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PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17105-3265

Public Meeting held May 22, 2014

Commissioners Present: Robert F. Powelson, Chairman John F. Coleman, Jr., Vice Chairman James H. Cawley Pamela A. Witmer Gladys M. Brown

National Fuel Gas Distribution Corporation’s Docket No. M-2013-2366232 Universal Service and Energy Conservation Plan for 20142016 Submitted in Compliance with 52 Pa. Code § 62.4

FINAL ORDER

BY THE COMMISSION

On January 9, 2014, the Commission entered a Tentative Order, tentatively approving National Fuel Gas Distribution Corporation’s (NFG or Company) proposed Universal Service and Energy Conservation Plan (UESCP) for 2014-2016 (Proposed 2014-2016 Plan) in compliance with 52 Pa. Code § 62.4. The Office of Consumer Advocate (OCA), the Pennsylvania Utility Law Project (PULP), and NFG filed written comments, and OCA and NFG filed reply comments. We have considered the comments filed by the parties and direct that NFG submit a revised 2014-2016 Plan, as a compliance filing, consistent with this Order, for the reasons articulated herein.

I. BACKGROUND AND HISTORY

The Natural Gas Choice and Competition Act (Competition Act), effective July 1, 1999, opened the natural gas supply market to competition and established standards and procedures for restructuring Pennsylvania’s natural gas utility industry. It includes universal service provisions to ensure that natural gas service remains universally available to customers in the Commonwealth. 66 Pa.C.S. §§ 2201, et seq. The universal service provisions tie the affordability of natural 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 customer assistance programs (CAPs) and usage reduction (i.e., energy conservation) programs. 66 Pa. C.S. §§ 2202 and 2203. The Commonwealth must, at a minimum, continue the low income policies, practices, and services that were in existence as of July 1, 1999. 66 Pa. C.S. § 2203(7). Universal service programs are subject to Commission oversight, and the utilities must run their programs in a cost-effective manner. 66 Pa. C.S. § 2203(8). The Commission must ensure that universal service is appropriately funded and available in each natural gas distribution territory. 66 Pa. C.S. § 2203(8).

To help meet these requirements, the Commission promulgated the Universal Service and Energy Conservation Reporting Requirements regulations (Reporting Requirements). 52 Pa. Code §§ 62.1-62.8. A natural gas distribution company (NGDC) serving more than 100,000 residential accounts must submit an updated universal service and energy conservation plan every three years to the Commission for approval. 52 Pa. Code § 62.4. Further, the Commission adopted its CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267. Although the Competition Act does not define “affordability,” the Commission’s Policy Statement provides guidance on affordable payments. 52 Pa. Code §§ 69.261-69.267. The Commission balances the interests of customers who benefit from the programs with the interests of the customers who pay for the 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.

2 NFG’s 2011-2013 Plan was approved by the Commission at Docket No. M-2010- 2192210, by order entered on May 9, 2011.

At the end of 2012, NFG reported to the Commission’s Bureau of Consumer Services (BCS) that it had approximately 198,663 residential gas customers. NFG also reported that the number of residential customers enrolled in its CAP program increased from 9,816 to 9,903 between September 30, 2013 and December 31, 2013.

A six-year evaluation of NFG’s universal service and energy conservation efforts was completed on March 1, 2013, by Melanie Popovich1 (2013 Popovich Evaluation),

In compliance with Commission regulations, NFG, as an NGDC, submitted its Proposed 2014-2016 Plan on May 28, 2013, and served OCA, the Office of Small Business Advocate (OSBA) and the Commission’s Bureau of Investigation and Enforcement (BIE).

On January 9, 2014, the Commission entered a Tentative Order, tentatively approving NFG’s Proposed Plan for 2014-2016 and requesting comments on the Proposed Plan. OCA, PULP and NFG individually filed Comments on February 10, 2014. OCA and NFG individually filed Reply Comments on February 20, 2014.

On April 8, 2014, BCS filed a Request for Additional Information regarding discrepancies found in the Low Income Usage Reduction Program (LIURP) needs assessment in NFG’s Proposed 2014-2016 Plan. On April 16, 2014, NFG filed and served Additional Comments on the BCS Request for Additional Information.

II. DISCUSSION

As detailed in the following paragraphs, NFG’s Proposed Plan for 2014-2016 substantially complies with Title 66, Commission regulations, and Commission policy

1 Melanie Popovich is a third party evaluator who conducted an impact evaluation of NFG’s Universal Service programs. 52 Pa. Code § 62.6 (a-c) requires all major NGDCs to have an independent evaluation of its Universal Service programs every six years.

3 statements. In particular, the Plan appears to contain all of the components cited in the statutory definition of universal service. 66 Pa. C.S. § 2202. The Plan 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). Finally, the Plan appears to meet the submission and content requirements of the LIURP regulations at 52 Pa. Code §§ 58.1-58.18, the Universal Service Reporting Requirements at 52 Pa. Code §§ 62.1-62.8, and most of the requirements of the CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267.

III. Contents of NFG’s Proposed 2014-2016 Plan

A. Requirements

The Reporting Requirements at 52 Pa. Code §62.4(b) require utilities to include the following information for each component of their universal service plans:

. Program description;

. Eligibility criteria;

. Projected needs assessment;

. Projected enrollment levels;

. Program budget;

. Plans to use community-based organizations;

. Organizational structures;

. Explanation of any differences between the large NGDC’s approved plan and the implementation of that plan;

. Outreach and intake efforts;

4 . Explanation of steps used to identify low-income customers with arrears and to enroll them in an appropriate program; and

. Explanation of the integration of the various universal service programs.

The following sections provide a summary of the information provided by NFG regarding its Proposed 2014-2016 Plan, including an explanation of changes from the prior Plan.

B. Differences between the Proposed 2014-2016 Plan and the 2011-2013 Plan

NFG has proposed only two changes from its prior Plan for 2011-2013. Both of these changes impact the company’s Hardship Fund entitled Neighbor for Neighbor Heat Fund (NFN). NFG reports NFN has been changed in the following ways:

 Eligibility criteria have been expanded to include persons currently receiving unemployment benefits.

 The maximum grant has been increased to $400 for natural gas heating customers and $200 for non-natural gas heating customers.

Additionally, in its non-docketed response to the 2013 Popovich Evaluation, NFG agreed to implement further changes but has not specifically addressed them in the Proposed 20142016 Plan:

 Track CAP participation trends.

 Conduct needs assessment annually.

 Increase outreach efforts.

 Increase shareholder funds to match customer contributions for the Company’s Hardship Fund.

5 The Tentative Order directed NFG to address its implementation of the Popovich recommendations in its Proposed 2014-2016 Plan.

1. Comments: NFG reported implementing the following changes as a result of the 2013 Popovich Evaluation:

a) Participation trends and enhancing outreach efforts for NFG’s Low-Income Rate Assistance (LIRA) program – NFG’s LIRA is a customer assistance program pursuant to the Commission’s CAP Policy Statement. In response to a 3% decline in NFG’s LIRA, Popovich recommended that NFG track LIRA participation trends and improve outreach (2013 Popovich Evaluation, p. 17). NFG reports that it has been monitoring LIRA participation and enhancing outreach through its automated phone system, Customer Insight. Customer Insight “automatically identifies [LIRA] eligible customers for the customer service representatives as they follow the call flow. Through this process, LIRA eligible customers will be made aware of the program and its benefits” (NFG Comments, p. 4). NFG will also begin tracking pre-LIRA and post-LIRA payment histories when its new computer information system is implemented in July 2015 (NFG Comments, p. 4).

b) Conduct needs assessment annually and increase outreach – Popovich recommended that NFG conduct an annual needs assessment to track changes in the estimated and actual number of customers eligible for LIRA and adjust outreach activities accordingly (2013 Popovich Evaluation, p. 15). NFG reports that the Company updates its LIRA needs assessment on an annual basis and has enhanced its outreach efforts through the Customer Insight automated phone system (NFG Comments, p. 4).

c) Shareholder fund increase for Neighbor for Neighbor Heat Fund – The 2013 Popovich evaluation “noted that customer contributions to NFN out-paced shareholder contributions in Pennsylvania by a combined $28,296 from 2009-2011” (NFG Comments, p. 5). Popovich recommended that NFG “[i]ncrease shareholder funds to match the annual customer contributions amount during those years where contributions

6 exceed shareholder dollars” (2013 Popovich Evaluation, p. 15). NFG reports that it has taken this recommendation under advisement and will evaluate whether a shareholder increase is needed (NFG Comments, p. 5). The Company notes that the Proposed 2014- 2016 Plan expands eligibility for NFN to include low-income customers receiving unemployment benefits and increased the maximum grant to $200 for non-natural gas customers and $400 for natural gas customers (NFG Comments, p. 3).

