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LIHEAP IM 2012-2 Update to the Allocation Formula for FY 2012

Published: February 1, 2012
Audience:
Low Income Home Energy Assistance Program (LIHEAP)
Category:
Guidance, Policies, Procedures, Information Memorandums (IM)

Transmittal No.  LIHEAP-IM-2012-02

Date:  February 1, 2012

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 for Federal Fiscal Year (FFY) 2012.

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.

PURPOSE:

To inform State LIHEAP grantees about the update to the Low Income Home Energy Assistance Program (LIHEAP) allocation formula for FFY 2012.

BACKGROUND:

Starting in Federal Fiscal Year (FFY) 1985, allocations to the States (the 50 States plus the District of Columbia) from the LIHEAP regular block grant fund have been determined by one of two formulas.  These formulas are the “old formula”, which takes effect when the amount available to all States falls below $1.975 billion, and the “new formula”, which takes effect when such amount equals or exceeds $1.975 billion.  The old formula sets such allocations by the shares that the States would have received under a FFY 1984 appropriation $1.975 billion; these shares remain fixed from year to year.  By contrast, the new formula sets such allocations by taking into consideration the States’ shares of home energy expenditures by low income households (LIHHs) in a normal year.  These shares (allotment percentages) must be based upon the most recent satisfactory data available; thus, the State percentages are updated annually.

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

Estimates of LIHH Home Energy Expenditures

DEA estimates the States’ home energy expenditures by LIHHs in a normal year by (1) multiplying, for each major home energy fuel, normal-year LIHH home energy consumption by the price of that fuel; and (2) aggregating such expenditures across all fuels.  DEA estimates such expenditures 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).

For each fuel except Wood, DEA estimates normal-year LIHH home energy consumption by adjusting given-year all household all-purpose consumption by (1) normal year temperature; (2) low income household prevalence; (3) the difference in consumption behavior by low income households; and (4) the share of all-purpose consumption that is used for home energy (itself adjusted for the given year’s temperature).  For Fuel Oil, DEA augments overall consumption by households that live in multi-family units—because such households are excluded from the original data.

For Wood, DEA estimates normal-year LIHH home energy consumption by adjusting normal-year all household all-purpose consumption for (1) low income household prevalence; (2) the difference in consumption behavior by low income households; and (3) unit heat content.

DEA uses Heating Degree Days (HDDs) or Cooling Degree Days (CDDs) to adjust temperature.  HDDs and CDDs represent, respectively, the amount below and above an ideal temperature of 65 degrees Fahrenheit.

Sources of Data

DEA obtains its data from the following sources:

  • The U.S. Department of Commerce, National Oceanographic and Atmospheric Administration’s (NOAA’s) Historical Climatology Series (HCS) 5-1 and 5-2—for HDDs and CDDs of all States other than Alaska and Hawaii;
  • NOAA’s Annual Climatological Summary—for HDDs and CDDs of Alaska and Hawaii;
  • The U.S. Department of Energy, Energy Information Administration’s (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.

With one exception, DEA uses the most current such data available.  The exception applies to given-year HDD/CDD data and SEDS consumption data, which calls for the same year for both sources, and captures the extent to which changes in consumption relate to changes in climate.  Normally, each type of data is updated on the following cycles—note that data on the heat content of Wood remains unchanged:

  • Annually, for given-year HCS 5-1, HCS 5-2, and Annual Climatological Summary data;
  • Annually, for SEDS data;
  • Annually (on a rolling three-year cycle), for ACS data;
  • Every four years, for RECS data; and
  • Every ten years (on a rolling three-decade cycle), for 30-year normal HCS 5-1 and HCS 5-2 data.

Such data is usually available three years after each update.
Final Allocations—Application of Hold Harmless Provisions

Subsections (a)(2) and (a)(4) of Section 2604 set only part of the requirements for allocating LIHEAP regular block grant funds to the States.  The 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”, set floors below which certain States’ allocations cannot fall when the total amount available to the States equals or exceeds certain given levels.  However, they also cause certain other States to experience disproportionate changes, or no changes at all, when regular Block Grant appropriations rise.

The following two types of hold-harmless provisions apply only to LIHEAP regular block grant funds:

  • The first hold-harmless provision applies to all States.  It takes effect when the amount available to all States equals or exceeds $1.975 billion, with each State’s allocation equal to or greater than what 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 takes effect when the amount appropriated equals or exceeds $2.25 billion.  It makes each such 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 the new allocation formula and the old allocation formula.  The descriptions of these are as follows:

  • The new allocation formula (which takes effect when the amount of such funds that is available to all States equals or exceeds $1.975 billion) allocates such funds to each State, in order of priority, in the following fashion:
    • 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; 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.
  • 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 would have received for FFY 1984 if the appropriation for that year had been $1.975 billion.

