Katrina as a New Beginning for Energy Assistance: The imperative of seizing the moment when America woke up to poverty

1. Katrina as a New Beginning for Energy Assistance:The imperative of seizing the moment when America woke up to poverty Wally Nixon President, Agents of Change, LLC 1705 North Jackson Street Little Rock, Arkansas 72207 501-831-0364 agentsofchange@gmail.com

2. Some differences from my world and yours • I come from Little Rock, Arkansas, and for all of my life have been a citizen of the middle South. Until January 1st of this year, when I retired, I worked for 15 years for Entergy Corporation, the largest utility holding company in that region of the country, whose headquarters were in New Orleans, Louisiana, and whose major cities of operations are – in addition to Little Rock -- Baton Rouge, Lake Charles, Beaumont, and Jackson. • I’ll pause a moment to let that sink in. Guess what my former fellow employees are doing these days in the aftermath of Katrina and Rita?

3. Some differences… • The world they face is indescribably different today than it was on August 29th of this year: In short: • The Entergy headquarters building next to the Hyatt Hotel in New Orleans (a 28-story highrise) has been abandoned, with its windows blown out and asbestos blown onto desks); • many of the company’s employees and their families have joined the hundreds of thousands of displaced persons in the region who have moved to other states. • Entergy’s headquarters now has been moved to Clinton, MS, into the building formerly owned by Bernie Ebbers’ WorldCom. • Entergy New Orleans, the company’s subsidiary in the Crescent City, whose offices were across the street from the infamous Charity Hospital, has declared bankruptcy.

4. Some differences… • For all practical purposes the City itself is bankrupt – as Mayor Nagin said last week in laying off 3,000 municipal employees: we have no revenue stream. The same is true of St. Bernard Parish, just east of the City. Can you imagine if Indianapolis had to be abandoned and its infrastructure were as devastated as that in New Orleans and the Gulf Coast? No jobs, no people, no commerce, no gas, no electricity, no water, no sewer, no homeowners insurance. • Total restoration costs for Entergy have now been estimated at between $750 million and $1.1 billion and will probably be more than that.

5. Some differences… • It is estimated that 150,000 or more of New Orleans’ 190,000 electric and gas customers are unable to receive electric and gas service and will be in that predicament for some time to come • The housing and commercial building infrastructure of much of New Orleans and the Gulf Coast has been obliterated, jobs, houses, property and other assets have evaporated. • The Gulf Coast outside New Orleans and across to Texas is only now beginning to receive recognition for enormity of their plight.

6. Some differences in low-income approaches • To cut to the chase on issues involving help for low-income and working poor people. As a starting point, both before and after these calamitous hurricanes: • we don’t have township “poor relief” funds; • we don’t have any Universal Service pilot programs with income-based benefits; • we don’t have winter or summer disconnect moratoriums; • we don’t have utility-sponsored or ratepayer-funded weatherization funding; • we don’t have state-funded bill payment energy assistance programs • we don’t have statewide coalitions like CKIW; • we don’t rank below the national average in the percentage of persons below the federal poverty level. In fact, Indiana ranks 35th on that list; Arkansas is 2nd, Louisiana is 4th, Mississippi is 1st, and Texas is 8th.

7. Still more differences… • Finally, our states don’t receive very much in LIHEAP or WAP funding from the federal government: • Indiana received $53.9 million in LIHEAP this year – the state has 775,000 low-income persons • our four states’ total LIHEAP allocation from DHHS was $83.1 million (and don’t forget how large Texas is and how hot it is in the summer throughout our region). The four states have a total of at least 5.6 Million LI persons. • It is not hard to understand why some in our part of the U.S. come to the conclusion that “them that has gets” when we look at the distribution of federal energy assistance dollars across the nation.

8. “Every day in every way, things are getting better and better!” • But hey -- Look what the Gulf Coast has been promised by our President: $200 Billion for rebuilding the region. He has also said that the 400,000 persons still living in motels will have homes by October 15 – just 4 days from today! And New Orleans and the levies will be rebuilt – all without raising taxes! This is the same administration that has proposed to cut next year’s LIHEAP budget from $2.1 billion to $2 billion. Shouldn’t we jump for joy?

