Percentage-of-Income Payment Plans (PIPP)

Percentage-of-Income Payment Plans improve energy affordability by capping utility bills at a percentage of household income.

Table Of Contents
  1. Why This Matters
  2. Policy Solution
  3. Model Policy Features
  4. Potential Limitations & Pitfalls
  5. Complementary Policies
  6. Examples
  7. Resources
COMMUNITY BENEFITAffordability
KEYWORDSAssistance, Electricity, Methane gas, Utility bills
REGIONState
AFFORDABILITY STRATEGYHousehold Protections
OVERSIGHTUtility Commission
POLICY MECHANISMLegislation, Regulation, Executive

Why This Matters

Roughly a quarter of households across the country are “energy-burdened,” meaning they pay more than 6% of their income towards energy bills.1 Urban low-income households pay an average of 8.3% of their incomes towards energy bills, but some households pay even more: an estimated one-quarter of urban low-income households pay more than 15.2% of their income for energy.2 Meanwhile, average rural low-income households face energy cost burdens of 9.5%.3 Energy affordability is an escalating challenge which forces households to face difficult trade-offs between paying their energy bills or for other essential needs, including food, medicine, and housing. Lack of utility bill payment can also lead to utility disconnections, which put vulnerable populations such as children and the elderly at particular risk.

Policy Solution

Percentage-of-Income Payment Plans (PIPPs) place a cap on utility bills at a percentage of household income. This cap is often set such that total energy bills—e.g. combined gas and electricity bills—do not exceed 6% of income for low-income households. Lower thresholds may be set for the lowest-income households.

Model Policy Features

Key policy components that make PIPPs effective include:

  • Cap utility bills at an agreed-upon “affordable” threshold (typically 6%) for low-income households, including consideration of lower caps for very low-income households. 
  • Ensure policies are opt-out for low-income households receiving other benefits, rather than opt-in, which can often lead to low enrollment. 
  • Minimize the paperwork required for enrollment.
  • Eliminate requirements that may put mixed status households at risk due to the process of signing up.
  • Enable households to self-attest income.
  • Couple with arrearage management and debt forgiveness programs.
  • Include provisions for regular data reporting and public transparency (e.g., public-facing data dashboards, program evaluation, audits to ensure meaningful benefits reach intended populations).
  • Ensure sufficient funding to cover all income-eligible households, without a waiting list. 
  • Conduct ongoing engagement efforts with eligible households, including in multiple languages and to recipients of other benefits programs.
  • Integrate non-energy benefits, both to the low-income households and to society at large, such as reduced loss of housing and reduced cost of shelter and emergency room visits, into accounting for benefits of increasing affordability.

Potential Limitations & Pitfalls

  • PIPPs help improve energy affordability, but alone they do not address the root causes of high energy cost burdens. If the money for a PIPP runs out, households will face the same affordability challenges as before. PIPPs therefore should be combined with root cause policies that help reduce energy bills, such as energy efficiency and weatherization programs.
  • Policy design can also significantly impact enrollment levels—and therefore effectiveness—of PIPPs; many existing PIPP programs report very low enrollment of eligible customers.
  • Unlike discounted electricity or gas rates for low-income households, PIPPs reduce some the price signals that would potentially encourage energy-saving behavior (e.g. conservation); however, such conservation is often out of reach for renter households or those unable to afford energy efficiency measures, and so PIPPs can help ensure bills are reduced to an “affordable” threshold in a way that discounted rates cannot.
  • PIPPs do not affect bills for propane or fuel oil.

Complementary Policies

Complementary policies include: 

  • Bill credits, arrearage management plans, and disconnection protections to help pay for bills and reduce the impacts of late payments.
  • Weatherization, residential solar+storage programs, efficient residential electrification and community solar to help systemically reduce energy demand and, in turn, energy bills and the overall funding required for a PIPP program.

Examples

1. Colorado Percentage-of-Income Payment Plan – Rules Regulating Gas Utilities, Low-Income Energy Assistance Act, 4 Colo. Code Regs. § 723-4:4411.

Details:

  • Applies to households making less than 80% of the Area Median Income.4 
  • PIPP is set such that bills for all-electric customers are capped at 3-6% of income (depending on income level); 2-3% for electricity and 2-3% for gas for dual-fuel households. Households with incomes under 75% of the federal poverty limit are eligible for the lowest caps.5 
  • Requires that households already qualify for other programs, such as the Weatherization Assistance Program, Utility Commission Bill Help Program, Energy Outreach Colorado Past-Due Bill Payment Assistant Program, or Low-Income Energy Assistance Program. 
  • Applies to specific subset of Colorado utilities.
  • Participation in PIPP is coupled with arrearage forgiveness.
  • Administered by each utility and overseen by the Colorado Utility Commission;6 first administered as pilot programs and then fully enabled after the Utility Commission required utilities to begin providing utility assistance and arrearage forgiveness.7‘8‘9

LIMITATIONS:

  • Insufficient funding for all households, leading to waitlists for some utilities. 
  • Lack of automatic enrollment.
  • Inconsistent outreach to eligible households, low awareness (even for enrolled households), and inconsistent program naming. 
  • Barriers have contributed to very low enrollment: only 8% of eligible households are enrolled. Approximately 11% of Colorado households likely qualify.10

2. New Jersey Universal Service Fund – NJ Universal Service Fund

Details:

