they relocate from one residence to another within NFG’s service territory and clarify the Company’s eligibility policy regarding adults who leave a LIRA household and establish service at a new location.

5. Provide in-program arrearage and collections information for LIRA customers who had pre-program arrears remaining after 36 months in 2015, 2016, and 2017.

32 6. Explain whether NFG will revise its policy and eliminate its time restrictions for monthly arrearage forgiveness.

7. Explain what documentation NFG accepts as proof of identity if the household is unable or unwilling to provide Social Security numbers for any of its household members.

8. Explain what amounts NFG requires a customer to pay prior to re-enrollment into LIRA and whether the company has any stay-out provisions for customers who leave the program voluntarily or involuntarily.

9. Clarify how NFG determines the required payment amount for a LIRA customer to stop a termination or re-establish service.

10. Clarify the LIRA re-verification policy and explain in what situations NFG considers a LIRA customer’s data “questionable.”

11. Explain whether NFG has engaged in discussions with stakeholders regarding its LIRA bill format and provide samples of current LIRA bills at the various discount levels.

12. Explain whether NFG will modify or remove the language regarding “substantial arrearage” from its LIURP eligibility criteria.

13. Clarify the term “special needs” in regards to LIURP eligibility for customers whose incomes fall between 151%-200% of the FPIG.

14. Explain what steps NFG is taking to address the annual underspending of its LIURP budget.

33 15. Clarify NFG’s incidental repair protocols for LIURP and whether it has developed any health and safety guidelines, allowance, or threshold to give contractors flexibility.

16. Explain what criteria NFG uses to determine whether a customer payment counts toward NFN eligibility.

17. Explain why it has determined that its system information is more accurate in determining its low-income population than the U.S. Census Bureau data, except for LIURP.

18. Provide a revised LIURP needs assessment and identify the estimated cost of serving all LIURP-eligible households.

19. Clarify whether NFG anticipates an increase in annual LIRA enrollments and provide projected LIRA enrollment levels through 2020.

20. Identify the separate organizational structures, staffing levels, and job titles for each of NFG’s universal service programs.

NFG’s supplemental information must be filed and served on or before twenty (20) days after the entry of this Tentative Order. Comments are due twenty (20) days after NFG’s supplemental information filing deadline, and reply comments are due fifteen (15) days thereafter. If the comments and reply comments raise relevant material factual issues, we may refer this matter, in whole or in part, to the OALJ for hearing and decision; THEREFORE,

34 IT IS ORDERED:

1. That approval of the Universal Service and Energy Conservation Plan for 2017-2020 as filed by National Fuel Gas Distribution Corporation on October 28, 2016, is withheld pending review of requested information and stakeholder comments, as set forth in this Tentative Order.

2. That a copy of this Tentative Order be served on the National Fuel Gas Distribution Corporation, the Department of Human Services, the Office of the Consumer Advocate, the Office of Small Business Advocate, the Bureau of Investigation and Enforcement, and the Pennsylvania Utility Law Project. A copy shall also be served on the parties to Docket No. M-2013-2366232.

3. That National Fuel Gas Distribution Corporation shall file and serve the supplemental information requested herein within twenty (20) days of the entry of this order:

4. That comments to this Tentative Order shall be filed within twenty (20) days after the filing deadline for NFG’s supplemental information. Reply comments shall be filed within fifteen (15) days thereafter.

5. That one original signed copy of comments and reply comments shall be filed with the Commission’s Secretary at: Pennsylvania Public Utility Commission P.O. Box 3265, Harrisburg, PA 17105-3265. Comments may also be filed electronically through the Commission’s e-filing system, in which case no paper copy needs to be filed with the Secretary provided that the comments are less than 250 pages.

6. That an electronic copy, in WORD® or WORD®-compatible format, of all filed submissions, comments, and reply comments be provided to Joseph Magee, Bureau 35 of Consumer Services, [email protected], Sarah Dewey, Bureau of Consumer Services, [email protected], and to Louise Fink Smith, Law Bureau, [email protected].

7. That the contact person for this Tentative Order is Joseph Magee, Bureau of Consumer Services, 717-772-1204, [email protected].

BY THE COMMISSION,

Rosemary Chiavetta Secretary

(SEAL) ORDER ADOPTED: August 3, 2017 ORDER ENTERED: August 3, 2017

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