Low income home weatherization pays big dividends for Ohio households - averaging over 20 percent home energy cost savings and returning $2.51 per dollar spent.  But the freeze and possible elimination of the clean energy standards threaten to squash investment by utility firms.

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Press release

Reduces pollution, cuts energy bills, creates jobs

Energy spending in Ohio increased 58 percent over the past decade. In 2012, Ohioans spent nearly $50 billion on energy, equal to nine percent of our gross state product.[1] Over $9 billion went to heat and power homes in the state, an expense of $2,052 for the average household.

For low-income families, energy costs can be a financial burden. Roughly one in three Ohio households, 1.4 million in all, are considered cost burdened by the U.S. Department of Housing and Urban Development standards, paying more than 30 percent of their annual income on housing and utilities combined.  After paying rent and utility bills, these families have difficulty covering the cost of other necessities such as food, clothing, transportation and medical care.  According to the 2013 Home Energy Affordability Gap Report, more than 300,000 Ohio households pay over 30 percent of their annual income just on their home energy bills alone.[2] 

Fortunately, Ohio has one of the best programs in the nation for weatherizing buildings where low-income families live.   Ohio’s Home Weatherization Assistance Program (HWAP) reduces energy costs for low-income households and makes it easier for them to meet their basic needs, while also making homes more comfortable and reducing pollution.  Ohio’s program saves more energy per household than has been documented in weatherization programs in any other state.[3] This report reviews Ohio’s HWAP accomplishments, documents some basic facts about energy use for home heat and power, discusses how recent policy changes are helping and hurting these efforts, and makes recommendations for policies that will spark more investment in weatherization and better returns. 

Due to inadequate state, federal and utility funding, we weatherize too few homes—just 1.2 percent of the 460,000 households that sought emergency utility bill assistance last year received weatherization services; and far less than one percent of the 1.3 million households technically eligible to receive them.  And a bill recently signed by Ohio Governor John Kasich and passed by the Ohio State Legislature will have detrimental effects on the future level of utility investments.  

In 2008, Ohio put in place an effective standard that requires investor-owned electric utilities to reduce electric energy consumption in their territory by 22 percent by 2025.  Since 2008, the standard has driven a seven-fold increase in electric utility investments in low-income home weatherization.  In late spring of 2014, however, Governor John Kasich signed into law a bill freezing that energy standard for two years while assessing whether to eliminate it altogether.  Eliminating the standard, or minimizing it, would result in dramatic cuts to already modest low-income weatherization programs.  Based on current spending trajectories, the freeze and future elimination of Ohio’s energy efficiency standard for electric utilities would result in the loss of more than $300 million in estimated investments in low-income weatherization services, enough to weatherize nearly 50,000 homes over the next ten years. The state should restore Ohio’s standard and further incentivize utilities to invest in low-income weatherization to meet requirements. 

Ohio would benefit greatly from increased state, federal and utility investments in weatherization. They more than pay for themselves. According to the U.S. Department of Energy, every $1 invested in HWAP generates $2.51 in energy savings and related benefits—$1.80 in reduced energy bills plus 71 cents in benefits to ratepayers, households, and communities.[4]  When low-income households cannot afford their utility bills, much of the cost is born by other ratepayers through increased rates.  Weatherization not only reduces utility bills for low-income households, it also shrinks utility debt and lowers rates for all households, improves the health and safety of homes, lessens reliance on imported energy, reduces harmful emissions, and increases employment.  For every $1 million invested in weatherization, 52 direct jobs and 23 indirect jobs are created, many of which go to lower-income workers.[5]

Home Energy Assistance

Heat and electric power are basic necessities. To keep the heat on and power flowing, low-income families are often forced to cut back on other necessities and seek public assistance.  These households face a difficult choice between eating properly, purchasing medication, or heating their homes.  Each year, hundreds of thousands of Ohioans seek public assistance in paying utility bills.

In 2012, more than $440 million in public dollars went to provide utility bill assistance to low-income families: $162.7 million in emergency assistance from the federal government to help 460,000 Ohio families cope with a winter or summer crisis and $277.5 million in ratepayer dollars to help 350,000 low-income households reduce their monthly utility bill to six percent of household income.  However, relatively few households are weatherized each year.  Table 1 shows that in 2012, 5,741 homes were weatherized, less than one percent of the 460,000 households that sought emergency energy bill assistance that year and far less than one percent of the 1.3 million households technically eligible to receive weatherization services.  It also provides basic information on the state of Ohio’s programs dedicated to making home energy bills more affordable for low-income families.

