Meg Power

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The Winter Behind, the Summer Ahead for Low-Income Energy Consumers

Statement of David Bradley, Executive Director May 3, 2001

Today we are releasing a study of new federal energy price statistics to bring your attention to the long-term energy crisis facing the poor in our nation. Our nationwide network of Community Action Agencies and our partner in advocacy for effective protection for small consumers, the National Consumer Law Center of Boston, Massachusetts are gathered in Washington today working on redesigning and expanding the limited systems and resources available today for keeping poor supplied with minimum energy requirements for their homes.

The report, The Winter Behind, the Summer Ahead: Low-Income Energy Consumers Face a Harsh Spring

by Economic Opportunity Studies of Washington confirms in cold statistics the growing anguish of low-income energy consumers. The study took US Department of Energy price and weather data released three weeks ago and found:

- Over the period from last fall to the beginning of the next heating season, the poor will need to spend about one- fifth of their income to purchase their basic home energy supplies for heat, hot water, lights and appliances;

- During the winter, the majority of poor ran up bills equal to nearly 30% of their income;

o For homes heated with natural gas, bills since October for gas and electricity have averaged $1100 so far; they can expect another $700 in costs before next fall;

o Fuel-oil users have spent about the same so far this year, but face slightly lower summer bills:

o Propane users have been hit hard; their heating season costs averaged over $1000;

o Homes heated by electricity did not fully experience the price increases in gas this winter; their heating season bills averaged over $500 for all fuels and that brings down the national average for all the poor. DOE predicts no change in electricity costs, as does the report. The bills we are releasing from communities across the country suggest the opposite, and we expect the burdens of electric heat users to become far worse shortly;

- The majority of households, those who are not low-income, will see bills total about 40% more on average than in the past, but their Energy Burden or the percent of income they have to devote to energy, will be less than 4% - as compared to 20% for the poor. The change meant they have to give up nearly one percent more of their budget on average this year.

§ To put it another way, if the bills of a family with $50,000 a year ate up the same share of its income, the annual energy bills of low-income families devour, their average bills for last winter through next summer would be $10,000. Of that, they would already owe more than $6,000 today.

o The poor, who not have enough disposable income to meet their needs and deal with life’s unpleasant surprises at any time, now face dramatic reductions in their budgets for food, shelter, medicine and other necessities.

The Outlook for the future: Universal Service is no longer an American promise

We see no reason to believe this is a short term or unpredictable phenomenon. In most areas, this winter’s weather was not extreme; it averaged about 7% colder than normal. This was far worse than in the previous two years, but those years may have been the aberration. This weather will recur. Further, retail energy prices, while at record highs, are predicted by DOE to remain at comparable levels for several years

Natural gas deregulation is complete; this winter was trial run of market pricing of a basic irreplaceable commodity. Now we have proved: de-regulation means consumer prices will be unstable – as demand is at the mercy of weather and industry’s needs. It means consumer prices will be high- what the economists call “market” clearing. To the poor, however, it means they cannot afford to be housed, fed and clothed, and to keep warm all in the same month.

These new market realities have created the condition in which the nation’s historic commitment to utility universal service is all but dead.

A Strategy to Revitalize the Protection and Promise to America’s Low-Income Energy Users

We propose that government and energy industries join with our local community action agencies and their partners in a three-part strategy to revive this basic promise.

1) Strengthening Weatherization Assistance – the permanent solution to lower bills. President Bush has wisely committed to nearly doubling this effective program. This year, 5 million weatherized low-income families received heating bills that averaged $240 lower than would have been the case without Weatherization. Community Action, which delivers most of the Weatherization services, is prepared to more than double that population. We are pleased at the Administration’s unwavering commitment to helping the neediest families in the face of the market realities and we expect to be enthusiastic partners with the Administration in this effort.

2) Strengthening LIHEAP
The Energy Assistance program must provide higher benefits to cover the higher bills and it must serve the growing number of families with high energy burdens.

The program has $2.25 billion in federal funds and over $200 million in state funds or state- mandated discounts this year. We have already demonstrated that sum is too little, as many states are out of funds, will have no summer program, and cannot help the families whose utilities are being shut off as we stand here today.

The President has proposed $1.4 billion with the possibility of $300 million more for emergencies. This half-billion dollar reduction is a big mistake. We need all of the $3 billion provided in the bipartisan Bingaman – Domenici Senate Budget Resolution and more.

3) A new framework of state rules, federal incentives, and utility commitments to leave no needy family or senior in the dark.

Low-income consumers, indeed all small consumers, need more than money. There must be new rules for this uncharted course into the “free market”

Today’s patchwork of regulation provides no guarantee of “universal” service. It only offers, “show me the money” service

The new figures in this report show this assumption of ability to pay is an anachronism. If a consumer is allowing heat or light to be shut off, we must now assume vulnerability to crisis and hardships.

o The rules allowing utilities to put families in the cold of winter or the dark as their routine collection tool are based on an era of cheap energy. They must go.

o No family should lose electric or gas service until a referral to a community agency verifies their ability to pay; then,

o For the millions who cannot afford the entire bill, the public sector funds and Weatherization must be matched by a utility commitment to demand only the level of regular payment that the consumer can afford along with her or his basic shelter, health, and safety needs.

o This can be a win-win for both families and energy suppliers.

It would cost an unrealistic $20 billion a year to bring the energy bills of the poor down to about 10% of their income – twice the share of income everyone else pays. But local/industry partnerships and smart state rules can ensure consumers are safe, manage the debts, coordinate assistance, and keep a modest but steady stream of payments coming from every family.

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