Poor Texans' Electric Bills to Dive, Then Go Back Up

Throughout August, The Texas Tribune will feature 31 ways Texans' lives will change because of new laws that take effect Sept. 1. Check out our story calendar for more.

Poor Texans will soon enjoy a deep discount on their electricity bills, but that discount will plummet and eventually disappear — a result of lawmakers agreeing to ensure that money in the System Benefit Fund is going toward its intended purpose.

The fund was created in 1999 to help low-income families pay their utilities in the wake of the deregulation of Texas’ energy market. But instead, it has generally been used to help prop up the state’s finances, and discounts on electric bills for those in need have varied from nothing to 20 percent. With the fund’s balance ballooning to more than $800 million as of this month, state Rep. Sylvester Turner, D-Houston, led an effort to force the Legislature to use the money as it was designed.

“We put it in place as a safety net for your most vulnerable Texans,” said Turner, who said he has been “raising hell” about the fund’s misuse since he helped create it.

Fellow lawmakers agreed this year to give the remaining money to low-income Texans as part of House Bill 7, one of the key pieces of budget legislation in the 83rd Legislature. But they also ended the surcharge of 65 cents per megawatt that all electricity customers in Texas paid into the fund, emptying it by 2017.

Texans who are eligible for food stamps or Medicaid qualify for assistance from the System Benefit Fund. A family of four making about $29,000 a year or less would also qualify for the discount, which does not apply to people living in noncompetitive Texas electric markets, like Austin and San Antonio, or customers not served by the Electric Reliability Council of Texas, or ERCOT.

The number of households on the rolls for the discount has increased from about 600,000 in 2004 to more than 900,000 currently. Terry Hadley, a spokesman for the Public Utility Commission of Texas, said that more than 6,700 people have signed up to join the program since the new discount was announced on July 25.

In September, the discount will jump from the current rate of 16.5 percent to 82 percent. But in 2015, it will drop to 15 percent, and be reduced further to 7 percent the year after, according to the bill’s fiscal note. By 2017 the discount disappears. (Those numbers could change, depending on what the 84th Legislature does.)

“This will be confusing to people,” said John Howat, who studies the effect of energy assistance programs on low-income consumers at the National Consumer Law Center. “It’s difficult to imagine the outreach and education that would be required to really inform people about what’s going on. It’s going to be critical, as people are receiving this discount, that they understand this isn’t forever.”

Hadley said electric providers will have to include a statement on customers’ bills explaining that the discount is temporary. But because it is calculated based on electric rates that are higher than what many Texans pay, some people could see a credit on their account this September. That could cause even more confusion, advocates say, and could discourage conservation.

“I personally think that this is going to be disruptive,” said Carol Biedrzycki, director of the Texas Ratepayers Organization to Save Energy, or ROSE. “Anyone who looks at this logically has to agree that it’s not prudent.”

Still, like most other advocates for energy affordability, Biedrzycki sees the bill as the lesser of two evils.

“[The 82 percent discount] could cause people to use more, but it could also cause people to have basic electricity,” she said. According to the most recent data available from the Public Utility Commission, power companies in competitive markets shut off electricity for nearly 40,000 households this June because they couldn’t pay their bills.

“Electricity expenditures just eat up a tremendous proportion of low-income budgets,” especially in Texas, Howat said. Texan households spend an average of $1,801 a year on electricity, according to the federal Energy Information Administration.

The System Benefit Fund is not the only such “dedicated fund” that hasn’t gone toward its intended purpose, though it is the largest. More than $650 million meant for the Texas Emissions Reduction Plan, which drivers pay into through fees on vehicle title transfers and emissions tests, has gone unspent. Texas politicians on both sides of the aisle have called for an end to raiding the funds.

Turner, whose insistence on using the fund properly nearly stalled budget negotiations in May, said he is pleased that needy Texans will finally get deserved help with their electricity bills. Even though a giant discount that soon goes away may be disruptive, it’s better than the alternative, he said. Should the Legislature have drawn down the funds more slowly and given smaller discounts over a longer period of time, newly-elected lawmakers could choose to raid the fund once again.

“I chose certainty and impact rather than uncertainty and a much lower impact,” he said. “Let’s just stop this craziness.”