Testimony of the National Consumer Law Center
Before the Subcommittee on Labor, Health and Human Service, and Education, 
and Related Agencies Committee on Appropriations United States Senate 

regarding 

Fiscal Year 1997 Appropriations for the Low-Income Home Energy Assistance Program (LIHEAP)

Mr. Chairman and Members of the Committee, the National Consumer Law Center appreciates the opportunity to submit testimony regarding the appropriation for the FY 1997 LIHEAP. We submit this testimony on behalf of our low-income clients, for whom the loss of utility service due to an inability to pay escalating charges is a persistent and painful threat.

The National Consumer Law Center (NCLC) is a nonprofit corporation dedicated to the interests of low-income consumers. Founded in 1969, NCLC provides specialized legal support and consulting services to legal services attorneys, government agencies, and private attorneys on all aspects of consumer and utility law. Working with utilities, regulatory commissions, and advocates, NCLC has helped design low-income affordability programs in dozens of states over the past several years. NCLC has written the leading reports on the impact of energy costs on the poor and elderly and has recently completed an extensive manual for advocates on access to utility services.

This past winter, poor families across most of the country suffered through brutally cold weather. In many states it was one of the coldest winters of the century. However, this past year, states received the lowest level of LIHEAP funding in the program's history, putting millions of low-income households at risk. Inadequate LIHEAP funding has numerous repercussions for low-income households, including:

• disconnection of utility service;
• consequent threats to health, especially for the elderly and children;
• increased malnutrition and hunger;
• rise in homelessness.

Funding Recommendation
Mr. Chairman and Members of the Subcommittee, we ask for your continued strong support for the Low-Income Home Energy Assistance Program, and urge that this Subcommittee and the Senate:

Provide an appropriation of at least $1.319 billion for the FY 1997 LIHEAP. This represents level funding from the FY 1995 LIHEAP. The $900 million level of funding provided in FY 1996 was severely insufficient in meeting the home energy needs of the 29 million low-income Americans across the country.

Provide an advance appropriation of at least $1.319 billion for the FY 1998 LIHEAP. LIHEAP is a time-sensitive program, and it is crucial for the state and local agencies administering the LIHEAP program to have the security of an advance appropriation to plan efficiently for the upcoming winter.

Continue the emergency contingency fund consistent with LIHEAP's authorizing statute, which authorized $600 million. These emergency funds are a critical supplement to the regular LIHEAP appropriation. This was demonstrated most recently in April, 1996, when the President released $180 million to the states for heating assistance, and in July, 1995, when the President released $100 million to certain states for cooling assistance. We urge you to not use these funds in lieu of regularly appropriated LIHEAP funding.

The Energy Crisis Continues for the Poor
Across the United States, more than 29 million low-income families are facing an energy affordability crisis. When the heat is turned off in the winter, and electricity turned off in the summer, the health of children, the elderly, and other household members is at risk -- because of unpaid utility bills. Low-income families struggle to pay their heating bills, often sacrificing other basic needs such as food, rent, and medicine.

As the cost of energy continues to outpace increases in salaries and government benefits, more and more families are simply unable to pay for energy. For the period of 1988 to 1992, energy prices increased at a rate faster than the growth in the income of poor families, particularly those surviving on minimum wage income, and families with children. For example, from 1988 to 1992, energy prices far outpaced the increases in AFDC benefits during that same period: by 300% for oil; 200% for electricity; and 150% for natural gas.

Energy burden as a measure of affordability. As the Department of Health and Human Services has pointed out, from the perspective of the low-income household, "energy burden" is the most important factor to consider. "Energy burden" refers to the percent of household income that must be devoted to the energy bills facing the household.

The burden that energy costs place on poor Americans, in comparison to the average 4% energy burden for middle-income families, is shockingly high:

Elderly poor and disabled poor individuals relying on Supplemental Security Income on average spent 19% of that income on energy costs, leaving them on average with less than $400 to survive on each month in 40 states in 1992.

The working poor. Approximately 18% of the nation's 81 million year-round, full-time workers earned below the poverty-level in 1992, many earning close to the minimum wage of $4.25. A full-time, year-round job at minimum wage would yield about $8,500 annually, which is well below the federal poverty guidelines. In 1992, 12% of this income was required on average to meet home energy costs.

Families with children living on Aid to Families with Dependent Children on average devoted a resen quarter of their AFDC income on energy bills, leaving them with less than $300 each month to cover rent, food, clothing, and medical needs. LIHEAP Helps Poor Households Afford Essential Utility Service

Over a decade ago, recognizing that millions of poor households simply could not afford to pay their energy bills, Congress created the Low-Income Home Energy Assistance Program (LIHEAP) as a federally funded block grant program to address this need. The goal of LIHEAP was then, and remains today, to assist households with their energy costs, targeting those with the lowest incomes and the highest energy costs in relation to income. In FY 1994, approximately 5.6 million low-income households received heating assistance, and 1.1 million received winter/year-round crisis assistance.

Whom does LIHEAP serve? LIHEAP serves the poorest of the poor: 81.3% of households receiving heating assistance in FY 1994 had incomes of less than $10,000. The elderly also receive significant LIHEAP assistance. In FY 1994, 33% of all households receiving LIHEAP assistance contained at least one elderly member. In addition, almost 30% of all households receiving heating assistance contained a disabled member.

Repercussions from Reductions in LIHEAP Funding
LIHEAP has contributed more than its share to deficit reduction during the past decade, suffering a cumulative loss of over $4 billion in funding and almost 4 million households served (from FY 1985 to FY 1993). While the Consumer Price Index increased approximately 18.6% from 1988 to 1992, the average LIHEAP benefit decreased 6.1%, from $228 in 1988 to $214 in 1992.

