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LIHEAP IM 2010-15 Update to the LIHEAP Allocation Formula for FY 2011

Published: October 14, 2010
Audience:
Low Income Home Energy Assistance Program (LIHEAP)
Category:
Guidance, Policies, Procedures, Information Memorandums (IM)

Date:  October 14, 2010

TO:      LOW INCOME HOME ENERGY ASSISTANCE PROGRAM (LIHEAP) GRANTEES

GUIDANCE INTENDED FOR:   ____X____STATES
                                                 ____X____TRIBES/TRIBAL ORGANIZATIONS
                                                 ____X____TERRITORIES

SUBJECT: Update to the LIHEAP Allocation Formula

RELATED REFERENCES: The Low Income Home Energy Assistance Act, Title XXVI of the Omnibus Budget Reconciliation Act of 1981, Public Law (P.L.) 97-35, as amended.

To inform State LIHEAP grantees about the update to the LIHEAP allocation formula for FY 2011.

BACKGROUND: Prior to Federal Fiscal Year (FFY) 1985, State allocations (including District of Columbia allocations) from the regular block grant fund of the Low Income Home Energy Assistance Program (LIHEAP) were determined by a formula that was established in 1980 (the old allocation formula).  Starting in FFY 1985, however, such allocations are determined by a formula that represents States’ shares of low income home energy expenditures (the new allocation formula)—though only when the total amount available for such section equals or exceeds $1.975 billion.  These shares (allotment percentages) are based upon the most recent satisfactory data available.

U.S. Department of Health and Human Services (HHS) administers LIHEAP at the Federal level.  The Division of Energy Assistance (DEA), within the Office of Community Services (OCS) of HHS’ Administration for Children and Families (ACF) is the branch of HHS that determines the new allocation formula’s allotment percentages.

Estimates of Low income Household Expenditures

DEA determines the new allocation formula’s allotment percentages by estimating the States’ home-energy expenditures by low-income households.  It determines such expenditures by estimating low income households’ normal-year home energy consumption and by multiplying such consumption by average price.  It does so for the seven major home heating fuels (Coal, Natural Gas, Fuel Oil, Kerosene, Liquefied Petroleum Gas, Electricity and Wood) and the major home cooling fuel (Electricity).  In determining “normal-year” consumption, DEA adjusts such consumption for the most recent 30-year average of Degree Days, which is a measure of the amount of heat or cold in the climate relative to an ideal temperature.  For home heating, DEA adjusts consumption for Heating Degree Days (HDDs); whereas for home cooling, DEA adjusts consumption for Cooling Degree Days (CDDs).

For each State, and for all fuels except Wood, DEA estimates low income households’ normal-year home energy consumption by following general scheme—with some modifications for certain fuels:

The modifications are as follows:

For Wood, DEA adjusts all- households’ consumption (in cords) for (1) a normal-year’s climate; (2) the ratio of average low income consumption to that of all-income consumption; and (3) the heat content of a cord.  DEA multiplies this adjusted consumption by the nationwide average price.

Sources of Data

DEA obtains the data that it uses in the steps above from the following sources:

With one potential exception, DEA updates these data annually, provided such sources make the updated data available.  The exception applies annual HDD/CDD and SEDS consumption data, which DEA always updates to the same year.  Usually, all such data lags by three years from the year in which its respective source collects it.  The normal schedules for such updates are as follows:

Final Allocations—Application of Hold Harmless Provisions

Subsections (a)(2) and (a)(4) of Section 2604 of P.L. 97-35 set only part of the requirements that DEA must follow in allocating LIHEAP regular block grant funds to the States; other subsections of P.L. 97-35 set the remaining requirements.  These remaining requirements, which are set by subsection (a)(2)(A) and subsection (a)(2)(B), require HHS to raise the allocations of certain States to certain amounts and to ratably reduce the allocations of the other States’ in order to fund the States whose allocations were so raised.  These requirements, called “hold-harmless provisions”, cause certain States to experience a disproportionate increase (or no increase at all) when regular Block Grant appropriations rise.  However, they prevent any State from experiencing a decrease when regular Block Grant appropriations rise.

There are the following two types of hold-harmless provisions—note that they apply only to LIHEAP regular Block Grant funds:

The first hold-harmless provision applies to all States.  It comes into effect when the amount available to all States equals or exceeds $1.975 billion.  It makes each State’s allocation equal to or greater than which it would have received in fiscal year 1984 if the appropriation for that year had been $1.975 billion.

The second hold-harmless provision applies to States whose shares of all States’ allocations (their “allocation shares”) under a hypothetical appropriation of $2.25 billion fall below one percent.  It comes into effect when the amount appropriated equals or exceeds $2.25 billion.  It makes each State’s allocation equal to or greater than the amount available to all States times the greater of (1) the State’s allocation share under a hypothetical appropriation of $2.14 billion; and (2) the State’s allocation share under the hypothetical appropriation of $2.25 billion.
 

The first hold-harmless provision effectively divides the LIHEAP regular block grant formula into two: the “new allocation formula” and the “old allocation formula”.  The descriptions of these are below:

The new allocation formula takes effect when the amount of such funds that is available to all States equals or exceeds $1.975 billion.  It allocates such funds to each State, in order of priority, in the following fashion:

The old allocation formula takes effect when the amount of such funds that is available to the States falls below $1.975 billion.  It allocates such funds to each State strictly by the share of all such funds that that State received for FFY 1984.

Unlike the old allocation formula, the new allocation formula changes from year-to-year.  These changes stem from updates to the formula (those described above) rather than from modifications to the formula, itself.  Depending upon the updates to the data that underlie the new allocation formula, these changes may cause States to receive different amounts in years in which the total available to all States remains the same.  Such States are those whose allocations, under the new allocation formula, are held to an amount determined by the first hold-harmless provision.

For an example of how DEA calculates the final allocations under the new allocation formula, see the FY10_$1.975B_NewFormula tab.   Note that the allotment percentages in this example aren’t updated for FFY 2011.

It determines the ratio of the most recent thirty-year average of HDDs or CDDs to the most recent year’s worth of such figures; It determines, using the most recent year’s worth of HDDs or CDDs and the most recent household-consumption data, the share of total residential energy consumption that’s attributable to home-heating or home-cooling for each fuel in that year; It determines the ratio of average consumption on the part of low income households to that of all (low income and non-low income) households for each fuel; It determines the ratio of the number of low income households to that of all (low income and non-low income) households that use each fuel (or, in the case of cooling, in total); It multiplies the products of the figures from #1, #2, #3 and #4 by total residential consumption for each fuel; and It multiplies the figures from #5 by each fuel’s average residential price for each fuel.</>For Coal, DEA uses the proportion of total residential energy consumption that’s attributable to home-heating for Fuel Oil; For Fuel Oil, DEA (1) augments total residential energy consumption by that of households in dwellings with five or more units; and (2) determines ratio of the number of low income households to that of all households that use Fuel Oil or Kerosene; and</>For Kerosene, DEA determines ratio of the number of low income households to that of all households that use Fuel Oil or Kerosene; The U.S. Department of Commerce (DOC), National Oceanographic and Atmospheric Administration’s (NOAA’s) Historical Climatology Series (HCS) 5-1 and 5-2—for HDD and CDD data; The U.S. Department of Energy, Energy Information Administration (EIA’s) State Energy Data System (SEDS)—for total residential energy consumption and fuel price data; EIA’s Residential Energy Consumption Survey (RECS)—for (1) share of residential energy consumption attributable to home-heating/cooling data; (2) Fuel Oil augmentation data; (3) low income household to all-household usage data; and (4) average all-household Wood consumption data; DOC, U.S. Census Bureau’s (Census’) American Community Survey—for all and low income fuel user counts; and DEA/EIA—for the heat content of Wood.  NOAA updates given-year HCS 5-1 and 5-2 data annually; NOAA updates 30-year normal HCS 5-1 and 5-2 data every ten years (on a rolling three-decade cycle); EIA updates SEDS data annually; EIA updates RECS data every four years; Census updates ACS data annually (on a rolling three-year cycle); and DEA/EIA leaves heat content of Wood data unchanged.  The amount determined by the first hold-harmless provision, if the appropriation is less than $2.25 billion;

 

  • The amount determined by the greater of the first and second hold-harmless provisions, if the appropriation exceeds $2.25 billion;

 

  • The amount determined by the State’s allotment percentage (as determined by DEA using the method above); or

 

  • An amount between that from #1 or #2 above (whichever applies) and #3 above, for States whose final allocations must be reduced to fund the States that are “held harmless” by provisions one or two.

Content:

 

On April 23, 2010; DEA updated the LIHEAP allocation formula for FFY 2011.  In so doing, it changed all States’ regular block grant allotment percentages.  DEA carried out these updates through a contract with APPRISE, Incorporated (Apprise) under purchase order number HHSP233200700798P.

In accordance with the normal schedule, DEA updated the following figures:

  • Total residential energy consumption for the aforementioned major heating fuels, except Wood, and the major cooling fuel;
  • Average residential price for the aforementioned major heating fuels (including Wood) and the major cooling fuel;
  • HDDs and CDDs.

However, out of accordance with the normal schedule, DEA didn’t update the numbers of low income and total (low income and non-low income) households that use each heating fuel (and, for cooling, in total).  DEA didn’t do so because last year’s data remained the most recent satisfactory such data available.  DEA expects to update these figures in future years.

DEA also corrected the following data that had been incorrectly entered:

  • The share of Natural Gas that households in the Northeast Region used for home heating in the year of the most RECS; and
  • The average, per household consumption of Wood on the part of low income households.

