PSEG slashes heat-pump rebates for lower-income customers

Lower-income energy customers who have been anxious to make the switch from fossil fuels to more efficient heat pumps for heating and cooling lost a big incentive to switch after PSEG this month said it would sharply reduce a popular rebate program.

A notice sent to installers across Long Island on Feb. 16, and obtained by Newsday, said a prior rebate of $5,500 for the equipment would be reduced to $2,000 for low- and moderate-income customers. The reduction applies to cold-climate air-source heat pumps installed for a customer's entire house.

In addition, a rebate for geothermal heat pumps for lower-income customers would be reduced to $2,000 a ton from $5,500 a ton for “tier 1 projects,” and $4,000 a ton for tier 2. Total systems can cost anywhere from $8,000 to more than $40,000 for geothermal systems.

PSEG in a statement indicated the reason for the reduction was that LIPA's budget for the program was depleting faster than anticipated.

LIPA's budget for low-income heat pumps was $7.3 million for 2023. But customers quickly signed up for the program. By Feb. 14, PSEG said, $2.7 million had been paid and another $10 million was preapproved.

"This total of $12.7 million is significantly above the approved budget so PSEG Long Island reduced the rebates," PSEG said, noting that the new rebate levels for income-eligible customers is "double what non-income-eligible customers would receive for the same installation."

The reductions come as PSEG customers opening their bills this week received flyers urging them to "stop by our home for savings," including "warmer, cooler, cleaner comfort" with heat pumps that offer "substantial savings," notably for "income-eligible customers." 

The cuts come just as the state, and LIPA, say they are trying to vastly increase the use of heat pumps and other green-energy solutions to meet aggressive new climate goals while weaning customers off oil and gas heat.

“Rebate programs are offered to customers to assist in the adoption of new technologies and programs," said Michael Voltz, PSEG's director of energy efficiency and renewables, in a statement. "As they become more successful and utilized, rebates are lowered to offer additional customers the ability to take advantage of the new programs at a reduced cost."

Installers say the drastic cuts in rebate amounts could apply to projects they had already begun to process but had not completed. PSEG in its letter noted the lower rebates “apply to projects that have not yet received a pre-inspection from PSEG Long Island. You will be notified if your submitted project rebate amount will be reduced.”

One potential customer caught in the rebate cutback was Edward Olaie of Great Neck, who qualified for the program and had been preparing for a new two-zone, two-unit heat-pump system in his home when he got a call from his installer last week saying prior prices no longer applied.

Suddenly, he said, the two-unit system that would have cost $7,500 would now cost more than $14,000, or $7,000 for just one unit that would cover only part of his home. He put the whole project on hold. 

"I'm definitely not spending $15,000 without the rebate," he said. "We're just going to have to stick with oil for now and figure something out." 

Jay Best, founder and president of green-energy firm Green Team LI in Holbrook, said the changes not only will have a “very significant impact on our low-income customers," but also affect Long Island’s "energy-efficiency contractors and our ability to reduce pollution and meet climate goals.”

Long Island’s low-income population, he noted, is already the most impacted by the higher costs of energy, and the rebates provided by PSEG for the low- and moderate-income customers had been “a bright spot to provide them with sustainable energy efficiency upgrades in an affordable way.”

Best said Green Team LI has “dozens of customers who have signed up for this program and started to make plans, and now will have nowhere to turn.” 

At the very least, Best said, he’s asking that the changes apply only to new contracts filed after Feb. 16, not those prior, because the way PSEG is now applying the lower rebates could affect between 50 and 100 projects he’s already begun processing.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.