2. Reply Comments: OCA supports NFG’s proposed increase to NFN grant amounts. OCA proposes that the Company also adopt the 2013 Popovich recommendation to match customer contributions with shareholder funds dollar for dollar, without a limit (OCA Reply Comments, p. 4). NFG reports that the actual amount of shareholder contributions for NFN are $67,000, which is more than double the $33,333 figure reported in the 2013 Popovich Report (NFG Reply Comments, p. 15).

3. Resolution: We note that the NFG’s Proposed 2014-2016 Plan actually states that NFN “is funded by public donations [and that NFG] stockholders match every dollar up to $100,000 for use within [NFG’s] service territory” (Proposed 2014-2016 Plan, p. 30). We also note that the NFG shareholder contributions to the NFN program in 2011 and 20122 exceeded ratepayer contributions by $20,173 (the Commission’s 2012 Report on Universal Service Programs & Collections Performance, p. 43). Although the Commission does not have authority to specify the amount of shareholder funds utilities must contribute to hardship fund programs, we encourage NFG to continue matching or exceeding ratepayer contributions to NFN. The Commission also commends NFG for expanding NFN eligibility to include households receiving unemployment benefits and for increasing the maximum NFN grant to $200 for non-natural gas customers and $400 for natural gas customers.

2 October 1, 2011, to September 30, 2012

7 C. Program Descriptions

The NFG Plan contains four major components that help low income customers maintain utility service. The four major components are as follows: (1) LIRA, which provides discounted rates for low-income residential customers; (2) a LIURP that provides weatherization and usage reduction services to help low-income customers reduce their utility bills; (3) a Customer Assistance and Referral Evaluation Services (CARES) Program, which provides referral services for low-income, special needs customers; and (4) NFN, which provides grants to customers who have had their utility service terminated or are threatened with termination. With these four programs in place, NFG’s Proposed 2014-2016 Plan meets the requirements of the Competition Act.3

1. Customer Assistance Program (LIRA)

NFG’s LIRA program offers discounted rates to payment-troubled 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.

The primary features of NFG’s program include:

* Reduced monthly gas bills.

* Complete arrearage forgiveness over a period of 24 months.

* Protection against loss of natural gas service.

* Referrals to other community programs and services.

3 NFG’s Proposed 2014-2016 Plan contains an additional component, the energy conservation audit, which provides energy conservation services to participants in the LIRA and CARES programs. This additional component is consistent with an NGDC’s obligations relative to its low-income customers.

8 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, NFG reported to BCS that it does not remove customers from the LIRA program if their LIHEAP cash grant is not designated to NFG. a. LIRA Discount Calculation

As described in its Proposed 2014-2016 Plan, NFG calculates the amount of the LIRA rate discount to ensure that households pay only a targeted percentage of household income over the course of a year, “based on [Commission]-related guidelines” (Proposed 2014-2016 Plan, p. 18). As shown in Table 1, the income target 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% 150% 9.0%

Once the annual target income percentage 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, as provided by NFG by to BCS via email on November 18, 2013, is provided in Table 2.

9 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 Bill Target

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

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

4. Discount $232 / $899 = 25.81%

5. Round up to nearest 10% 30.00%

10 b. Analysis of NFG LIRA Discount Rate

As described above, NFG’s discount rate for LIRA customers is determined by totaling the customer’s calculated annual percentage payment and the amount of the 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 percentage. The discount is designed to ensure that customers only pay the targeted income percentage over the course of one year. We are concerned, however, that using the seasonal LIHEAP grant to reach this income target may be disadvantageous to the lowest income customers because larger anticipated LIHEAP payments result in smaller monthly discounts.

CAP programs are intended to have a low income customer receive and pay an affordable bill each month. NFG’s LIRA discount rate calculation determines the affordability of LIRA payments from an annual perspective. While we are not adverse to utilities looking at affordability on an annual basis, utilities must be mindful that the ultimate goal is affordable monthly payments.

As illustrated on the NFG discount chart (Proposed 2014-2016 Plan, p. 11), a household earning $0 to $1,000 annually – 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%. We are not aware of any other NGDC (or electric distribution company) utilizing this methodology for rate discounts.

In the Tentative Order, we expressed concerns that NFG’s LIRA discount rate appears to disadvantage some low income customers. First, NFG’s discount rates provide the smallest discounts to the lowest income households. Even though the smaller discount rate is anticipated to be offset by a large LIHEAP grant to be received in the future, we questioned whether this could lead to a situation where customers may not be able to afford monthly payments, fall into LIRA arrears, and miss opportunities to obtain arrearage forgiveness. In addition, if LIRA customers direct their LIHEAP cash grant to

11 another utility, they may be responsible to make unaffordable gas bill payments for the entire year. To date, NFG has not explained what happens if the customer does not receive a LIHEAP grant or directs the LIHEAP grant to another utility.

Second, LIRA customers who experience a sudden loss of income may end up paying higher gas bills when they report this change to NFG. For example, a four-person household in the NFG LIRA program will have its discount reduced from 30% to 10% if the household reports that its annual income has decreased from $5,000 to $1,000. While NFG recalculates the payment, we questioned whether such income changes could result in customers who have experienced a sudden financial hardship being asked to pay more of the monthly gas bill because NFG anticipates that they would qualify for a higher LIHEAP grant in the future.

In the Tentative Order, the Commission invited comment on the way NFG anticipates the LIHEAP grant when determining the monthly discount rate and requested discussion of alternatives to NFG’s current discount rate methodology.

1. Comments: OCA agrees with the Commission that NFG’s discounted rate could result in unaffordable bills for its lowest income customers if the LIHEAP grant is directed to another utility. OCA suggests that if changes are warranted, then such changes should be achieved through a collaborative process (OCA Comments, p. 3).

PULP asserts that calculating the discount rate in conjunction with the anticipated LIHEAP grant disadvantages NFG’s lowest income LIRA customers (PULP Comments, p. 9). PULP recommends that the Commission form a collaborative with interested stakeholders to consider other methodologies to NFG’s current LIRA billing rates or refer this matter to the Office of Administrative Law Judge (OALJ) (PULP Comments, p. 12). PULP notes that its organization has received multiple queries from NFG customers and advocacy groups about the LIRA billing format and computation. PULP identifies two reasons for this confusion: NFG’s anticipation of a customer’s LIHEAP grant and NFG’s failure to credit the LIHEAP grant to a customer’s monthly asked to pay amount.

12 Relative to NFG’s anticipation of LIHEAP grants, PULP contends that NFG may be violating Section 8624(f)(1) of the federal LIHEAP statute by counting the LIHEAP grant as a future resource for the customer. PULP maintains that Section 8624(f)(1) “prohibits utilities from treating LIHEAP as a resource available to the household when it determines the amount that a household in a CAP program will be required to pay” (PULP Comments, p. 11). PULP advises the Commission to “not approve [any] CAP structure that takes into account a CAP customer’s receipt or potential receipt of a LIHEAP grant” (PULP Comments, p. 11).

Relative to NFG’s failure to credit the LIHEAP grant to a customer’s asked to pay amount, PULP is concerned that this practice may not be in compliance with the Department of Public Welfare (DPW) requirement that utilities must apply LIHEAP cash grants to the customer’s monthly “asked to pay” CAP bill (PULP Comments, p. 6). NFG applies the actual LIHEAP Cash Grant received first to any existing LIRA arrears and then to the amount of the budget bill which was deferred (budget credit calculation). PULP notes that the scenario described in Table 3 of the Tentative Order (Tentative Order, p. 10) – where application of the LIHEAP Cash grant results in months of zero payment responsibility for an NFG customer – is not possible because the LIHEAP Cash Grant is never applied to the monthly amount the LIRA customer is required to pay. As noted above, PULP would have these issues referred to a collaborative or OALJ (PULP Comments, p. 12).