DEA defined “low income households” as those whose incomes don’t exceed the Federal maximum LIHEAP income-eligibility standard set by Section 2604(a)(2) of P.L. 97-35, as amended.  This standard is greater of 150 percent of Federal Poverty Guidelines (FPG) or 60 percent of State Median Income (SMI).  DEA used 60 percent of SMI rather than 75 percent of SMI despite the fact that 75 percent of SMI has been the applicable level for the last two fiscal years.  DEA did so because the 75 percent of SMI level applies only to those two fiscal years.
DEA determined the States’ allotment percentages (under the new allocation formula) to be as follows:

State

Allotment Percentage

Alabama

0.01598810

Alaska

0.00511136

Arizona

0.01098008

Arkansas

0.00851620

California

0.04453204

Colorado

0.01247231

Connecticut

0.02238652

Delaware

0.00372930

District of Columbia

0.00192205

Florida

0.04582679

Georgia

0.02640566

Hawaii

0.00149531

Idaho

0.00349312

Illinois

0.05013781

Indiana

0.02080388

Iowa

0.01099416

Kansas

0.00993180

Kentucky

0.01255667

Louisiana

0.01364782

Maine

0.01090475

Maryland

0.02080203

Massachusetts

0.03718079

Michigan

0.04819121

Minnesota

0.02025435

Mississippi

0.00939977

Missouri

0.02011412

Montana

0.00287114

Nebraska

0.00553228

Nevada

0.00526474

New Hampshire

0.00604558

New Jersey

0.04105011

New Mexico

0.00441234

New York

0.10018105

North Carolina

0.02822560

North Dakota

0.00256213

Ohio

0.04941378

Oklahoma

0.01224121

Oregon

0.00702429

Pennsylvania

0.05884936

Rhode Island

0.00614566

South Carolina

0.01259760

South Dakota

0.00252569

Tennessee

0.01716759

Texas

0.07348829

Utah

0.00507743

Vermont

0.00418985

Virginia

0.02486369

Washington

0.01244919

West Virginia

0.00639254

Wisconsin

0.02235696

Wyoming

0.00129389

 

The updates caused 24 States to experience increases in their allotment percentages and 27 to experience decreases in their allotment percentages.  Five States (Alaska, Colorado, Idaho, Utah and Wyoming) experienced decreases of more than five percent.  Six other States (Arizona, District of Columbia, Iowa, Maryland, Nevada and New York) experienced increases of more than five percent.

The most significant causes of these increases were increases in expenditure for Natural Gas, Fuel Oil and Electricity (for heating and cooling).  For example; Arizona, which had the greatest increase in allotment percentage, experienced a 6.7 percent increase in its households’ Natural Gas and Electricity (heating and cooling) expenditures.  Similarly, the District of Columbia, which had the second-greatest increase in allotment percentage,  experienced a 14.0 percent increase in its households’ Natural Gas, Fuel Oil and Electricity (cooling) expenditures.  In these States, the increases in Natural Gas and Fuel Oil expenditures stemmed from increases in total residential consumption and increases in price; whereas the increases to Electricity (heating and cooling) stemmed from increases in price.

The most significant sources of these decreases were decreases in expenditure for Fuel Oil and Kerosene.  For example; Idaho, which had the greatest decrease in allotment percentage, experienced a 26.3 percent decrease in its households’ Fuel Oil and Kerosene expenditures.  Similarly, Alaska, which had the second-greatest decrease in allotment percentage, experienced a 19.8 percent decrease in its households’ Fuel Oil and Kerosene expenditures.  In each State, the decrease in Fuel Oil expenditures stemmed from a decrease in total residential consumption—a decrease that offset an increase in price.

The changes in the States’ allotment percentages don’t necessarily result in concomitant changes in those States’ final allocations (after applying the hold-harmless provisions) under a FFY 2011 appropriation of $2.51 billion.  For example, of the 11 States with allotment percentage changes of greater than five percent in magnitude, only two—Alaska and Maryland—have final allocation changes of greater than five percent in magnitude.  The lack of such relationship in the other States results from their final allocations being held to amounts, under a hold harmless provision, that (1) don’t stem from their allotment percentages at all (e.g. those that stem from hold harmless provision one); or (2) stem from their allotment percentages but are reduced to fund the States whose allocations were based on a hold harmless provision.

ATTACHMENT:

(A) Section 2604(a)(2) of the Low Income Home Energy Assistance Act, Title XXVI of the Omnibus Budget Reconciliation Act of 1981
(B) Section 2604(b)(2)(B) of the Low Income Home Energy Assistance Act, Title XXVI of the Omnibus Budget Reconciliation Act of 1981
(C) PDF of the Spreadsheet that calculates the States’ allotment percentages
(D) Descriptions of the columns that appear in 2010


INQUIRIES TO:
Peter Edelman, Program Analyst
Division of Energy Assistance
Office of Community Services, ACF
U.S. Department of Health and Human Services
370 L'Enfant Promenade, S.W.
Washington, D.C.  20447
(202) 401-5292
E-mail: peter.edelman@acf.hhs.gov

_______/s/_________________
Nick St. Angelo
Director
Division of Energy Assistance