  • The Universal Service Fund (USF), established in 2003, provides assistance for households making at or less than 60% of the State Median Income11 and paying more than 2% of their income towards their electric bill or their gas bill; or more than 4% towards their gas bill if they have electric heating.12 Bill credits are based on the amount a customer owes over the income threshold.
  • Uses the same application as the Low Income Home Energy Assistance Program (LIHEAP), improving ease of stacking multiple affordability resources and enabling households to access both benefits simultaneously.13
  • Participants in other assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP), are auto-enrolled.14
  • Benefit is capped at $200/month.15
  • Funded through a surcharge on gas and electricity bills.16
  • If enrollees in the program have a balance of $60 or more and successfully complete 12 months of payments, their past due balances are forgiven as part of the Fresh Start program.17
  • Customers who have had utility shutoffs can be reconnected if they enroll in USF or another assistance program and make a downpayment of up to 25% of their balance.18
  • Reached approximately 225,000 households in the 2023-2024 program year.19
  • An assessment of combined assistance benefits—including LIHEAP, Lifeline, and USF—found that the stacked assistance programs brought median energy burdens for recipients from 8.7% down to 2.7% of household income, with USF responsible for the final 3% reduction in energy burden.20
  • Only 20% of eligible households participate in USF.21

LIMITATIONS:

  • Does not apply to heating oil or propane.
  • Benefit has a monthly cap—although easy enrollment in LIHEAP may help improve access to additional assistance for months when bills exceed this cap. New Jersey raised the cap in 2025 to expand access for the approximately 10% of households who exceeded the cap.22
  • The low participation rate of eligible households in USF has led the Board of Public Utilities to suggest more aggressive annual enrollment targets for utilities.

Resources

For history and overview of PIPP programs in various states, see:

Written: December 2025

  1. Drehobl, A., L. Ross, and R. Ayala. (2020). How High Are Household Energy Burdens? Washington, DC: American Council for an Energy-Efficient Economy. ↩︎
  2. Ayala, R. and Dewey, A. (2024). Data Update: City Energy Burdens. Washington, DC: American Council for an Energy-Efficient Economy. ↩︎
  3. Ross, L., Drehobl, A., and Stickles, B. (2018). The High Cost of Energy in Rural America: Household Energy Burdens and Opportunities for Energy Efficiency. Washington, DC: American Council for an Energy-Efficient Economy. ↩︎
  4. Energy Outreach Colorado. Percentage of Income Payment Plan. Accessed October 12, 2025. ↩︎
  5. Offenstein, J., Johnson, C. Bohannan, T. and Thomas, A. (2020). Evaluation of the Percentage of Income Payment Plans. ADM for the Colorado Energy Office. ↩︎
  6. Offenstein, J., Johnson, C. Bohannan, T. and Thomas, A. (2020). Evaluation of the Percentage of Income Payment Plans. ADM for the Colorado Energy Office. ↩︎
  7. Colorado Public Utilities Commission, Rules Regulating Electric Utilities, Low-Income Energy Assistance Act, 4 Colo. Code Regs. § 723-3-3411. ↩︎
  8. Colorado Public Utilities Commission, Rules Regulating Gas Utilities, Low-Income Energy Assistance Act, 4 Colo. Code Regs. § 723-4:4411. ↩︎
  9. LIHEAP Clearinghouse. (2016). State PBF/USF History, Legislation, Implementation: Colorado. ↩︎
  10. Offenstein, J., Johnson, C. Bohannan, T. and Thomas, A. (2020). Evaluation of the Percentage of Income Payment Plans. ADM for the Colorado Energy Office. P. 7 ↩︎
  11. New Jersey Department of Community Affairs. Low Income Home Energy Assistance Program; Universal Service Fund; FFY 2026 Fact Sheet. ↩︎
  12. DCAid. Get Started With Utility Assistance Programs. Accessed: December 9, 2025. ↩︎
  13. New Jersey Department of Community Affairs. Universal Service Fund. Accessed: December 9, 2025. ↩︎
  14. Sergici, S., Kavlak, G., Graham, K. and Gonzalez, J. (2024). An Assessment of Energy Affordability in New Jersey and Alternative Policy and Rate Options. The Brattle Group for the New Jersey Board of Public Utilities. ↩︎
  15. New Jersey Department of Community Affairs. Low Income Home Energy Assistance Program; Universal Service Fund; FFY 2026 Fact Sheet. ↩︎
  16. New Jersey Department of Community Affairs. Universal Service Fund. Accessed: December 9, 2025. ↩︎
  17. New Jersey Board of Public Utilities. Utility Assistance Programs. Accessed: December 9, 2025. ↩︎
  18. New Jersey Board of Public Utilities. Utility Assistance Programs. Accessed: December 9, 2025. ↩︎
  19. New Jersey Board of Public Utilities. (2025) In the Matter of Addressing New Jersey Energy Affordability for Low- and Moderate-Income Households. Straw Proposal. Docket No. QO24110853. ↩︎
  20.  Sergici, S., Kavlak, G., Graham, K. and Gonzalez, J. (2024). An Assessment of Energy Affordability in New Jersey and Alternative Policy and Rate Options. The Brattle Group for the New Jersey Board of Public Utilities. ↩︎
  21. Sergici, S., Kavlak, G., Graham, K. and Gonzalez, J. (2024). An Assessment of Energy Affordability in New Jersey and Alternative Policy and Rate Options. The Brattle Group for the New Jersey Board of Public Utilities. ↩︎
  22.  New Jersey Board of Public Utilities. (2025) In the Matter of Addressing New Jersey Energy Affordability for Low- and Moderate-Income Households. Straw Proposal. Docket No. QO24110853. ↩︎