NFG contends that its current LIRA billing system provides customers with affordable and stable monthly payments. All LIRA participants are placed into the NFG Budget Plan, which is adjusted quarterly, as needed, to reflect changes in weather and usage. A LIRA customer’s Budget Plan is also re-calculated when a LIHEAP cash grant is received (NFG Comments, p.7). NFG contends that its application of LIHEAP in LIRA discount calculations creates fair and affordable payments compared to other utilities’ CAPs. The Company notes that monthly LIRA payments averaged only $66 in 2012, which was less than the state average of $72 for gas CAP bills (NFG Comments,

13 p. 9, citing the Commission’s 2012 Report on Universal Service Programs & Collections Performance, p. 36).

2. Reply Comments: OCA re-affirms its support for convening a collaborative with interested parties to discuss possible changes to NFG’s LIRA discount rate calculation (OCA Reply Comments, p. 2).

NFG disputes that the way it applies LIHEAP to a customer’s LIRA discount rate or account violates DPW or federal LIHEAP policy. NFG states that DPW’s CAP policy prohibits utilities from using LIHEAP funds to offset the cost of its CAP programs. NFG contends that it has never used LIHEAP to subsidize LIRA and that LIHEAP grants are always applied directly to a customer’s account (NFG Reply Comments, p. 3). The Company reports that it uses LIHEAP “in the development of the bill target a customer is ‘asked to pay’ on an annual basis. This approach allows LIRA participants to receive real benefits from LIHEAP funding, as intended by the DPW policy” (NFG Reply Comments, p. 4).

NFG states that PULP is misinterpreting 42 U.S.C. § 8624(f)(1) when it asserts the LIHEAP statute prohibits utilities from treating LIHEAP as a resource when determining what a CAP customer should pay. NFG contends that the cited provision is part of the requirements that all states administering a LIHEAP program must meet. DPW administers the LIHEAP program in Pennsylvania and establishes the LIHEAP policy for energy vendors to follow. NFG states that the federal government has affirmed that DPW is meeting LIHEAP requirements by approving Pennsylvania’s LIHEAP funding application and DPW has affirmed that NFG is in compliance with state policy when it renewed its status as a LIHEAP vendor (NFG Reply Comments, pp. 12-13).

NFG further argues that applying LIHEAP cash grants outside of the Budget Plan would cause volatility in the monthly amount LIRA customers are required to pay:

If LIHEAP was applied to an account separately, then LIRA participants would receive some months with no amount due, and other months with

14 increased Budget Plan payments once the funding ran out. This directly cuts against LIRA’s ability to achieve affordable payments each month. (NFG Reply Comments, p. 9). In addition, NFG is concerned that LIRA customers could develop poor payment practices if they become reliant on LIHEAP grants to cover some monthly payments during the winter season. The Company asserts that applying the LIHEAP cash grant to the annual “asked to pay” amount in a Budget Plan allows customers to maintain a reduced monthly payment amount and good payment habits throughout the year (NFG Reply Comments, pp. 9-10).

3. Resolution: As described above, the Commission’s main concern regarding NFG’s discount rate methodology is that customers with the lowest incomes receive the smallest discounts because they would qualify for higher LIHEAP cash grants. We questioned whether using an anticipated LIHEAP grant to determine a customer’s monthly discount could result in unaffordable bills for LIRA participants who experience a sudden loss of income or assign their LIHEAP grant to another vendor.

Through its comments and reply comments, NFG maintains that LIRA participants receive affordable payments each month through a Budget Plan that is reduced by the amount of the customer’s anticipated LIHEAP cash grant and the LIRA discount rate. Though calculated on an annual basis, the Company asserts that the LIRA payment rate meets the CAP policy objective of providing participants with an affordable bill each month. NFG also correctly notes that its average monthly LIRA payments are lower than the state average for NGDC CAP bills.

While the Commission has the authority and discretion pursuant to Title 66 to set utility rates,4 the Commission recognizes that DPW is the Commonwealth agency vested with the responsibility to disburse federal LIHEAP funds and grant utility vendor status. Since DPW has consistently approved NFG’s LIHEAP vendor status, the Commission

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

15 accepts that DPW has reviewed and approved the Company’s LIHEAP grant application process.

After reviewing all comments and reply comments regarding this issue, the Commission remains concerned that LIRA customers who assign their LIHEAP grant to another utility may receive unaffordable bills. However, in our review of informal complaints filed at the Commission from NFG customers in 2012, we did not find that LIRA participants frequently contested the application of their LIHEAP grants or their monthly LIRA payment amount. Therefore, we are not inclined to order NFG to change its current discount rate methodology or to establish a collaborative for that purpose at this time. Nevertheless, NFG is directed to describe in its revised 2014-2016 Plan how a LIRA customer’s payment is adjusted when the household’s LIHEAP grant is assigned to another utility and how a customer’s LIRA account is affected when they fail to apply for LIHEAP or do not otherwise receive a LIHEAP grant.

We will continue to monitor NFG’s average LIRA bills and the informal complaints filed at the Commission to determine if this issue needs to be revisited when NFG submits its next triennial Plan. c. Clarity of Customer Bills

This matter was not addressed in the Tentative Order.

1. Comments: PULP observes that the existing NFG billing format also adds to customer confusion over how credits and discounts are applied. PULP notes that the Commission has previously commented on the complexity of NFG’s bills in Dickson v. NFG, Docket No. C2009-2132947 (December 9, 2010). PULP observes that a LIHEAP cash grant received by a LIRA participant will appear only once on the customer’s bill because any LIHEAP funds remaining after applying it toward existing LIRA arrears is immediately absorbed into the Company’s budget credit calculation (PULP Comments, pp. 5-7). In addition, a customer’s LIRA discount rate is not identified anywhere on the first page of the NFG bill. PULP recommends that NFG consider using the Budget Plan

16 Summary illustrated in Table 3 to make the payment calculations easier for a LIRA participant to follow:

Table 3 PULP’s Proposed Budget Plan Summary Current Month Charges: $68.11 Less LIRA Discount 10%: -$6.88 LIRA Bill: $61.23 Budget Plan Deduction: -$32.23 LIRA Budget Bill: $29.00

(PULP Comments, pp. 7-8). PULP recommends that the Commission require NFG to modify its bill accordingly.

2. Reply Comments: OCA agrees with PULP that NFG should take steps to improve bill clarity and recommends that this issue also be addressed by a collaborative of interested stakeholders (OCA Reply Comments, pp. 3).

NFG explains that it has significantly revised its billing format since Dickson:

The current bill demonstrates the LIRA discount, the amount of LIHEAP funding applied to the Budget Plan, the month the Plan year ends, the difference between the LIRA bill and the non-LIRA amount, the amount forgiven each month, and a number of other important messages…NFG’s current format seeks to balance the need to provide all important information up front, while preventing the bill from becoming crowded or unwieldy.

(NFG Reply Comments, p. 11). The Company notes that the changes to its billing format were made after consultation with BCS. NFG states that it is willing to engage in discussions with PULP about further billing enhancements (NFG Reply Comments, pp. 10-11).

3. Resolution: The Commission notes that the NFG bill has greatly improved since Dickson but encourages NFG to work with PULP and OCA to determine if further

17 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. d. Pre-program Arrearage Forgiveness

Under NFG’s LIRA program, a customer’s pre-program arrearage can be completely forgiven in 24 monthly installments. Customers may have up to 36 months to earn all 24 installments. To earn an installment of arrearage forgiveness, the customer must make an on-time and in-full payment:

Each month the Budget Plan amount is paid on time, one twenty- fourth of the amount eligible for forgiveness is eliminated. Once a Budget Plan payment is missed, the customer has forfeited the opportunity to have this amount forgiven, until all missed LIRA payments are made.