Home Weatherization Assistance Program (HWAP)

Many low-income families live in older homes with inadequate insulation and inefficient appliances, contributing to high levels of energy use and large utility bills.   Ohio’s Home Weatherization Assistance Program increases the energy efficiency of homes of low-income renters or owners and permanently reduces energy bills.[6] Recipient households receive the following weatherization and efficiency services:[7]

1. An inspection or audit to determine what energy-efficiency measures are appropriate

2. Energy education

3. Installation of weatherization services and necessary health and safety measures including: Wall, attic and floor insulation; blower-door guided air sealing; heating system safety tests, repairs and tune-ups; duct insulation and sealing; hot-water savings measures; and energy related home repairs. [8] 

4. Final inspection of installation.

To qualify, households must be at or below 200 percent of the federal poverty guidelines, as shown in Table 3. Nearly 1.4 million households in Ohio qualify.  Since weatherization funds are so limited, priority is given to the elderly, those with disabilities, families with children, and households with high energy burdens.[9] 

According to the 2013 Home Energy Affordability Gap Report, over 300,000 Ohio households with incomes at or below 50 percent of the federal poverty level pay 31 percent of their annual income on home energy bills.[10]More than 377,000 households living with incomes between 50% and 100% of the federal poverty level, face a home energy burden of 16%.

HWAP State and Federal Funding

HWAP receives funding from the federal Department of Energy (DOE) and an appropriation from the state of Ohio’s federal Home Energy Assistance Program (HEAP) dollars. Per federal rules, up to 20 percent of a state’s HEAP budget can be appropriated to the Home Weatherization Assistance program, and Ohio consistently transfers 15 percent.[11]  Table 3 shows the level of funding and the number of homes weatherized over a ten-year period.  On average, the state of Ohio weatherizes roughly 7,000 homes each year, only about 1.5 percent of the 459,000 households seeking emergency assistance for help with their utility bills. 

 

In 2009, however, the American Reinvestment and Recovery Act (ARRA), also known as the federal stimulus package, temporarily expanded the Weatherization Assistance Program across the nation.[12]  Ohio received $289 million of $5 billion dollars committed nationally.  ARRA also changed a number of existing provisions for weatherization, notably: requiring weatherization workers be paid “prevailing wages”; expanding the income eligibility level from 150 percent to 200 percent of the federal poverty level; increasing the average assistance level per home from $2,500 to $6,500; and doubling allowable funding for training.[13]

During ARRA’s three-year period, more than 40,000 homes in Ohio were weatherized with federal stimulus funds.  Table 5 shows average household savings during that period ranging between $540 and $620, with a net present value of the total lifetime energy savings of measures installed amounting to over $10,000 per household. Among other benefits, in addition to household energy savings, approximately 1,200 Ohio residents were hired and trained to do the work.[14]  Unfortunately, because ARRA funds were temporary, nearly 900 of those workers later lost their jobs, emphasizing the need for a sustainable and consistent source of funding.  On a positive note, 300 of the original 1,200 were retained to meet increasing utility investments in weatherization resulting from Ohio’s energy efficiency requirement.

Ohio’s Weatherization Network also Manages Low-income Energy Efficiency Programs for Ohio’s Utilities. 

Ohio’s HWAP network also manages low-income efficiency programs for all seven major utilities in the state (both gas and electric companies), and for a number of smaller gas utilities, an approach that enhances household savings and saves ratepayer money.   The majority of electricity and natural gas services in the United States are provided by investor-owned utilities (private companies with stockholders typically regulated by state public service commissions).  Figure 1 below shows the many sources supporting Ohio’s weatherization network, the largest source being federal HWAP dollars, which peaked during the three-year federal stimulus period from 2009 to 2011. 

Ohio’s Clean Energy Law Drives Utility Investments.

