The California Public Utilities Commission (CPUC) regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and certain passenger transportation companies. The agency’s mission is to ensure that regulated utilities provide safe and reliable services at affordable rates. In addition to its regulatory activities, CPUC also administers programs that provide subsidized utility services to certain underserved populations and supports energy-related research and development activities.
The Governor’s budget proposes about $1.7 billion for CPUC in 2020‑21, a net decrease of about $66 million (4 percent) compared to 2019‑20 spending estimates. This year-over-year decrease is largely the result of (1) a decrease in costs for the California LifeLine Program due to slightly lower caseload estimates for 2020‑21 and (2) one-time contracting resources provided in 2019‑20 for legal and financial advisors related to the Pacific Gas and Electric (PG&E) bankruptcy. In this post, we provide our recommendation to modify the proposed budget for the LifeLine program.
In a separate report, The 2020‑21 Budget: Governor’s Wildfire-Related Proposals, we provide our assessments and recommendations related to various wildfire-related proposals in the Governor’s 2020‑21 budget, including proposals from the CPUC and the Public Advocates’ Office to review wildfire mitigation plans and perform other wildfire-related activities. Specifically, we recommend the Legislature withhold action on these proposals until there is more information about the resolution of the PG&E bankruptcy.
LifeLine Provides Discounted Telephone Service to Low-Income Households. The California LifeLine Program, which is administered by CPUC, provides free or discounted telephone service to about 1.7 million low-income households. To qualify for California’s LifeLine Program, a household must have income below 150 percent of the federal poverty level (FPL) (for example, currently about $39,000 annually for a family of four to qualify) or be enrolled in certain public assistance programs for low-income households, such as Medi-Cal or CalFresh. Roughly 90 percent of enrollees demonstrate eligibility for the LifeLine program by qualifying for certain programs. Each eligible household can receive one subsidized telephone line—either wireline or wireless. For each household enrolled in the program, CPUC provides telephone companies (carriers) a monthly state subsidy that is meant to offset the lower rate charged to the consumer. Currently, the maximum state subsidy is about $15 a month per household. (The Federal Communications Commission administers the federal LifeLine program that provides an additional monthly discount of about $9 to qualifying plans.)
2018‑19 Budget Directed Our Office to Assess Ways to Improve Program Enrollment. As part of the 2018‑19 budget package, the Legislature adopted supplemental reporting language directing our office to assess and make recommendations about ways to improve enrollment and reenrollment (also known as renewal) in the program. Roughly 40 percent of eligible households are enrolled in the program (also known as the take-up rate). This take-up rate is substantially lower than other low-income public assistance programs—70 percent for CalFresh, for example—but higher than other states’ LifeLine programs. In our April 2019 report, A Review of LifeLine Budget Estimates and Enrollment Process, we found that there are several potential reasons why an eligible household would not enroll or renew its enrollment in the LifeLine program. Such reasons could include that the household (1) is unaware of the program or the need to renew enrollment, (2) prefers a non-LifeLine telephone plan or carrier, or (3) has difficulty completing the enrollment and/or renewal process. However, there has not been a recent large-scale formal evaluation of the reasons why eligible households do not participate in the program.
Based on these findings, we recommended the Legislature direct CPUC to conduct a study to identify the primary reasons for eligible households not enrolling in the program. The results from such an assessment could help the state target any future actions that are most likely to be effective at increasing enrollment. We also recommended the Legislature consider directing CPUC to develop a statewide marketing and outreach plan to help improve overall program awareness among eligible households. However, since such a plan could be costly to develop and implement, we recommended the Legislature wait until the results of the above evaluation are available to determine if lack of program awareness is a key factor in low enrollment. If so, the Legislature might then want to provide funding for CPUC to develop an outreach plan. Outreach activities could incorporate information obtained from the evaluation about specific locations or populations with lower program awareness to determine where outreach can be targeted to have the most substantial effect on enrollment.
2019‑20 Budget Provided Funding for Program Assessment. The 2019‑20 budget included $454 million from the Universal LifeLine Telephone Service Trust Administrative Committee Fund (ULTSTACF) for the LifeLine program, including $426 million for local assistance (primarily for subsidies to carriers) and $28 million for state operations (primarily to pay a third-party program administrator that processes applications and renewals, plus nine authorized positions at the CPUC for other program administration and oversight). This funding also included $500,000 in one-time contracting resources for the CPUC to hire an outside vendor to assess factors influencing program enrollment. The CPUC is in the process of identifying a vendor to conduct this assessment.
The Governor’s budget for 2020‑21 proposes a total of $390 million for the LifeLine Program, including $362 million for local assistance and $28 million for state operations. This includes $4.2 million in additional ongoing funding for program evaluation and outreach activities as follows:
Program Assessment Support and Implementation ($161,000). The proposed budget includes $161,000 (ULTSTACF) and one permanent position to help assess factors contributing to the low program take-up rate. This position would manage the contract with the vendor, collaborate with the vendor on the study design, and lead the commission’s activities related to future policy and program changes that are based on the results of the program assessment.
Outreach and Marketing ($4 million). The Governor proposes $4 million (ULTSTACF) contracting resources to enhance marketing and outreach activities targeted at potential program enrollees.
Proposal for Outreach Funding Premature. In our view, the proposal to fund one position to manage the contract with the vendor conducting the program assessment and implement subsequent program changes has merit and is consistent with the recommendation in our 2019 report. For example, such an assessment could provide information about (1) the degree to which a lack of program awareness is a key factor in low take-up rate and (2) if a lack of program awareness is a major factor, where future outreach efforts might be best targeted. Regardless of whether or not a lack of program awareness is identified as a key factor driving low take-up, there will likely be additional workload to implement programmatic changes intended to address the issues identified in the program assessment.
The proposed $4 million ongoing for outreach activities, however, is premature. This is because the CPUC has not yet conducted the assessment of major factors affecting program take-up. As we noted in our 2019 report, enhanced outreach activities could have merit if a lack of awareness is found to be a major barrier to enrollment, but such an approach should be informed by the results from the program assessment.
We recommend the Legislature approve the request for $161,000 and one position to manage a contract with a vendor that will assess factors influencing program enrollment and implement subsequent programmatic changes, but reject the proposed $4 million ongoing for additional outreach. The Legislature can reconsider providing additional outreach funding in future years—potentially as soon as next year’s budget process—after the assessment is complete, which is expected to be sometime during the middle of 2020‑21. This would ensure the Legislature has more information about the degree to which a lack of program awareness is a key factor in overall program enrollment and how additional outreach activities could be targeted most effectively.