(Proposed 2014-2016 Plan, p.14). This description has not changed from NFG’s 2011- 2013 Plan. In NFG’s reply comments to that proceeding, the Company explained that “customers who have failed to make CAP payments as required and ultimately catch those payments up at a later date will receive arrearage forgiveness for those monthly payments that the customer originally missed” (NFG 2011-2013 USECP, Docket No. M2010-2192210, NFG Reply Comments, p.2). However, in response to BCS regarding the 2013 Popovich Evaluation, the Company reported that “[s]hould [LIRA] payments be missed, as during the winter months, but ultimately paid up, the forgiveness has been lost” (NFG Response to 2013 Popovich Evaluation Recommendations, p. 3). Based on these conflicting statements – and the ambiguity in the language of the current plan – the Commission opined in the Tentative Order that NFG’s official policy regarding retroactive arrearage forgiveness for missed months remains unclear.

It is the Commission’s understanding that NFG currently applies arrearage forgiveness for past months in the following way: LIRA customers who fail to make a full payment do not receive 1/24th arrearage forgiveness for that month and will be unable

18 to obtain any further arrearage forgiveness until they pay all LIRA arrears in full. Thus, if a customer misses one month, but then pays the next LIRA monthly payment in-full and on-time, forgiveness does not occur that month or any month until the customer catches up that first missed payment. Customers receive arrearage forgiveness for those previous missed months only after the LIRA account is fully paid up during the 24 month period. NFG states in its Plan that it may offer LIRA customers “up to an additional 12 months to achieve full arrearage forgiveness if they become current” (Proposed 2014- 2016 Plan, p.14).

In the 2013 Popovich Evaluation of NFG’s Universal Services programs, it was recommended that NFG apply 1/24th of monthly arrearage forgiveness each time a customer makes a payment in-full and on-time, regardless of existing LIRA arrears (2013 Popovich Evaluation, p. 35). The CAP Policy Statement does not require participants to catch up on missed payments to qualify for further forgiveness.

In the Tentative Order, the Commission invited comment about whether NFG should be directed to apply 1/24th arrearage forgiveness with each on-time and in-full LIRA payment, whether or not all prior months were paid in full. Additionally, the Commission supported NFG’s current practice of applying arrearage forgiveness retroactively to missed months once the LIRA account is caught up.

1. Comments: Both OCA and PULP agree with the Commission’s recommendation that arrearage forgiveness should be applied for each in-full and on-time monthly LIRA payment, regardless of whether any LIRA arrears exist. Both organizations also support the continuation of NFG’s current policy of providing arrearage forgiveness for missed payments once the CAP balance is paid in full (OCA Comments, pp. 4-5; PULP Comments, pp. 13-14).

In response to the Commission’s statement that NFG’s arrearage forgiveness policy remains unclear, the Company provided the following clarification:

19 LIRA provides 1/24th arrearage forgiveness for each on-time and in-full payment received. If a LIRA payment is missed, then forgiveness is halted until the LIRA balance is paid. Once payment resumes, forgiveness is applied retroactively for any prior months now paid in full. A LIRA participant has 36 months to catch up any past due LIRA amounts owed and complete 24 monthly payments on-time and in-full.

(NFG Comments, p. 9). NFG states that it will consider applying 1/24th arrearage forgiveness for each on-time and in-full payment, regardless of any existing LIRA arrears. However, the Company reports that it is currently beginning a two year process of overhauling its software system and that implementing this policy change may not be feasible until after 2015. NFG requests that the Commission allow the Company to revisit this issue in its next triennial Plan (NFG Comments, p. 10).

2. Reply Comments: OCA recommends that the Commission direct NFG to address this issue in its next triennial Plan (OCA Reply Comments, p. 4).

NFG contends that granting arrearage forgiveness for each timely and in-full monthly payment, regardless of existing arrears, would provide the LIRA participant with little incentive to catch up on missed payments. The Company argues that allowing LIRA customers to accrue arrears without penalty would be unfair to participants who do not miss payments and would result in higher LIRA costs borne by full rate residential customers. NFG asserts that the current LIRA program provides sufficient assistance to payment troubled households by allowing them to receive arrearage forgiveness retroactively for months missed once the account is caught up and allowing 36 months for customers to make 24 on-time payments (NFG Reply Comments, p. 5).

3. Resolution: The Commission supports granting arrearage forgiveness for each on- time and in-full monthly LIRA payment, regardless of any existing LIRA arrears. LIRA customers are more likely to be consistent with monthly payments – even if they fall behind – if there is a continuing opportunity to reduce pre-program arrears. This seems especially true for NFG customers, who are restricted to a maximum 36 months to achieve full arrearage forgiveness.

20 The Commission directs NFG to implement changes necessary to ensure that LIRA customers receive arrearage forgiveness for each on-time and in-full monthly LIRA payment as soon as practicable after the computer system overhaul is completed. NFG is directed to advise BCS when the computer system is completed and when the change is commenced and thereafter completed. NFG is directed to reflect this in its revised 2014-2016 Plan and to file an addendum to the Plan to reflect that the change has been implemented. e. Time Restrictions to Pre-program Arrearage Forgiveness

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; but most participants only qualify for a term of 24 months. At the end of this period, LIRA customers become immediately responsible for paying the full balance of any remaining pre-program arrears in addition to their monthly LIRA payment. At this point, NFG may negotiate a payment arrangement with the customer regarding the pre-program arrearage, but the low-income customer is still burdened with this additional financial hardship.

In 2011, 9% (990) of the total LIRA participants (11,398) were required to pay some or all of their pre-program arrears because they had exceeded the 24 or 36 month period available to receive arrearage forgiveness. The average amount of pre-program arrears for these customers was $440 (2013 Popovich Evaluation, p. 35). BCS recommended in its response to the 2013 evaluation that NFG study whether an extension of arrearage forgiveness would be more beneficial and cost effective for both the customer and the Company.

In the Tentative Order, the Commission invited comment on the necessity and reasonableness of limiting arrearage forgiveness to a maximum 36 month period and requiring LIRA participants to pay the full balance of their pre-program arrears in addition to their regular monthly LIRA bill. The Commission also proposed that NFG

21 eliminate or extend the time restrictions for LIRA customers to receive monthly arrearage forgiveness.

1. Comments: OCA and PULP separately agree that arrearage forgiveness should not be limited to 24 or 36 months for LIRA customers (OCA Comments, p. 5; PULP Comments, p. 14). OCA notes that LIRA customers are more likely to miss a monthly payment because their limited income streams can be negatively impacted by events such as a reduction in hours, illness by the worker or family member, and parental responsibilities (OCA Comments, p. 5). PULP contends that LIRA households with arrears who exceed this timeframe could lose service because they cannot afford a monthly LIRA payment that includes an additional charge for pre-program arrears (PULP Comments, p. 14).

NFG does not support eliminating the 36-month time limit for arrearage forgiveness. The Company argues that “[w]ithout the timeframe, LIRA participants may have no incentive to catch up on past due balances or achieve full forgiveness” (NFG Comments, p. 10).

2. Reply Comments: OCA recommends that the Commission eliminate or extend NFG’s time restrictions for arrearage forgiveness (OCA Reply Comments, pp. 34).

NFG re-asserts that its current arrearage forgiveness policy “reinforces proper payment habits and incentivizes participants to make a real effort to achieve forgiveness” (NFG Reply Comments, p. 13). The Company also states that changing the arrearage forgiveness timeframe is not feasible at this time due to the ongoing upgrade of its computer system, but it is willing discuss this issue further with interested stakeholders (NFG Reply Comments, p. 13).

3. Resolution: As noted previously, although NFG’s Proposed 2014-2016 Plan states that LIRA participants can have a maximum of 36 months to achieve full arrearage forgiveness (p. 14), most LIRA customers become responsible for paying any remaining

22 pre-program arrears after 24 months. It would appear that few customers qualify for the additional 12 months because accounts that are “current” at the end of 24 months would have no remaining pre-program arrearages. Thus, only customers in special circumstances (as determined by NFG) actually receive up to 36 months to achieve full arrearage forgiveness.

Nevertheless, NFG maintains in its comments and reply comments that LIRA participants are permitted up to 36 months to make 24 on-time payments (NFG Comments, p. 9; NFG Reply Comments, p.5). The Commission is concerned that LIRA participants may fall further into arrears if they are required to make payments toward pre-program arrears in addition to their monthly LIRA bill. To avoid this outcome, all LIRA participants should be given 36 months to achieve full arrearage forgiveness.