Roughly half of the states, including Ohio, have laws and regulations in place requiring utilities to invest in energy efficiency programs. Ohio’s efficiency standard, prior to being frozen by Governor Kasich and the state legislature, required electric utilities to achieve a 22 percent reduction in energy consumption by 2025 (starting at 0.3 percent annual savings in 2009, ramping up to one percent annually in 2014 and two percent in 2019).

Table 5 below shows that as Ohio’s efficiency requirements ramped up, utility investments in low-income weatherization increased dramatically.   Since Ohio’s efficiency standards were enacted, electric utility investments increased seven-fold.  In 2012 alone, to meet energy efficiency requirements, Ohio’s electric utilities invested approximately $249 million in efficiency services, six percent of which went towards low-income weatherization programs. In 2013, Ohio ranked 18^th in the nation for its energy efficiency policies and was the most improved state (according to the American Council for an Energy-Efficiency Economy’s 2013 State Energy Efficiency Scorecard).  Unfortunately, since then, Ohio became the first state to roll back its efficiency requirement for electric utilities. Governor Kasich signed a bill essentially freezing Ohio’s efficiency standard for two years while the legislature debates whether to eliminate the standard altogether. This is a huge setback for Ohio’s clean energy economy and for low-income weatherization programming.

HWAP Administration.  With respect to energy savings achieved, Ohio has one of the most successful weatherization assistance programs in the country.[15] According to an independent evaluation conducted in 2006, “Ohio’s HWAP program is so effective that many households don’t need to go on [the Percent Income Payment Plan] to retain utility service.”[16] Ohio also set an example for other states by creating a funding model combining federal weatherization funds with utility resources and other housing rehabilitation funds to provide the most comprehensive and effective services possible, discussed more in the next section.  The Ohio Development Services Agency administers HWAP through its Office of Community Assistance (OCA). The OCA oversees weatherization providers to ensure regulations are followed and the program is effective.[17] Services are delivered through a network of 58 community action agencies and local governmental organizations throughout the state, in partnership with local, independent contractors. Weatherization providers are trained at the Ohio Weatherization Training Center run by the Corporation for Ohio Appalachian Development.[18]

HWAP Outcomes.  Nationally, for every $1 invested in the Low-Income Weatherization Assistance Program, weatherization returns $2.51 to the household and economy: $1.80 to the household through reduce energy bills; 71 cents to ratepayers, households, and communities through fewer payment shortfalls and uncollectible bills, decreases in heat-related illness and death, reduced risk of home fires due to utility disconnection, and increased local employment. [19] On average, HWAP participants reduce their gas consumption by 25 percent for single-family homes and 20 percent for multifamily homes, saving low-income families $350 in reduced first-year energy costs following a HWAP project.[20] Beyond energy benefits, weatherization increases property value, reduces fires, improves health and safety conditions, increases comfort for occupants, reduces homelessness, and extends the lifetime of affordable housing.[21]  Investments in weatherization also reduce reliance on imported energy, curb harmful greenhouse gas emissions, and increase employment.

Investments in HWAP create jobs, many of which pay relatively decent wages.  For every $1 million invested in weatherization, 52 direct jobs and 23 indirect jobs are created. [22]Basic weatherization includes minor repairs, blowing and batting insulation, window and door repair, weather stripping, solar film installation, air sealing, caulking, minor structural repairs, air and duct sealing, light bulb installation, and installing smoke detectors. Special weatherization work, usually done by qualified independent local contractors, includes door and window replacement, installation or repair of furnace/cooling system (HVAC) and related electrical, pipe and duct work. Weatherization jobs don’t pay as well as many building trades positions, but they pay above minimum wage.  Table 6 details prevailing wages for both general and special work related to weatherization jobs, based on a survey conducted for 2010 ARRA purposes.  Table 6, below, shows official prevailing wages compiled by the Department of Labor for weatherization and related work across Ohio.[23]    

Weatherization and Health Partnerships

Low-income weatherization service providers are in a unique position to address health and safety issues when they enter homes to do weatherization-related work.  To this end, Ohio’s home weatherization network has expanded the types of services it provides when funding allows.  These health and safety measures and home modifications can increase safety of homes, prevent injuries, and reduce health care costs, particularly for elderly people and children.  Measures might include electrical work, addressing mold and moisture issues and poor air quality, lead abatement, roof maintenance, and/or basic home repairs such as banister repair, debris removal, installation of shower bars, ramps, and supplemental lighting. 