9. What are the implications of Katrina and Rita for Indiana and the rest of the country? • Consider the types of programs and the sources of funds and assistance for the poor and working poor that can be directed to help those in need: • Public Funds • Federal Government • State and Local Government • Private Funds • Charitable Giving (including in-kind) • Utility Public Benefits (ratepayer funding) • Utility Programs

10. Some facts about Federal Programs • LIHEAP – National picture • DOE has projected that home heating prices will average 47.5% more this winter than last, the largest increase in 31 years, the spike largely Katrina- and Rita-related • This will increase the number of households in need of assistance by 5% or more • LIHEAP was Funded nationally in 2005 at $2.134 billion • Bush administration has proposed reducing funding to $2 billion for FY 2006 • Total needed to hold the current number of LIHEAP beneficiaries harmless: $5.209 billion, an increase of $3.2 billion • Senate voted 50-49 in favor of this on Oct. 6; amendment failed because it needed 60 votes.

11. LIHEAP – States’ needs for 2006* to hold beneficiaries harmless for projected increased heating costs State2005 FundingBush request Addn’l needed to Total hold harmlessNeeded Indiana $53.9M $50.5M $81.0M $131.5M Arkansas $13.5M $12.7M $20.3M $ 33.0M Louisiana $17.8M $16.7M $26.8M $ 43.5M Mississippi $15.6M $14.6M $23.4M $ 38.0M Texas $46.2M $43.3M $69.4M $112.7M *Center on Budget and Policy Priorities, October 6, 2005

12. Q: What works against getting this kind of LIHEAP increase in 2006? • Competing priorities of Administration and Congress – i.e., budget constraints: • Funding for Iraq War • Funding for FEMA for Katrina/Rita rebuilding • Other deficit growth programs (Medicare prescription program) • Other cuts in discretionary programs • Tax reform and reductions (income, estate) • Long term infrastructure needs (levies, etc.)

13. Constraints on the ability of State and Local Governments to Help with Energy Affordability • State solvency issues (esp. Louisiana, New Orleans, Parishes) • Housing needs are overwhelming in the region; insurance companies may decline to offer coverage for new/rebuilt homes before levies are strengthened • Utility infrastructure destruction and cost recovery issues before regulators • Lost revenue stream from disappearance of customer base • Regulatory and legislative reluctance to spread costs of rebuilding within and across rate classes and companies

14. Obstacles to Charitable Solution • Historic low levels of customer giving to fuel funds (< 2% of customers contribute nationally and in middle South region) • Charitable “giving fatigue” likely from repeated catastrophes: tsunami, hurricanes, earthquakes • Loss of customer base in LA, MS, New Orleans (many givers and recipients are no longer customers after the dispersal of evacuees across the nation): No bills, no revenues, no giving • Loss of jobs, income, assets will reduce economic ability of many to give

15. Obstacles to Charitable Solution… • Total charitable giving is but a drop in the bucket nationally and locally – a critically important safety net but small nonetheless. • Put charitable giving in context: • National fuel funds raise $200M annually; LIHEAP is 9x that • Entergy fuel funds raise $2 million annually; 4 states’ LIHEAP of $83M take is 40x that (Compare that to Indiana’s 103:1 ratio: $400,000 max fuel fund collections and $54M in LIHEAP) • Compare to $2 billion in giving to Red Cross, Salvation Army, etc. vs. $200 billion need for FEMA help to Gulf Coast Region • Bottom line: Yes, charity will and does provide – but not enough to supplant Government aid

16. Seize this moment • Katrina brought home to the nation the reality of poverty in the Gulf Coast. Let us use it to educate America about the needs and the abilities of the nation to do something to address it. • We all know poverty exists in every corner of this country. What works in the Gulf Coast can be taken to other places (and vice versa). • Sharp natural gas prices increases and catastrophic damage to people, homes, businesses, jobs, government and utility infrastructure present a daunting challenge and yet an opportunity to do great things as we rebuild.

17. How worried should you be? • This headline from today’s USA Today says it all, although it refers to the prospect of global outbreak of bird flu – another natural catastrophe we must address. • As Mike Leavitt, secretary of DHHS put it yesterday while visiting New Orleans, “What if it weren’t just New Orleans struck by catastrophe?” • Build on what you’ve done in Indiana. Use the reality of Katrina and the looming crisis in energy assistance this coming winter to move energy affordability to a new level of success. Strengthen your coalition of providers, advocates, regulators, policymakers, utilities and citizens.

18. Seize this moment and Do it right! • Using Katrina as a model. Let’s do it right this time: with energy efficiency in new and rebuilt houses and businesses to make utility bills affordable, with careful and frugal management of the public’s money, with concern for the environment and sustainable development, and with compassion for the people who want to return to their homes, regardless of their income levels. • Every journey begins with the first step. You have already taken more than that in Indiana. I commend you, thank you for what you’ve already done and urge you to share what you learn with the people of the afflicted areas of the Gulf Coast.