Accordingly, NFG is directed to ensure that its arrearage forgiveness period does extend to 36 months for all LIRA customers. Since allowing 36 months for arrearage forgiveness is part of NFG’s current system capabilities, it should not critically interfere with the ongoing overhaul of its computer systems. NFG should include this policy change in its revised 2014-2016 Plan.

f. Customer education concerning arrearage forgiveness

Ms. Popovich recommended in her 2013 evaluation that NFG should enhance its customer education efforts to fully inform LIRA customers about the consequences of remaining in default once the arrearage forgiveness period expires. Ms. Popovich also recommended that NFG include messages on bills that inform customers about the consequences of missed LIRA payments (2013 Popovich Evaluation, p. 35). LIRA customers may make a greater effort to keep their accounts current if they are aware that they will be responsible to pay all the remaining pre-program arrearages at the end of the forgiveness period, whether it is 24 or 36 months. 23 In the Tentative Order, the Commission proposed that NFG should develop a method to routinely inform LIRA applicants and participants of how much time remains for arrearage forgiveness and the consequences of being in default when this time period expires. The Commission suggested this enhanced customer education could be done through correspondence, phone calls, or a message added to the monthly bill.

1. Comments: NFG reports that LIRA customers are updated monthly about the status of their frozen arrears through their monthly bills. The bill identifies the amount of arrears forgiven for the current month and the amount of pre-program arrears remaining. The Company does not propose any changes to its current communication procedure concerning arrearage forgiveness (NFG Comments, p. 11).

2. Reply Comments: This issue was not addressed in any of the reply comments received.

3. Resolution: The Commission, remains concerned that LIRA customers are not made aware or specifically reminded of how being in default at the end of the arrearage forgiveness time period could impact their monthly bills. LIRA participants may be more likely to make full and timely monthly payments if they are aware of the consequences of being in default at the end of the arrearage forgiveness time period.

The Company should make every effort to help customers understand that they will have to make payments toward any remaining pre-program arrears in addition to their monthly LIRA bill at the end of 36 months. Because there were no other comments favoring a change in NFG’s procedures relative to this point and because we are extending the forgiveness period to the full 36 months for all LIRA customers, we will not mandate this contemplated change at this time. This matter will be revisited in evaluating NFG’s next USECP. The Commission does, however, recommend that NFG consider including the following information as part of each LIRA customer’s monthly bill:

24  The amount of months remaining for the customer to receive a proportionate forgiveness for each monthly payment; and

 A reminder that any pre-program arrears remaining after the specified deadline will be the responsibility of the customer to pay in addition to their monthly bill. g. Requesting Social Security Numbers at LIRA Application

NFG’s Proposed 2014-2016 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” (Proposed 2014-2016 Plan, p. 9). We have addressed this issue in recent USECP reviews for other utilities.

1. Comments: PULP is concerned that requiring Social Security numbers (SSNs) as a condition for LIRA enrollment may increase the risk of identity theft for all household members. PULP recommends that the Commission direct NFG to follow the procedures used by Duquesne Light and PECO, which makes the submission of SSNs voluntary when applying for CAP (PULP Comments, pp. 14-15).

2. Reply Comments: OCA suggests that NFG should only require SSNs when there is a demonstrated need for this information. OCA requests that NFG explain what steps it takes to protect this information from identity theft (OCA Reply Comments, pp.5-6). NFG states that it uses SSNs or other identification to verify the number of household members listed on a LIRA application (NFG Reply Comments, p. 14).

3. Resolution: While the Commission supports efforts by utilities to verify income and household information for Universal Service applicants, we are sensitive to the concerns raised by PULP that sharing a SSN increases an individual’s risk of being a victim of identity theft. The CAP Policy Statement at 52 Pa. Code § 69.265 (6)(ii)(A)(E) does not require use of a SSN for income verification or intake purposes. It does, however, permit a utility to use an already existing government agency process. DPW, a government agency, does not require households to provide SSNs to receive energy

25 assistance. The LIHEAP application does request SSNs, but omission does not preclude eligibility. DPW permits individuals to receive benefits if they are U.S. citizens or have satisfactory immigration status. Thus, it may not be necessary for an applicant to have or provide a SSN in order to receive energy benefits under Pennsylvania statutes or regulations.

The official website of the U.S. Social Security Administration gives guidance in a Frequently Asked Questions (FAQ) article titled “Must I provide a Social Security number to any business or government agency that asks?”5 as follows:

If a business or other enterprise asks you for your Social Security Number, you can refuse to give it. However, that may mean doing without the purchase or service for which your number was requested. For example, utility companies and other services ask for a Social Security Number, but do not need it; they can do a credit check or identify the person in their records by alternative means. Further, Section 7 of the Privacy Act, 5 U.S.C. § 552a, provides in relevant part, that it:

[S]hall be unlawful for any Federal, State or local government agency to deny to any individual any right, benefit, or privilege provided by law because of such individual’s refusal to disclose his Social Security account number. As reflected in our Final Order on PECO’s 2013-2015 USECP, PECO agreed to alter its policy of requiring SSNs for all CAP customers and allows households to refuse to provide SSNs without losing CAP eligibility. See PECO 2013-2015 USECP, Docket No. M-2012-2290911 (April 4, 2013), at 36-38.

Accordingly, we agree with OCA that NFG should only require SSNs when there is a demonstrated need for this information. Therefore, we recommend that NFG explore alternatives to requiring customers to provide an SSN for each household member as a precondition for LIRA enrollment whenever possible. 5 https://faq.ssa.gov/ics/support/KBAnswer.asp?questionID=1822&hitOffset=350&docID=6855

26 2. LIURP

NFG’s LIURP is designed to assist low-income customers in reducing their energy usage and bills. a. Eligibility requirements

NFG’s eligibility criteria for the LIURP program include income below 150% of the Federal Poverty Income Guidelines (FPIG), residency at the premises for at least one year, annual consumption in excess of 130 Mcf and substantial arrearage. NFG does not specifically mention seniors or those with special needs or disabilities but does allow for 20% of its annual budget to be spent on households with income in the 151%-200% FPIG range. The Tentative Order did not specify any proposed changes.

1. Comments: Both OCA and PULP separately contend that energy usage should be the highest prioritized criteria and that customers arrearages should only be a mitigating factor when all else is equal (OCA Comments, p.8; PULP Comments, p. 17).

2. Reply Comments: NFG agrees to use substantial arrearage as a criterion for LIURP prioritization only when all other household factors are equal (NFG Reply Comments, pp. 6-7).

3. Resolution: According to LIURP regulations at 52 Pa Code §58.10 (a), eligible customer priority is determined by highest usage, greatest arrears, and then lowest income.

(1) Among eligible customers, those with the largest usage and greatest opportunities for bill reductions relative to the cost of providing program services shall receive services first. When prioritizing eligible customers by usage level, several factors shall be considered when feasible. These factors include: the size of the dwelling, the number of occupants and the end uses of the utility service. When prioritizing eligible customers by opportunities for bill reductions, utility rate factors which may tend to limit (for example, declining block rates) or facilitate, for example, time-of-day rates or heating rates, bill reductions somewhat independently of absolute usage levels should be considered.

27 (2) Among customers with the same standing with respect to paragraph (1), those with the greatest arrearages shall receive services first. When feasible, priority should be given to customers with the largest arrearage relative to their income; for example, arrearage as a percentage of income. (3) Among the customers with the same standing with respect to paragraph (2), those with incomes which place them farthest below the maximum eligibility level shall receive services first. NFG may prioritize LIURP participants in any manner that is consistent with the above LIURP regulations. We also remind NFG that 20% of the LIURP budget may be used for those eligible households who are below 200% FPIG, and the Commission encourages NFG to consider seniors and those with disabilities or special needs who may fall into this range. We will, however, not require any specific changes regarding this issue in NFG’s revised 2014-2016 Plan. b. Emergency Fund Pilot Program

NFG is currently allocating approximately $300,000 of its LIURP budget annually to an Emergency Fund Pilot Program. This pilot targets users who would otherwise meet NFG’s LIURP eligibility requirements and are in need of furnace or water heater replacement or repair but who have total annual usage under the 130 Mcf level. Participants in the pilot must also own the home qualified for repairs and weatherization.

