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How can a city use federal funds to help residents with overdue utility payments?

Generally, cities can utilize multiple programs established or expanded by the American Rescue Plan Act of 2021 (“ARP”) to pay for residents’ overdue utility bills during the period of the COVID-19 public health emergency.

The U.S. Department of the Treasury’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Interim Final Rule (the “Rule”) lists overdue utility bills during the COVID-19 pandemic as a form of household assistance.[1] Additionally, these utility bills may predate March 3, 2021, so long as the overdue bills are due to the economic impact of the COVID-19 pandemic and the cost of providing assistance to the household was not incurred by the municipality prior to March 3, 2021.[2] Treasury guidance does not indicate whether these payments for utility bills may be made directly to the service provider or if it must be paid to the resident. Rather, the Rule states in considering whether a potential use is eligible under this category, a recipient (i.e., the municipality) must consider whether, and the extent to which, the household has experienced a negative economic impact from the pandemic.[3]  

The Emergency Rental Assistance Program (“ERAP”), expanded through the ARP, also includes utility assistance for households that pay rent (but not for homeowners) and meet other income and financial hardship criteria[4] as an eligible use.[5] Both ERAP1 and ERAP2 funds can be used for this purpose if conditions are met. ERAP encourages (and in the case of ERAP1 funds, requires) recipients to work directly with utility providers to pay for batches of utility bills for large numbers of renters who have overdue utility bills.[6] All payments through this program must be associated with an invoice, bill, or evidence of payment for overdue payments, as well as documentation of the eligibility of the recipient.[7] Treasury has not published further guidance for municipalities that control utilities, but as noted above, does encourage direct payment to utility providers.

The Homeowner Assistance Fund (“HAF”), likewise established by the ARP, also includes utilities as an eligible use, but encourages municipalities “to consider program designs that leverage utility assistance from other federal programs that have been created expressly for that purpose before using HAF funds for utility assistance.”[8] Additionally, any household that receives funding from this program must submit attestations and documentation of their financial hardship and other eligibility requirements.[9]

The ARP also provided supplemental funding to the Low Income Home Energy Assistance Program (“LIHEAP”). Utility bills are also an eligible use of LIHEAP funds.[10] This program is administered through states, tribes, and territories.[11]

For example, if determined to be a necessary expenditure, a government may be able to provide grants to individuals facing economic hardship to allow them to pay their utility fees and thereby continue to receive essential services.

In addition, under the Coronavirus Aid, Relief, Economic Security Act’s (“CARES Act”) Coronavirus Relief Fund (“CRF”) program, fund payments could be used to provide direct subsidies to utility account holders—but not as government revenue replacement. In response to the question “May Fund payments be used to replace foregone utility fees? If not, can Fund payments be used as a direct subsidy payment to all utility account holders?”, Treasury stated the following in its Coronavirus Relief Fund FAQ:

Fund payments may not be used for government revenue replacement, including the replacement of unpaid utility fees. Fund payments may be used for subsidy payments to electricity account holders to the extent that the subsidy payments are deemed by the recipient to be necessary expenditures incurred due to the COVID–19 public health emergency and meet the other criteria of section 601(d) of the Social Security Act outlined in the Guidance. For example, if determined to be a necessary expenditure, a government could provide grants to individuals facing economic hardship to allow them to pay their utility fees and thereby continue to receive essential services.[12]

Last Updated: June 29, 2021

[1] Treas. Reg. 35 CFR 31, at page 33, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf; see also Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 24, 2021), at FAQ #2.21, at page 12, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[2] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 29, 2021), at FAQ #4.7, at page 18, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[3] Treas. Reg. 35 CFR 31 at page 33, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[4] These criteria vary slightly between ERAP1 and ERAP2. See Department of Treasury Emergency Rental Assistance Frequently Asked Questions (as of June 29, 2021), at FAQ #1, at page 1, available at: https://home.treasury.gov/system/files/136/ERA_FAQs_6-24-21.pdf.

[5] U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions (as of June 29, 2021), at FAQ #6, at page 6, available at: https://home.treasury.gov/system/files/136/ERA_FAQs_6-24-21.pdf.

[6] Id. at FAQ #12, at page 7.

[7] Id.

[8] U.S. Department of the Treasury ‘Homeowner Assistance Fund Guidance (as of April 14th, 2021), at page 6, available at: https://home.treasury.gov/system/files/136/HAF-Guidance.pdf.

[9] Id. at 4.

[10] U.S. Department of Health and Human Services ‘LIHEAP FAQs for Consumers’, at FAQ #2, available at https://www.acf.hhs.gov/ocs/faq/liheap-faqs-consumers#Q2.

[11] U.S. Department of Health and Human Services ‘Low Income Home Energy Assistance Program (LIHEAP)’ Home Page, available at: https://www.acf.hhs.gov/ocs/low-income-home-energy-assistance-program-liheap.

[12] Coronavirus Relief Fund, Frequently Asked Questions – FAQ #27 (FRN Vol. 86 No. 10, page no. 4189), at 8, available at https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf.