National Community Action Foundation

810 First St, N.E. Washington, D.C.

Subcommittee on Education Reform

Committee on Education and the Workforce, U.S. House of Representatives

Hearing on LIHEAP & CSBG: Providing Assistance to Low-Income Families

July 8, 2003

Response of David Bradley for the Record of the Committee

This is a follow-up to Congressman Ehlers question, Why not do more Weatherization, instead of LIHEAP, to achieve a more permanent result?

I am attaching an analysis by Economic Opportunity Studies, Inc at page 3 comparing average DOE/WAP savings to households and LIHEAP average payments in recent years and also showing the national totals of the benefits of both programs. It illustrates how, when prices rise, the WAP savings are worth more, while a LIHEAP payment buys less.

The population living in the 5 million Weatherized homes enjoys the bill reductions and healthier housing conditions every year, of course. But both programs need to expand and to provide incentives for partnerships in these investments for the foreseeable future.

The addition to my assertion that, given a choice, I would add $50 million to Weatherization instead of $100 million to LIHEAP, I must complete my answer by offering the following comparisons between the benefits offered by each program.

A larger LIHEAP program will be needed indefinitely because many cannot afford to pay basic household energy costs as well as for their food, heat and medicine. Even if only the five million households LIHEAP served in 2001 were in need of help, and that is not the case, this number still exceeds those that will receive Dept of Energy Weatherization Assistance in any given year by 5.9 million families

We believe that the numbers of families receiving energy services from our local Weatherization network may be nearly twice as high, perhaps 200,000, because of utility and state or LIHEAP matching funds, but studies are incomplete. Nevertheless, many will remain in dilapidated, wasteful housing for years before Weatherization reaches them.

President Bushs repeated insistence on requesting significant growth in Weatherization is very encouraging to Community Acton, and we are working with the Administration to achieve the goal. Weatherization on average saves about 20% of the main fuels cost, about $200 per house in a state with average weather and fuel costs. This compares favorably with the average U.S. LIHEAP benefit. In colder states, like Michigan, both LIHEAP payments and Weatherization savings are generally higher. For many families assisted, the Weatherization savings lower the energy burden to affordable levels. For others, especially the very poor, it will not.

Community Action Agencies favor the programs that bring permanent changes for their participants and Weatherization, of which 80% is provided by CAAs, is one tool for self-sufficiency.

Certain LIHEAP changes could make the LIHEAP program more effective as a tool for increasing self-sufficiency. For example,

• It should be available in all CAAs, not only in county Social Services offices, so it is likely to be used by the working poor as part of their transition to economic stability. (In Michigan, LIHEAP in winter is only available to families participating in other cash assistance programs and many CAAs in rural areas have no LIHEAP programs for emergency help.)

• It should be more flexible. The 5% limit on energy and financial education and family services is too strict.

• It should reward states that stretch the funding by getting cheaper fuels as a result of the large-scale purchasing power.

In response to the question of whether the barriers to using more of LIHEAP for weatherization are too great our answer is that the certifications required of Governors if they want to use over 15% are patently absurd, but states have worked within the framework as they needed. There is now more LIHEAP funding in some local Weatherization programs than there is Dept of Energy funding, but the DOE standards, advanced technology, and cost tests are applied to most of the investments regardless of source.

ECONOMIC OPPORTUNITY STUDIES

400 NORTH CAPITOL STREET, SUITE G-80, WASHINGTON, D.C. 20001

Tel. (202) 628 4900 Fax (202) 393 1831 E-mail Info@opportunitystudies.org

_________________________________________________

Weatherization Annual Benefits,

A Comparison of LIHEAP Payments and Energy Bill Reductions

June 2003

The Department of Energy Weatherization Assistance Program offers efficiency investment resources that have, to date, been extended to about 5 million low-income homes, or less than 20% of all eligible units. The Community Action Agencies and other local non-profit organizations that administer it select homes with high potential to save energy and with especially vulnerable families from their substantial waiting lists;

A typical Weatherized consumer will spend about 20% less on his main heat fuel (including the many appliances and/or water heating fueled by the primary utility source or fuel) than would have been the case before the house was weatherized.ⁱ They also enjoy savings on electricity usage that have not been Quantified by DOE. Since usage reductions are worth more as prices rise, the impact of price spikes is blunted in these homes, whose residents largely live on fixed or unstable incomes...

Household impacts: That modest figure means a good deal to those with very low budgets, as it represents a savings of 1.5% - 2% of all their annual resources. ⁱⁱ ( In 1997, a year with normal weather and fuel prices far below those of the 2002-03 winter or those predicted for the next two years (US DOE, Energy Information Administration, Short-Term energy Outlook July 2003), this would have meant a reduction in the average eligible households energy burden to 13.5% from about 15% of annual income. For the median income US family that same percentage drop would be the equivalent of an annual savings of $1250 -i.e. a noticeable improvement.

The annual W.A.P. contribution to reductions in out-of pocket payments by all the families Weatherized to date is the equivalent of 31% of the entire FY 2003 LIHEAP block grant. In any one year, the savings depend on the energy price and weather, so, at the very high 2001-02 prices it was worth nearly 50% of that years total LIHEAP allocation, including administrative and other costs.

The table below shows this contribution of the Weatherization investments that are already in place in low-income housing.

Federal Low-Income Energy Program Benefits Total and Comparison

Federal Energy Benefit Type	Annual Value in Billion $$ (Nominal $$)
	FY 2001 actual	FY 2002 est.
Savings in Weatherized homes (5 million) Houses @ 20% of Main fuel Used)iii	$ 1.18	$ 0.90
LIHEAP total Appropriation	$ 2.25	$ 2.00
Total Federal Energy Benefits	$ 3.43	$ 2.90
WAP Annual Savings as a Percent of All Federal Low-Income Energy Benefits	34%	31%

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