In the Tentative Order, the Commission requested that NFG address the use of LIURP funds being used to provide services to non-LIURP customers.

1. Comments: OCA supports NFG’s Emergency Fund Pilot Program and the LIURP services it provides to low-income households who fall below the usage thresholds. OCA does not recommend lowering the budget for this program (OCA Comments, p.6).

NFG notes that 75% of its low income customer base consumes less than 130 Mcf per year. The Company contends that the $300,000 spent on the Emergency Fund Pilot program is a reasonable expenditure of LIURP funds to provide weatherization services

28 to households who would otherwise be eligible except for their gas consumption level (NFG Comments, p. 13).

2. Reply Comments: This issue was not addressed in any of the reply comments received.

3. Resolution: LIURP is a statewide, utility-sponsored, free residential energy usage reduction program designed to help low-income households reduce their energy consumption and thereby reduce their energy bills. NFG’s eligibility criteria for the LIURP program include income below 150% of the FPIG, residency at the premises for at least one year, annual consumption in excess of 130 Mcf and substantial arrearage. NFG’s Emergency Pilot Fund provides weatherization services to those customers that would meet all other LIURP requirements except that their annual usage is lower than 130 Mcf.

We recognize that the 130 Mcf limit for inclusion in NFG’s LIURP was established by NFG. While that number is consistent with levels chosen by other NGDCs, it is not stipulated by regulation or statute. NFG may clearly waive that element of its LIURP eligibility criteria to provide the services rendered through the Emergency Fund Pilot. The Commission finds merit in encouraging and enabling all customers to reduce consumption. Accordingly, we shall not require any change in the Emergency Fund Pilot for 2014-2016.

We do, however, note that there are differences in reporting requirements relative to LIURP funds expended in the normal course of the LIURP program and LIURP funds expended in a LIURP pilot program. If NFG wishes to continue this program beyond the end of the USECP 2014-2016, it will be necessary to begin reporting the program as a part of regular LIURP reporting, rather than as a pilot. The funds expended on the pilot will then need to be reported consistent with 52 Pa. Code § 58.15 relating to program evaluation.

29 c. Administrative and Job Costs

NFG states in its plan that the LIURP program will incur approximately $177,000 in administrative costs. This is an almost 40% increase from the previous plan, where administrative costs were only $125,000 (See table below). After deducting the pilot program and administrative costs from the budget, NFG cites that it will devote $800,000 to providing weatherization services, down from $900,000 in the 2011-2013 Plan. NFG estimates that the average job cost will be roughly $4,400, but provides no reason for the almost 35% average increase from $3,300 in the previous plan (See table below). The list of measures and services that the participants receive is exactly the same as the Plan for 2011-2013.

Table 4 Comparison of LIURP budget and costs in prior and current Plans Plan 2011-2013 2014-2016

Budget $1,300,000 $1,300,000

Pilot Program $300,000 $300,000 Administrative Costs $125,000 $177,000 Weatherization $900,000 $800,000

Average Job Cost $3,300 $4,400

In the Tentative Order, the Commission requested that NFG explain in its comments the reasons for the increases in both the administrative costs and the average job cost, as the available budget for actual weatherization decreased by $100,000.

1. Comments: NFG claims that the increase of administrative and LIURP job costs are due to both inflation and the use of private contractors to complete weatherization projects. The Company reports that private contractors are more expensive than non- profit agencies but also complete weatherization jobs much faster. This allows LIURP recipients to realize energy savings sooner (NFG Comments, pp. 13-14).

30 2. Reply Comments: This issue was not addressed in any of the reply comments received.

3. Resolution: The Commission encourages and supports striving for outstanding LIURP performance results but cautions that high job numbers do not outweigh quality service. While costs may vary from private contractor to non-profit contractor or agency, there should not be significant differences in the costs of the weatherization when similar services are provided to customers. We encourage NFG to make sure that all LIURP contracts are competitively bid, to evaluate the work quality and savings results, and to coordinate with other weatherization programs to maximize cost-effectiveness. NFG should proactively pursue partnership opportunities to reduce program costs by coordinating with overlapping contractors and agencies that perform state weatherization under the Department of Energy’s (DOE) Weatherization Assistance Program (WAP) for the EDCs in the NFG service territory. With the WAP agencies and contractors required to meet new DOE work specification standards in 2015, it is necessary and beneficial for LIURP work standards and quality to remain high as well, whether performed by private contractor or nonprofit agency.

NFG has anticipated a significant increase in average job costs and overall administrative costs. With these considerations outlined above in mind, we encourage NFG to remain mindful of cost causations and the potential for offsetting costs. NFG’s administrative costs for the LIURP program in the 2014-2016 USECP while increasing, are, however, still below the 15% cap required by the LIURP regulations at 52 Pa. Code § 58.5. Accordingly, we shall not require a specific change regarding this issue in NFG’s revised 2014-2016 Plan. d. LIURP Referrals

NFG has historically produced some of the highest savings results over all for companies implementing a LIURP program, both gas and electric. It has done a good job of coordinating with other weatherization programs and with electric companies in its

31 service territory to maximize savings and efficiencies with its contractors. NFG also has an effective referral program that receives, processes, and distributes pre-screened lists of eligible customers among its six subcontracted agencies within the service territory.

In the Tentative Order, we did note, however, that there was no mention in the NFG plan of utilizing LIHEAP recipients as a potential source of eligible LIURP participants. In the 2011-2013 Plan, NGF indicated that 27% (21,204) of its confirmed low-income accounts had usage in excess of 130 Mcf.

1. Comments: The OCA supports the Commission’s recommendation to target LIHEAP recipients for potential LIURP referrals. OCA feels that focusing on this population would allow NFG to reach low-income customers who may not otherwise enroll in NFG’s CAP (OCA Comments, p. 6)

NFG accepts the Commission’s recommendation and will begin looking at LIHEAP recipients for LIURP referrals (NFG Comments, p.15).

2. Reply Comments: This issue was not addressed in the reply comments received, but NFG did file Additional Comments. In its Additional Comments, NFG reports revised figures that show 27% (25,185) of the estimated low-income households have the potential to meet the threshold usage and qualify for participation in LIURP6.

3. Resolution: While the revised figure of potentially eligible low-income households is larger than initially reported, we nonetheless find that screening LIHEAP recipients for additional possible LIURP referrals is worthwhile. Accordingly, NFG will add this component to its 2014-2016 Plan in its revised 2014-2016 Plan.

6 In the 2014-2016 Plan, NFG reported that 9% (8,832) of its confirmed low-income accounts meet the threshold for participation in LIURP. BCS staff noted an error in the Company’s LIURP needs assessment calculation and requested clarification. On April 16, 2014, NFG filed additional comments amending its LIURP needs assessment and reported that 27% of confirmed low-income accounts meet the eligibility threshold for LIURP services, and when 27% is applied to the estimated low-income population it yields (25,185) potentially eligible low-income customers.

32 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. Company representatives also make referrals to other social service agencies and provide information regarding available programs. The maximum time a customer can remain in the CARES program is four months. 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.

This aspect of NFG’s Plan did not generate any recommendations in the Tentative Order and did not generate any comments.

Accordingly, we find that NFG’s CARES program continues to comply with Commission regulations. See 52 Pa. Code § 62.4(b)(1). No changes are required for regarding this issue in NFG’s revised 2014-2016 Plan.

4. Hardship Fund (NFN)

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. Natural gas heating customers can receive grants of up to $400 while non-natural gas heating customers can receive up to $200. Public donations fund NFN and NFG matches donations with shareholder contributions up to $100,000.

33 This aspect of NFG’s Plan did not generate any recommendations in the Tentative Order and did not generate any comments.

Accordingly, we find that NFG’s Hardship Fund continues to comply with Commission regulations. See 52 Pa. Code § 62.4(b)(1). No changes are required regarding this issue in NFG’s revised 2014-2016 Plan.

