02 Sep Throwing Money at Problems: The False Promise of Free Weatherization

Guest Post – from Paul Robbins

The Texas (Lone Star Chapter) of the Sierra Club has recently made a proposal to the Austin City Council to increase low-income weatherization by $1.5 million in next year’s budget for Austin Energy.  The proposal claims to restore funding for this program to “historic highs” and help people in need lower their utility bills.

On the surface, this sound harmless, and maybe even beneficial.  Looking deeper, you will find this money is largely wasted, and could be spent on better options to assist the poor, saving them more money, and in many cases, reducing pollution from fossil and fissile fuels in the process.

It is the goal of this short article to give readers a basis for understanding this issue, and suggest more positive choices that can be made for low-income assistance.

Context of Conservation

There is a meme circulated by some low-income advocates at City Hall that our municipal utility, Austin Energy, ignores the poor.  There are numerous actions and programs the utility has put in place that belie this accusation.  This includes a highly progressive residential rate structure that charges more per kilowatt hour for higher use (poor people generally use less electricity than the average customer).  It also includes about $10 million a year in bill discounts to the poor, and low-income weatherization.

Low-income weatherization provides several hundred homes per year with free basic conservation retrofits such as ceiling insulation, solar screens, duct sealing, and air infiltration measures.  Since 1982, almost 13,000 have participated. These programs have historically targeted people at or below 200% of the poverty level.

Free Weatherization Isn’t Free 

In 2014, Austin Energy collected about $2.6 million for free weatherization.  This was funded with an average surcharge on all residential customers of about $7 a year.  The proposed budget increase will bring this to $11 per customer.

What are the poor getting for all this money?  Very little.

A survey of 857 free weatherization participants in 2011 and 2012 showed that for an average investment of $3,400, the savings was only $57 a year.  That is a 59-year payback.

Data taken from an Austin Energy survey of 857 homes receiving free weatherization shows a payback of almost 60 years.

At first this seems counterintuitive.  Why wouldn’t there be more savings?  Reasons include: 1) lower-income people generally use less energy, so there is not as much energy that can be saved; 2) many of these homes require repairs before they can be weatherized; 3) the entire cost is being absorbed by ratepayers.

This trend of long paybacks has been observed on a national level as well as a local one.  Low-income weatherization is generally viewed as a social program, in contrast to most other utility programs designed to save energy cost effectively while stopping pollution.

Full Potential Overstated 

Sierra Club has postured its request for a funding increase on recreating “historic highs” achieved in low-income weatherization in Austin in 2011 and 2012.  Participation was about 1,000 homes per year.

The implication here is that Austin has achieved this before, so we can do it again.

The organization, however, has not informed the City Council that these historic highs were achieved in large part because of massive federal funding that took place during the economic stimulus program early this decade.  Austin Energy spent almost $10 million of federal money, and continuing funds are no longer available.

This federal stimulus money was mainly spent to circulate money back into the economy.  That these homes might save energy was a side benefit.

Weatherization for the Poor at Rolls Royce Costs 

Asking for a budget increase to maintain these “historic highs” would not even be necessary if Austin Energy would get is costs under control.  At least two documents issued by the utility state that the cost of basic weatherization should be somewhere between $1,500 and $2,500.  Currently the cost per home is about $3,800.

According to Austin Energy, the current cost of free weatherization is significantly higher than it has been historically.

Both Austin Energy and Sierra Club proponents both acknowledge that the per-home cost is too high.  There does not seem to be an adequate plan, however, to bring down costs to a reasonable level.

It would be highly imprudent to continue to fund these programs with more money when the existing budget would be sufficient if it were better managed.

Charity or Investment?

Whenever you spend a dollar on energy programs, there are choices about how to achieve the best results.  Let’s look at 3 examples:

1. $1 Million in Free Weatherization: 294 participants/$168,000 saved in 10 years.

2. $1 Million in Customer Bill Discounts: 397 participants/$1 Million distributed in 10 years

3. $1 Million in Door-to-Door LED Direct Installation Program: 8,327 participants/$3.2 Million saved in 10 years

This third example is a program proposal that has yet to occur in Austin.  But it is one of several that could provide more savings and rate relief per dollar invested.  And it has been done in other places.

One good example of this approach is Seattle City Light’s Powerful Neighborhood Program.  The pilot program was run between 2009 and 2011.  It installed 665,000 compact fluorescent lamps and LEDs, as well as 33,000 low-flow showerheads, and 42,000 aerators in 56,000 single-family homes and apartments.  (This was about 15% of the utility’s residential customers.)  The total savings from the program was estimated at 22 million kwh a year, enough to save $2.1 million annually.

The program was targeted to types of customers that had historically low participation rates in the utility’s other efficiency programs, including low-income, seniors, and people who did not speak English.

Since the installers were already in these homes, they used the opportunity to conduct onsite energy assessments.  This generated immediate recommendations used to enlist these customers in the utility’s other energy-saving programs, and provided a database to plan future efforts.

Another idea is On-Bill Finance, which puts conservation retrofit cost on the bill, presumably at less cost than the savings.

The vast majority of low- and moderate-income people are tenants.  Landlords do not want to invest in energy efficiency because they do not pay the bill.  Tenants do not want to invest because they will be upgrading a property they don’t own.  Even if they did, most do not have the capital.

U.S. Census data for the 2013 Median Household Income in Travis County shows the vast majority of low- and moderate-income households are occupied by renters.

If creative financing can be arranged, this landlord/tenant barrier might be broken at a favorable advantage to both.

What You Can Do

Right now, there is a proposed budget amendment (Concept Proposal 3.18) that asks for more money to assist low-income customers.

Ask City Council to amend this Proposal to direct this money to more cost-effective programs than free weatherization, including door-to-door direct installations and creative financing for rental dwellings

Council Members’ contact information is at this link.

The Bank of No Return

If the only thing Austin can do for low- and moderate-income consumers is self-righteously throw money at problems to make ourselves feel less guilty, we will not be helping them much.

I support money for pilot programs* in next year’s budget to assist more people in the bottom half of income.  However, these programs have to save these customers noticeable amounts of energy and money.  We need to think strategically, and we need to choose carefully. There will never be enough money to help the poor.

A rich person will not invest in the Bank of No Return.  Why should we treat the poor any differently?

*Alternative Ideas for Pilot Programs to Help the Poor

1. Door-to-Door Direct Installation Program

Budget: $500,000

This will install low-cost, high savings measures such as LEDs, pipe wrap, and low-flow showerheads in lower income neighborhoods.  This approach has been effectively implemented at Seattle’s municipal utility. (See link.)

2. Creative Financing for Rental Units

Budget: $500,000

The vast majority of low- and moderate-income people in Travis County are tenants.  Landlords do not want to invest in energy efficiency because they do not pay the bill.  Tenants do not want to invest because they will be upgrading a property they don’t own.

Paul Robbins has been an environmental activist and consumer advocate since 1977.  He was one of the original founders of Austin’s clean energy programs.  In the late 1980s, he was instrumental in founding Austin Energy’s Multifamily Program, which is the City’s most cost effective alternative for low- and moderate-income people.