Thousands of Pennsylvanians are receiving invitations this week to participate in a program to help them pay their winter heating bills, but the agency sending the invitation may need some help of its own.

This morning, allegations of fraud within the Low Income Home Energy Assistance Program (LIHEAP) will be the subject of a hearing at La Roche College by the Republican Policy Committee, comprising GOP state representatives. The hearing comes in response to a report issued in June by Auditor General Jack Wagner that found "serious deficiencies" in the state Department of Public Welfare's administration of the program, which uses federal funds to provide grants to low-income households.

Committee chair Rep. Mike Turzai, R-Allegheny, said the group had been conducting hearings on possible fraud within the state welfare system since January, so when Mr. Wagner's report was released, it fell naturally within the work they already were doing.

"We wanted to learn more about [the auditor general's] suggested solutions and remedies," he said.

The information gleaned from the hearing may lead to further amendments in House Bill 83, a package of legislation dealing with welfare fraud that already has passed the House by a 200-1 vote, and is now before the Senate.

But as DPW prepares to submit its plan for 2007-08 to the U.S. Department of Health and Human Services, many observers say there is more wrong with LIHEAP than a welfare fraud bill is likely to fix.

For starters, there is the issue of funding. In his budget request for fiscal year 2008, President Bush has called for a reduction of the block grant money that makes up the heart of LIHEAP'S operations, to $1.48 billion. For fiscal year 2007, the block grant funding was $1.98 billion. The president's budget request would allocate $100.5 million in program funds for Pennsylvania, down from $133.3 million in the current fiscal year that ends Sept. 30.

Congress has proposed maintaining block grant funding at its current level.

"There is a very strong case for it," said Mark Wolfe, executive director of the National Energy Assistance Directors Association.

"But we're funded out of a budget allocation process that's been starved for the last four or five years" by tax cuts and funding the war in Iraq. Even prior to the Bush administration, the program's funding did not keep pace with inflation -- the $1.875 billion that it received in its first year in 1982, adjusted for inflation, would be more than $4 billion today.

The prospect of reduced federal funding is one reason that Michael Love, president and chief executive officer of the Energy Association of Pennsylvania, said, "We're going to have a horrible year as far as LIHEAP is concerned."

If the president's request prevails, "We will probably not be able to reach at least 60,000 households that we reached last year," he said. In fact, the number could be much larger. With an average basic grant of $250, a reduction of $30 million in core funding translates into 120,000 fewer grants available.

All three of Pittsburgh's natural gas utilities -- Dominion Peoples, Equitable Gas and Columbia Gas -- have advocated for increases in federal funds for years. In the face of rising energy costs, "The bottom line is: There needs to be additional funds going into LIHEAP, not less," said Equitable Gas spokeswoman Patricia Kornick.

The utilities, along with low-income advocates, said the state should provide supplemental funding. That has happened only once, during the 2006-07 heating season, when a brutal early winter in the wake of Hurricanes Katrina and Rita drove natural gas prices to record highs. Then, the state provided an additional $19.3 million to help fund the program.

Advocates say the state should continue to supplement the federal money -- as do New York, New Jersey, Ohio and a host of other states.

The funding could come, they say, from a modest surcharge on electricity, similar to that which Gov. Ed Rendell has proposed for his Energy Independence Strategy. According to information from the Energy Association of Pennsylvania, at least 16 other states use such a surcharge to help pay for LIHEAP or other energy assistance programs, ranging from .27 mills per kilowatt-hour (Delaware) to 4.3 mills per kilowatt-hour (Connecticut).

For this years's state budget, Mr. Rendell proposed a surcharge of .5 mills per kilowatt-hour, but in his plan the money generated would go primarily toward the development of alternative energy in Pennsylvania.

Other states also use part of their surcharges to promote alternative energy, "But at the same time they use it for energy efficiency programs and energy assistance programs for low income consumers," Mr. Love said.

With the surcharge projected to leverage $850 million in state revenue through a bond issue, he said, "Clearly we should be able to put $50 million to $100 million" toward LIHEAP.

In any case, a Legislature that viewed the surcharge as a tax did not approve the measure.

The argument for state funding is complicated by the fact that in fiscal year 2006, when the state did provide additional funds, DPW apparently did not use them -- when the fiscal year ended, LIHEAP had $21.3 million dollars in its till to carry over to the next year.

While that amount was unusually large, it was not a one-time occurrence, said spokeswoman Stacey Witalec.

"We generally have funds left over from year to year," she said. The department expects to end the current fiscal year with $5.4 million to carry forward. And the budget for fiscal year 2008 includes a carryforward of $7.5 million.

Why doesn't DPW give away all of the money?

It tries to, Ms. Witalec said. The department increased the income eligibility for the program from 135 percent of federal poverty income guidelines to 150 percent last year and is maintaining that threshold this year -- $30,975 a year for a family of four, or $2,581 a month. But although that change makes more families eligible for assistance, "Not all of those families apply" for the help, she said. "If the families don't apply, I can't give it out."

On that point, there seems to be universal agreement. Deb Couchenour, manager of universal services at Columbia Gas, estimates that 60,000 of the company's 360,000 customers are LIHEAP-eligible -- while 20,000 actually use the program.

Some customers may not know about the program or may assume that they are not eligible, but many simply avoid the stigma that they attach to it, she said.

"They think it's welfare or a handout, and they won't even ask for it," she said.

Another continuing point of concern is the timing of the program. The program year typically runs from November through March. Advocates say it should start in October, which would align it with the federal fiscal year and with other programs -- such as the Dollar Energy Fund. And Ms. Kornick said October is "really when people begin to turn on their furnaces."

Could the $5.4 million carryover be used to fund the program during October?

Too risky, said Ms. Witalec. If DPW starts spending that money before it's received confirmation from HHS on what it will receive for the year, the agency could set itself up for failure.

"What if the feds come back and say, 'Well, you're only going to get $90 million'? " rather than the $100.5 million now budgeted, she said.

Some also question the allocation of 15 percent of LIHEAP funds for weatherization programs administered by the Department of Community and Economic Development because other agencies, including the utilities themselves, have weatherization programs in place.

Ms. Couchenour said Columbia spends $1.37 million a year on weatherization, helping about 200 homeowners a year. Mr. Love's Energy Association has proposed cutting the DCED allocation to one half of 1 percent and keeping the rest within DPW to provide more LIHEAP grants.