Affordability Gap Increases in FY 2015

April 15, 2016—Two recently-released studies put into perspective the home energy burden many low-income utility customers face in the United States. According to a recent white paper released by the energy equity nonprofit, Groundswell, an estimated 16 million households in the U.S. pay more than 10% of their total income on utility bills, which is more than four times higher than the average consumer. Meanwhile, Fischer, Sheehan and Colton, a law and economics research and consulting firm, found that the nation’s “affordability gap” has risen from $38.6 billion in 2011 to $41.1 billion in 2015, which it reported in its annual Affordability Gap report.

Introduced in April 2003, the affordability gap is a model that estimates the shortfall between actual home energy bills and affordable home energy bills on a state-by-state and county-by-county basis. With a funding around $3.3 billion in Fiscal Year 2015, LIHEAP only managed to help a fraction of the households identified in this report.

The 2015 Gap report details the extent to which federal LIHEAP resources are inadequate, i.e., the amount by which low-income energy bills exceeded affordable energy bills at this year's and last year's fuel prices. On a scale of 1 to 51, each state is given an "energy gap ranking," which compares it to other states in terms of energy burdens for the very low income; the percent of persons below 100 percent of poverty; and the percent that each state's heating/cooling affordability gap is covered by LIHEAP. Finally, the analyses show the percent of the low-income energy bill that goes to each end use, i.e., heating, cooling, non-heating and cooling electricity, and water heating.

The Groundswell white paper identifies a wide variety of social and economic factors as the root of the U.S.’s increased energy cost inequalities. Of these, the report singles out factors such as low property ownership rates, lack of access to capital, and lack of awareness of existing programs as challenges that are the most addressable among policy makers and advocates. The report advocates enhancing community engagement strategies and community solar programs in order to lower energy bills and boost the local economy with related higher income jobs associated with the solar projects.

Source: FSC, Groundswell