As articulated in Energy 20/20, my blueprint for a new U.S. energy policy conversation, I believe there is a consensus that it is in our national interest to make energy abundant, affordable, clean, diverse and secure. In addressing these goals, too often affordability is ignored – despite the difficult choices increasing energy costs impose on Americans. In particular, low-income households are highly vulnerable to energy prices because energy bills make up a larger percentage of their living expenses. These families are energy insecure, defined as the inability to afford to maintain a home at a reasonable temperature and the loss of access through cessation of service due to non-payment or other factors.
Senator Tim Scott (R-SC) and I have developed “Indicators of Energy Insecurity” (IEIs), enabling policymakers to consider, in quantitative terms, how a specific policy action will impact Americans (read more in Plenty At Stake: Indicators of American Energy Insecurity.) When energy prices rise, IEI’s can be used to quantify:
- The number of households that experience a significant decrease in spendable budget
- The number of households pushed below the poverty line
- The average household energy burden, expressed as a percentage of average gross income
From an initial application of the IEI concept to U.S. Census Bureau records, we determined that based on 2012 data, a 10% increase in household energy costs would lead to:
- 840,000 people across the U.S. being pushed into poverty
- 7 million additional people across the U.S. spending more than 10% of their gross household income on home energy, the threshold for entering energy insecurity.
Energy price increases often crowd out or eliminate other household essentials, including food, clothing, medical care and education, forcing low-income households to make difficult tradeoffs. The effects of these sacrifices are heightened odds of food insecurity, more frequent relocations, poorer health, decreased educational achievement and reduced productivity. Programs such as LIHEAP are limited in addressing an issue of this scope by a number of factors.
Any policy proposal that would increase the cost of energy should therefore be fully evaluated for its impact on energy insecurity, in order to give policymakers a complete picture of its potential consequences.
How can these new tools, the IEIs, inform the discussion of the nexus between energy policy and the affordability of energy? Why has this nexus received comparatively little attention? How best can federal policy help relieve energy insecurity and decrease costs for the American people?