D. Eligibility Criteria

This aspect of NFG’s Plan did not generate any recommendations in the Tentative Order and did not generate any comments. NFG’s various programs have slightly different eligibility criteria as shown in Table 6 below. These criteria appear to be consistent with 52 Pa. Code § 69.265(4):

Table 5 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 may be allocated to . Must be a resident at the property customers with incomes for at least one year of 151-200% FPIG) . Must have a substantial arrearage CARES . No specific income . Must be payment-troubled criteria other than low . Special needs, elderly, income handicapped . Circumstances must be temporary, otherwise the customer is considered for the LIRA program

34 Hardship . No specific income . Must be at least 55 years old Fund (NFN) criteria . Must be on a disabled or handicapped 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

Accordingly, we find that the eligibility requirements of NFG’s Plan continue to comply with the Commission’s CAP Policy Statement. No changes are required regarding this issue in NFG’s revised 2014-2016 Plan.

E. Projected Needs Assessments

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

1. CAP (LIRA)

Based on the number of LIHEAP grants the company receives and on the income and expense information provided by customers who call the company to make payment agreements, NFG estimates that 31,000 households in its service territory have incomes below 150% of the federal poverty income guidelines. Based on recent history, NFG anticipates that LIRA participation will be at 45% of its identified confirmed low income population.

NFG and other NGDCs have noticed a recent decline in CAP enrollments. They attribute the decline to recent warmer winters and lower gas rates. Ms. Popovich recommended in NFG’s 2013 Evaluation that the LIRA needs assessment be updated annually to more accurately reflect the anticipated participation rate (2013 Popovich Evaluation, p. 15).

35 NFG utilizes only information from its own ratepayers to estimate the total number of customers who may qualify for LIRA. Most other utilities gather information from the U.S. Census Bureau to determine the total number of households below 150% of the FPIG in their service territory.

In the Tentative Order, the Commission recommended that NFG use U.S. Census Bureau data in future needs assessments to look for opportunities to increase enrollment for LIRA and other Universal Service programs.

1. Comments: NFG notes that it currently utilizes the U.S. Census Bureau for LIURP needs assessments, but questions its accuracy in determining the current number of households potentially eligible for LIRA. The Company states that it will examine whether using Census Bureau data in future needs assessments for all of its Universal Service programs could help to increase enrollments (NFG Comments, p. 15).

2. Reply Comments: This issue was not addressed in any of the reply comments received.

3. Resolution: NFG has agreed to review whether using Census Bureau data to estimate the number of households potentially eligible for LIRA and its other Universal Service Programs will help increase enrollments. We will monitor the accuracy of the Company’s current LIRA enrollment estimates to determine whether this issue needs to be revisited when evaluating NFG’s next triennial Plan.

2. LIURP

In the needs assessment, NFG states that its LIURP program has weatherized over 4,968 homes since the program began, and that it disqualified another 6,522 homes for various reasons. It also states that approximately 11,300 homes could receive future weatherization. The number of future weatherization recipients is the same figure the Company reported in its 2011-2013 Plan.

36 In the Tentative Order, the Commission requested that NFG explain why the number of households who may receive future weatherization remains unchanged from its 2011-2013 Plan.

1. Comments: There were no comments or reply comments. NFG, did however, file Additional Comments. NFG acknowledged that it had failed to update the number of households who are eligible for future weatherization from its 2011-2013 Plan. The Company reported that the actual number of households who are eligible for future weatherization should have been 13,695.

2. Resolution: NFG is directed to update its LIURP Needs Assessment accordingly as part of its revised 2014-2016 Plan.

3. CARES

NFG’s CARES program “targets those payment troubled customers that have a temporary inability to pay and are in danger of having service terminated” (Proposed 2014-2016 Plan, p.24). Potential customers for this program are identified based on income level and payment history. Approximately 35,000 NFG customers have been identified as having incomes of less than 150% of the FPIG. This aspect of NFG’s Plan did not generate any recommendations in the Tentative Order and did not generate any comments.

Accordingly, we see no need for further changes on this point at this time.

4. Hardship Fund (NFN)

NFG reports that it trains staff to identify eligible customers for NFN and other universal service programs (2014-2106 Plan, p.31). However, the Plan does not contain a needs assessment that identifies the number of potentially eligible residents living in NFG’s service territory.

37 In the Tentative Order, the Commission requested that NFG provide a needs assessment for NFN that identifies the population of elderly/special needs residents who may qualify for this service.

1. Comments: PULP supports the Commission’s request for a needs assessment for NFN program and asks that this information be made publicly available (PULP Comments, p. 17).

NFG reports that its current system does not have the ability to identify customers who may qualify for its NFN program. The Company claims that candidates for its NFN program are currently identified through discussions with NFG staff or by customer contact about the program initiated by company seminars and newsletters (NFG Comments, pp. 15-16).

2. Reply Comments: NFG explains that it uses CBOs to administer its NFN program. The Company maintains that these CBOs are actively engaged in their communities and play a substantial role in identifying households in need and make the final determination whether an NFN grant should be issued (NFG Reply Comments, p. 15).

3. Resolution: 52 Pa Code Section 54.74 (b) (3) requires utilities to provide a needs assessment for each component of its Universal Service and Energy Conservation Plan. While the number of households actually served through NFN may be ultimately determined by the administering CBOs, the number of potentially eligible households might be estimated through company or government databases. The U.S. Census Bureau may provide the number of low income households who have members age 55 and older or with a disability. Other NGDCs and the EDCs are able to provide such needs assessments for their hardship funds. We are not persuaded that NFG cannot provide one as well.

Accordingly, NFG is directed to provide a needs assessment for its NFN program as part of its revised 2014-2016 Plan.

38 F. Projected Enrollment Levels

NFG’s Proposed 2014-2016 Plan projected enrollment levels are as shown in Table 6 below.

Table 6 Projected Enrollment Levels Program 2014 2015 2016 CAP (LIRA) 10,088 10,088 10,088 LIURP 187 187 187 CARES 50 50 50 Hardship Fund 360 360 360 a. LIRA participation

As reported to BCS through an informal quarterly survey, as of December 31, 2013, total enrollment in LIRA was 9,903. Although the needs assessment shows that there could be as many as 31,310 households eligible for the LIRA program, NFG does not anticipate enrollment to be that great. NFG’s LIRA remains open to new enrollments and has no enrollment limits. Participation rates for government programs such as food stamps and LIHEAP generally run about 50%. Using this rule of thumb, NFG projects LIRA enrollment of approximately 10,088 customers in 2014. NFG anticipates that 1,500 new participants will enroll in LIRA each year. Even so, the Company projects the LIRA enrollment level (10,088) and program costs will remain constant through 2016. The Proposed 2014-2016 Plan states that NFG expects “the program costs, discounts and arrearage forgiveness to stabilize at the current rates for the near future. The forecast takes into account the low cost of natural gas and the consistent level of participants” (Proposed 2014-2016 Plan, p. 22).

In the Tentative Order, we raised issues relative to the projected annual increase in LIRA participants and the lack of a projected increase in NFG’s LIRA budget. We address these issues in our budget level discussion below.

39 b. Projected Weatherization Jobs

NFG proposes to fund the LIURP program at $1,300,000 over the three years covered by this plan. It projects completion of approximately 232 full weatherization jobs per year with that budget (Proposed 2014-2016 Plan, p.28), an increase in jobs over the 212 average of the last ten years. However, later in the plan (Proposed 2014-2016 Plan, p.28), NFG shows the number of jobs reduced to 187 for each year of the plan. These numbers appear to be contradictory.

In the Tentative Order, the Commission requested that NFG clarify and explain the differing numbers of reported weatherization jobs to be completed during each Plan year.

1. Comments: PULP agrees with the Commission that NFG’s Proposed 2014-2016 Plan is ambiguous in identifying the number households who will receive LIURP services annually. Furthermore, citing the 2013 Popovich Evaluation at page 16, PULP contends that NFG’s higher estimate of 232 full weatherization jobs per year is still insufficient to meet the need of its service territory. NFG has previously determined that 15,057 homes are currently in need of weatherization services. PULP recommends that the Commission “direct NFG to amend its goals, targets and budget for LIURP to target at least 350 homes per year” (PULP Comments, p. 16).

NFG explains that the projection of 232 weatherization jobs per year was calculated based on the annual LIURP budget plus carryover from a previous year. The Company projects that the current LIURP budget will only fund 187 weatherization jobs annually through 2016 (NFG Comments, p. 14).