Unlike the old allocation formula, the new allocation formula changes from year to year.  These changes stem from the previously-described updates to the data that underlie that formula rather than from modifications to the formula itself.  Depending upon the updates to such data, these changes may cause States to receive different amounts in years in which the total available to all States remains the same.  Such States typically are those whose allocations aren’t fixed by the first hold-harmless provision in at least one such year.

For an example of how DEA calculates the final allocations under the new allocation formula, see the FY10_$1.975B_NewFormula tab of http://archive.acf.hhs.gov/programs/ocs/liheap/guidance/information_m...  Note that the allotment percentages in this example aren’t updated for FFY 2012.

CONTENT:

 

Last spring, DEA updated the LIHEAP allocation formula for FFY 2012.  In so doing, the updated new formula changed all States’ regular block grant allotment percentages.

In accordance with the normal schedule, DEA updated specific information for the following years:

  • Calendar Year (CY) 2008: total residential energy consumption for the aforementioned major heating fuels, except Wood, and the major cooling fuel;
  • CY 2008: average residential prices for the aforementioned major heating fuels, including Wood, and the major cooling fuel;
  • CY 2008: single-year HDDs and CDDs; and
  • CYs 2007 through 2009: the numbers of low income and total (low income and non-low income) households that use each heating fuel (and, for cooling, in total).

No updates were made to the thirty-year average HDDs or CDDs, or to any data obtained from RECS, as the previous year’s data continued to be the most current available.

“Low income households” are those whose incomes do not 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).

The States’ allotment percentages for FFY 2012 (under the new allocation formula) are as follows:

State

Allotment Percentage

Alabama........................................................................................

0.01582998

Alaska...........................................................................................

0.00398279

Arizona..........................................................................................

0.01132088

Arkansas........................................................................................

0.00898551

California......................................................................................

0.04451530

Colorado.......................................................................................

0.01267421

Connecticut...................................................................................

0.02398413

Delaware.......................................................................................

0.00375073

District of Columbia.....................................................................

0.00193969

Florida...........................................................................................

0.04592628

Georgia..........................................................................................

0.02741827

Hawaii...........................................................................................

0.00204877

Idaho.............................................................................................

0.00334873

Illinois...........................................................................................

0.05243020

Indiana..........................................................................................

0.02209150

Iowa..............................................................................................

0.01080294

Kansas...........................................................................................

0.00966931

Kentucky.......................................................................................

0.01343606

Louisiana.......................................................................................

0.01413996

Maine............................................................................................

0.01010302

Maryland.......................................................................................

0.02196700

Massachusetts...............................................................................

0.03729867

Michigan.......................................................................................

0.04862711

Minnesota......................................................................................

0.02047260

Mississippi.....................................................................................

0.00990414

Missouri.........................................................................................

0.01829074

Montana........................................................................................

0.00328155

Nebraska.......................................................................................

0.00591476

Nevada..........................................................................................

0.00497867

New Hampshire............................................................................

0.00742209

New Jersey....................................................................................

0.04010499

New Mexico..................................................................................

0.00429852

New York.....................................................................................

0.10227480

North Carolina..............................................................................

0.02618677

North Dakota................................................................................

0.00301794

Ohio..............................................................................................

0.04686780

Oklahoma......................................................................................

0.01151984

Oregon..........................................................................................

0.00663895

Pennsylvania.................................................................................

0.05807060

Rhode Island.................................................................................

0.00670385

South Carolina..............................................................................

0.01201268

South Dakota................................................................................

0.00271978

Tennessee......................................................................................

0.01700490

Texas.............................................................................................

0.07135182

Utah..............................................................................................

0.00413352

Vermont........................................................................................

0.00395721

Virginia.........................................................................................

0.02490459

Washington...................................................................................

0.01145104

West Virginia................................................................................

0.00638267

Wisconsin......................................................................................

0.02230423

Wyoming.......................................................................................

0.00153793

The updates caused 27 States to experience increases and 24 States to experience decreases in their allotment percentages over last year’s percentages.  Such increases and decreases were caused primarily by the following:

  • Relative changes in HDDs;
  • Relative changes in natural gas, fuel oil, and electricity prices;
  • Relative changes in the shift of heaters from all-income to low income; and
  • Relative changes in the shares of fuels used for home energy.

However, changes in the States’ allotment percentages do not necessarily result in concomitant changes in such States’ final allocations, due to the new-formula’s hold-harmless provisions.  For example, 10 States had new-formula allotment percentage changes of greater than eight percent in magnitude.  However, under a FFY 2011 appropriation of $2.51 billion, only two—Hawaii and Missouri—would have a final allocation change of greater than eight percent in magnitude.  The lack of such a relationship in each of the other eight States results from its final allocation being held to one of its hold-harmless levels.

ATTACHMENTS::

(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) Descriptions of the columns that appear in the spreadsheet

INQUIRIES:

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
Office of Community Services