With reduced funding, states are put in the difficult position of whether to cut benefit levels, or to reduce the number of households which they will serve. Reducing the level of LIHEAP benefits results in a diminishing ability to lower the burden that energy costs place on low-income recipients. On the other hand, when states, for example, chose to raise the average benefit level to a more sustainable level in FY 1993, the impact of that decision left 1.2 million households with no energy assistance.

Over the past 15 years, as the LIHEAP funding level has decreased, the number of households living in poverty -- and in need of energy assistance -- has increased. In FY 1994, when the funding level was $1.737 billion, only 21% of the households eligible under the federal eligibility standard received LIHEAP assistance. In FY 1996, with only $1.08 billion in LIHEAP funding, that percentage is likely to drop significantly, leaving more households with no heat in the winter, and no means of cooling in the summer.

Some disastrous repercussion flowing from reduced funding for LIHEAP include: Disconnection of Utility Service:

If families and individuals cannot afford to pay their utility bills, they face the possibility of having their utility service disconnected. As LIHEAP funding began to decrease in the late 1980s (from $1.825 billion in FY 1987 to $1.383 billion in 1989), "heat interruptions" increased (678,000 in 1986-87 to 1.0 million in 1989-90). Further proof that LIHEAP helps prevent shutoff of essential utility service is the finding by HHS that in the winter of 1992-93, of all LIHEAP eligible households with heat interruptions (1.023 million), over 70% did not receive LIHEAP assistance. In other words, those that received LIHEAP were almost twice as likely to avoid shutoff.

Common misperception: people won't really lose their utility service . Despite the perception that utilities just won't disconnect, in fact, every utility does terminate service for nonpayment. In 1990, according to HHS, as many as five million households had their utility service disconnected for failure to pay utility bills. According to the Census Bureau, in the last three months of 1992, 32.4% of poor families could not pay their full utility bill, and 8.5% had their gas or electric service disconnected.

There is also a perception that state regulations ("winter moratoria") will prohibit utilities from terminating service. While some states have a limited moratoria rule which does make it more difficult for utilities to terminate service during the winter months, in the majority of states there is no outright prohibition on termination. Even if a utility chooses not to terminate service during the winter months, that action only forestalls the timing of the termination until after the cold season. In the spring months following the winter moratoria period, thousands of households do have their utility service terminated. Many of these households are unable to pay their bills sufficiently to have service restored for the following winter. Thus, there is a strong possibility they will still face a cold winter without any heat.

In addition, bulk fuel dealers, which provide propane, fuel oil, and wood, are not regulated. As such, they can terminate any service (or delivery of bulk fuel) to customers who cannot pay for their services up front. Many of these unregulated fuel dealers are small businesses who may have no other choice but to terminate service.

Health Risks to the Elderly and Children:
Malnutrition in children. A study released by the Boston City Hospital (BCH) in 1992 dramatically demonstrated the effects of cold weather and high energy costs on low-income children. The study found that in the month following the coldest winter month, low-income children had high rates of malnutrition because their parents were choosing to pay their utility bills during those months, rather than buying sufficient food for their children. As the Director of the Project put it, "[p]arents know their children will freeze before they starve."

Correlation between utility shut-offs and hunger. In addition, the BCH study revealed that children whose parents had suffered through a utility shutoff or the threat of a shutoff were found to be twice as likely to be classified as hungry or at risk of being hungry. Of those surveyed, only 16% reported being on fuel assistance during the previous winter.

Extreme weather conditions and the health of the elderly. The elderly and poor are most susceptible to hypothermia and hyperthermia -- fatal health conditions that often result in deaths -- which can result from inadequate heating and cooling. The newspapers have been filled with stories over the years of health hazards posed to seniors from extreme cold or hot weather. The death toll was nearly 500 in the Chicago area alone as a result of the heat wave in July, 1995. Most victims were elderly and without air conditioning or fans.

Further health hazards of alternative heating sources. When people have their heat shut off, they do what they can to avoid freezing to death. Frequently households resort to other means to keep warm, such as electric space heaters, portable kerosene burners, or gas grills. These heat sources are often inadequate to protect families, especially seniors, from severe cold and are frequent sources of fires, which can be deadly.

Rise in Homelessness:
Increasingly, the obvious connection between utility costs and housing affordability is being documented. According to a Philadelphia study, "[u]tility terminations are clearly a precipitating factor in housing abandonment," and "the relationship between [utility] termination and homelessness is...clearly discernible." Utility cut-offs were found to be one of the housing-related issues contributing to homelessness in Northern Kentucky. Under rules established by the U.S. Department of Housing and Urban Development, utility shutoff is grounds for eviction in public housing.

Need for Advance Appropriation
Part of the reason the LIHEAP program works well for the states is that they are able to obligate funds at the beginning of the season. That way, state programs can begin the process of taking applications for and distribution of benefits, in order to prevent shutoff of vital utility service during harsh weather. Without an advance appropriation, the situation in FY 1997 could mirror that in FY 1996, in which state agencies operated for most of the fall and winter months from a situation of uncertainty, which made it difficult for LIHEAP assistance to reach families when it was most crucial -- in the midst of one of the coldest winters ever.

Conclusion
Congress does not have the power to prevent the harsh weather that Americans have suffered through this past winter and last summer, but by providing an adequate appropriation for the FY 1997 LIHEAP, Congress can prevent some of the tragedies which result from the inability of many low-income Americans to afford their energy bills.

May 6, 1996