Congress and the Biden administration need to act now to help families struggling with high energy bills – especially those struggling the most to make ends meet.
Home energy prices are rising rapidly this winter; for many families the cost of home energy will simply be unaffordable. On average, families will be paying about 18 percent more than last year for home heating and 34 percent more than two years ago — and for those using heating oil, prices are expected to increase by about 44 percent from last year and a whopping 144 percent from two years ago.
The war in the Ukraine is a key driver behind these price increases, as Europe is scrambling to purchase fuel from countries other than Russia. The result is increased energy prices across the globe, which in the U.S. is placing a severe burden on lower income families this winter, forcing many to choose between paying their energy bill and food, medicine, and other essentials.
For those in the bottom 20 percent of income — the lowest income families in the U.S. — the yearly cost of home energy increased from $2,511 in 2019 to $3,400 last year. If current trends continue, the cost could reach close to $4,000 this year, almost 58 percent higher than costs were in 2019, constituting 27 percent of their total income. In comparison, middle income families are projected to spend an average of about $5,600 on home energy or 9 percent of their total income.
On top of that, families are struggling with high rates of inflation for other essential goods including food, rent and gasoline.
The U.S. Census Bureau’s Household Pulse Survey reported that close to 46.9 percent of families earning between $35,000 and $50,000 reduced spending on food or medicine at least once in the last year to pay their home energy bills, up from 37.4 percent the previous year.
When a family still cannot pay their home energy bill, they face disconnection from their utility. Last year, an estimated 3.5 million households were disconnected in 2020 in 32 states plus the District of Columbia. And for those using delivered fuels — heating oil and propane — the dealer simply won’t deliver more product unless they receive their payment up-front.
Families are drowning in utility debt. More than 20 million families are currently behind on their utility bills, owing about $23 billion, up from about $10.5 billion at the end of 2019. And the outlook for this coming year is even worse, with incomes not keeping up with inflation. All signs point to higher arrearages and more families subject to having their service shut-off from power when winter moratoriums end.
The energy cost crisis this winter is just one in a seemingly never-ending series of energy emergencies that put the lives of low-income families at risk. Over the past few years, we have seen record heat waves, heat islands, and extended fire seasons during summer months, and long cold spells in the winter — all while energy prices are rising faster than incomes. The way we pay for residential energy in this country is failing our most vulnerable families.
Congress needs to take action to address these crises in home energy bills and supply disruptions for heating oil as they begin to finalize the FY 2023 spending bill.
First, Congress needs to increase funding for LIHEAP by an additional $5 billion to help families pay their heating and cooling bills as well as install energy efficient heating and cooling equipment to address increases in extreme weather that put families at risk of health conditions if they are forced to live without appropriate heating and cooling equipment.
Second, the Biden administration needs to prepare to release fuel from the Northeast Home Heating Oil Reserve (NEHHOR), which could be used to alleviate short-term supply issues. NEHHOR is a one-million-barrel supply of heating oil fuel providing limited protection for homes and businesses in the northeast should there be a disruption of heating oil supplies. About 82 percent of households that use heating oil reside in the Northeast, making the region vulnerable to fuel oil disruptions.
The National Association of State Energy Officials (NASEO) recently sent a letter to a group of bipartisan Congressional energy leaders urging short- and long-term action on the heating oil reserve — including amending the NEHHOR statute to allow for an expedited release process, an increase in the size of the reserve to address the changing dynamics of fuel markets and potential fuel emergencies and directing DOE to perform economic benefit analysis and sizing optimization studies for the reserve.
Winter has already started, and prices already are reaching unaffordable levels for many households. Congress should act as part of the next appropriations round, while there is still time to help vulnerable families throughout the country and especially those in the Northeast who are struggling with very high heating oil price and supply issues.
Families shouldn’t need to cut back on food and medicine to afford the high cost of home heating this winter.
Mark Wolfe is an energy economist and serves as the executive director of the National Energy Assistance Directors’ Association (NEADA), representing the state directors of the Low Income Home Energy Assistance Program, and the Energy Programs Consortium. He specializes in energy and housing affordability and related finance issues.