2. Reply Comments: OCA supports PULP’s recommendation to direct NFG to increase LIURP funding to accommodate weatherization services for at least 350 homes per year (OCA Reply Comments, p. 5). NFG notes that its LIURP budget is currently more than three times the statutory requirement. The Company feels that its LIURP program is appropriately funded and contends that there is no legal basis to require an

40 increase to the LIURP budget based on the number of households in need within its service territory (NFG Reply Comments, p. 14).

3. Resolution: We note that there is significant need indicated by the NFG Needs Assessment within the low income population in NFG’s service territory. The LIURP budget and enrollment figures provided by NFG are, however, in line with those of other NGDCs. According to the Commission’s 2011 and 2012 Universal Service Programs & Collections Performance Reports, which are published on the Commission’s website, and the 2013 LIURP Spending and Production data submitted to BCS, which will be part of the report scheduled to be published in August 2014, NFG consistently has the fourth largest LIURP budget of the seven reporting NGDCs.

The LIURP enrollment figure of 187 jobs per year does not reflect any of the jobs performed under the Emergency Fund Pilot Program, which serviced over 100 homes in 2013.7 While it is admirable to want to provide LIURP services to as many low income households as possible, we do not find sufficient justification to direct NFG to increase their LIURP budget at this time. We find that NFG has adequately explained the issues we raised relative to projected enrollment levels and per job cost increases in the Tentative Order. Further, NFG is correct that its budget for LIURP is more than three times the statutory requirement. Accordingly, NFG is directed to include the enrollment numbers with the revised needs assessment but needs no other changes to this aspect in its revised 2014-2016 Plan.

G. Program Budgets

Table 7 below shows the proposed budget levels for 2014-2016.

7 This figure was provided by NFG in the 2013 annual LIURP spending and production report. We have discussed reporting of Pilot information going forward above. The change directed above will result in these Pilot numbers being reported in the context of regular LIURP reporting.

41 Table 7 Proposed 2014-2016 Plan Projected Budgets and Spending Universal Service Component 2014 2015 2016 CAP (LIRA) $1,900,000 $1,900,000 $1,900,000 LIURP $1,300,000 $1,300,000 $1,300,000 CARES $16,500 $16,500 $16,500 Hardship Fund* $100,000 $100,000 $100,000 Total $3,216,500 $3,216,500 $3,216,500 Average Monthly Spending per $16.19 $16.19 $16.19 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 198,663 residential customers, as reported by NFG as of December 31, 2012.

In its Proposed 2014-2016 Plan, NFG expected to provide discounts to 4,500 additional LIRA participants by 2016 with no increase in the program’s budget. In the Tentative Order, the Commission directed NFG to describe how the Company plans to maintain flat funding for LIRA while adding 1,500 new participants each year.

1. Comments: NFG reports that it anticipates both the LIRA participation level and budget to remain stable through 2016. While the company does expect 1,500 new customers will enroll in LIRA annually, it also predicts that a corresponding number will likely leave the program during that time. In addition, the Company projects LIRA costs will stabilize as more participants achieve arrearage forgiveness during this time period (NFG Comments, pp. 11-12).

2. Reply Comments: This issue was not addressed in any of the reply comments received.

3. Resolution: The Commission appreciates the additional detail provided by NFG regarding its LIRA enrollment projections. Accordingly, the Company is directed to

42 include this explanation for why it anticipates LIRA enrollment and budget will remain flat through 2016 in its revised 2014-2016 Plan.

H. 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 utilizes approximately 70 community agencies throughout the Company’s service territory as referral agencies or contractors in the LIURP, CARES and Neighbor for Neighbor programs. NFG’s LIRA program deals with the Department of Public Welfare, primarily through the local County Board of Assistance offices and the Social Security Administration. NFG utilizes other social service agencies as needed based on the customer’s situation.

We did not raise any issues on this point in the Tentative Order, and there were no comments on this aspect.

Accordingly, we find that NFG’s use of CBOs complies with the intent of the Competition Act. No change regarding this issue is required for the revised 2014-2016 Plan.

I. Other Section 62.4(b) Requirements

The organizational structure for NFG’s universal service programs consists of the following:

1 Vice President, Consumer Business

1 General Manager, Consumer Business

1 Assistant General Manager, Consumer Business

43 1 Manager

1 Customer Outreach for Energy Management Employee

1 Administrative Assistant

3 Supervisors

2 CIS Project Employees

1 Energy Management Employee

1 Regulatory Oversight Employee

1 Functional and Statistical Oversight Employee

In addition to those listed above, the company employs various clerical and support staff.

We did not raise any issues on this point in the Tentative Order, and there were no comments on this aspect.

Accordingly, we find these aspects of the Proposed 2014-2016 Plan to be acceptable. No changes are required to these provisions in the revised 2014-2016 Plan.

J. Differences between 2011-2013 Approved Plan and Implementation of that Plan

NFG reported no deviations from the provisions of the 2011-2013 Plan and the implementation of that plan.

IV. CONCLUSION

Having addressed NFG’s Proposed Plan, as well as the various comments, we note that any issue or request for a further deviation from the Proposed Plan for 2014-2016, but which we may not have specifically delineated herein, shall be deemed to have been

44 duly considered and denied without further discussion. The Commission is not required to consider expressly or at length each contention or argument raised by the parties. Consolidated Rail Corp. v. Pa. PUC, 625 A.2d 741 (Pa. Cmwlth. 1993); also see, generally, U. of PA v. Pa. PUC, 485 A.2d 1217 (Pa. Cmwlth. 1984).

Consistent with the discussion above, we shall direct NFG to amend and file a Revised USECP for 2014-2016 pursuant to the universal service requirements of the Competition Act at 66 Pa. C.S. §§ 2202, 2203(7), and 2203(8), the reporting requirements at 52 Pa. Code § 62.4 and the LIURP regulations at 52 Pa. Code §§ 58.1- 58.18, and the CAP Policy Statement at 52 Pa. Code §§ 69.261-69.267 in compliance with this order. Finally, the Commission’s approval of NFG’s Plan subject to the changes directed herein does not limit the Commission’s authority to order future changes to the 2014-2016 Plan based on evaluation findings, universal service data, rate- making considerations, or other relevant factors. Accordingly, NFG is directed to:

(1) Describe in its revised 2014-2016 Plan (a) how a LIRA customer’s payment is adjusted when the household’s LIHEAP grant is assigned to another utility and (b) how a customer’s LIRA account is affected when the customer fails to apply for or fails to receive a LIHEAP grant.

(2) Provide 1/24th arrearage forgiveness for each full and timely monthly LIRA payment received, regardless of existing arrears, by or before filing its next triennial Plan.

(3) Extend its arrearage forgiveness period to 36 months for all LIRA customers. The Company will include this change in its revised 2014-2016 Plan.

(4) Transition the Emergency Fund Pilot program to a standard element of LIURP and report it as such.

(5) Revise the LIURP Needs Assessment, including enrollment numbers, in the revised 2014-2016 Plan.

45 (6) Provide a needs assessment for its NFN program in its revised 2014-2016 Plan.

(7) Include the explanation of why NFG projects that LIRA enrollment and budgets will remain stagnant through 2016 in the revised 2014-2016 Plan.

NFG will file and serve a further revised Plan for 2014-2016 in a compliance filing within 30 days of entry of this order, reflecting the changes directed consistent with this order. The Company is invited to submit the revised Plan to BCS for review prior to filing. THEREFORE,

IT IS ORDERED:

1. That the Universal Service and Energy Conservation Plan 2014-2016 as proposed and filed by National Fuel Gas Distribution Corporation, on May 28, 2013, is approved, in part, as consistent with Title 66 of the Pennsylvania Consolidated Statutes, Title 52 of the Pennsylvania Code, and Commission practice, consistent with this Order.

2. That National Fuel Gas Distribution Corporation file and serve a revised Universal Service and Energy Conservation Plan for 2014-2016, consistent with this Order, within 30 days of the entry date of this order.

3. That a copy of this Final Order be served on the National Fuel Gas Distribution Corporation, 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-2010- 2192210.

BY THE COMMISSION,

Rosemary Chiavetta

46 Secretary

(SEAL) ORDER ADOPTED: May 22, 2014 ORDER ENTERED: May 22, 2014

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