Weatherization service providers are largely housed in non-profit community action agencies that also administer senior programs, health clinics and Head Start programs, making them trusted members of the community and more likely to be welcomed into the homes of residents (a typical barrier to service delivery).  Rather than having different groups of people enter a dwelling multiple times to tackle various issues, weatherization providers in coordination with public health entities can and often do achieve a one-touch approach to delivering services. 

Summary

Weatherization helps end the cycle of energy poverty for low-income households and shrink the home energy affordability gap.  Ohio’s Home Weatherization Assistance Program, one of the best in the nation, reduces financial stress on low-income families in Ohio and enables them to allocate more of their income towards other necessities, such as food, medication, and transportation. There are also health benefits related to the program. But we do way too little of it. By reviving Ohio’s energy efficiency standard and driving greater state, federal and utility investments in low-income weatherization, Ohio can lead the nation in energy efficiency while reducing the energy burden on struggling families.  Investments in weatherization also create jobs, reduce dependence on polluting fossil fuels imported from elsewhere, and improve public health. 

Recommendations

1. Require energy utilities to invest in home weatherization for low-income families. Unfreeze Ohio’s energy efficiency standards. Doing so will promote greater investment and innovation in weatherization. Electric utilities should be further encouraged to meet requirements by expanding their low-income weatherization programs.

2. Make low-income home weatherization an important component of Ohio’s State Implementation Plan for meeting the Environmental Protection Agency’s carbon rule.  The Obama Administration is in the process of establishing carbon rules that will require significant reductions in carbon pollution by 2030.  In order to meet Ohio’s specific requirements, the state must create an implementation plan.  Ohio’s state implementation plan should make investing in low-income weatherization one of its priorities to achieve the necessary carbon reductions.

3. Create additional avenues to combine federal, state and local funding for weatherization, home repair and health service delivery for low-income households. During initial weatherization consultations, contractors should examine low-income households for other problems, including mold or leakage. Such efforts can combine funding sources to improve the overall health and quality of homes through weatherization and other home improvements.

4. Increase state and federal investments in low-income weatherization. Federal funding should return to ARRA levels. These long-term investments reduce energy costs and demand, improve the health and safety of a home, reduce harmful greenhouse gas emissions and increase federal support for weatherization services, providing additional tools to states for meeting carbon reduction goals.  Ohio’s Advanced Energy Fund could also be a source of additional support from the state. 

5. Expand the Energy Efficiency Standards to the federal level. Require ten percent national energy efficiency standard to encourage utilities throughout the nation to increase investment in weatherization and other energy efficiency measures.
   

Authors

Amanda Woodrum, a researcher for Policy Matters Ohio, has released reports on the advanced energy fund, clean energy standards, transportation, manufacturing, green pathways out of poverty and basic family budgets in Ohio, among other topics. Amanda has a master’s in economics and a law degree from the University of Akron, and a bachelor’s degree from Bowling Green State University.

Elizabeth Jacob, a summer research intern at Policy Matters Ohio, is a sophomore at The College of William and Mary double majoring in Environmental Science and Policy and Business Administration.

Acknowledgements

We extend our gratitude to Environmental Health Watch for generous support of this work and smart feedback.  We are also very thankful to the Ohio Partners for Affordable Energy for their overall work and for review of this report.  The Ohio Development Services Agency provided data and insights. Any errors and omissions in the report are the sole responsibility of the authors.

Policy Matters Ohio is a non-profit, non-partisan research institute dedicated to researching an economy that works for all in Ohio. Policy Matters seeks to broaden debate about economic policy by providing research on issues that matter to Ohio’s working people and their families. Areas of inquiry for Policy Matters include work, wages, and benefits; education; economic development; energy policy; and tax policy. Generous funding comes from the Ford, Saint Luke’s, Joyce, Gund, Cleveland, Public Welfare, Sisters of Charity, R.J. Wean, Stoneman, Doll Family, EMA and AHS Foundations; from the Center on Budget and Policy Priorities and the Working Poor Families Project and Greater Cleveland Community Shares. Special funding for this project came from Environmental Health Watch.

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© 2012 Policy Matters Ohio. Permission to reproduce this report is granted provided that credit is

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