Within a single town or city, households pay the same energy rates (all residential customers pay the same rate for energy on a per unit basis). However, even for the same size of house or amount of energy use, households with lower incomes spend a larger share of their income on their energy bill than higher-income households do, leaving less for other expenses like rent, healthcare, or college tuition.
Recent research by the American Council for an Energy-Efficient Economy (ACEEE) found that the median energy burden (energy costs as a share of income) in the United States is 3.1 percent: For example, in 2018, the U.S. median income was $62,000; therefore, half of households pay less than $192 and half pay more in energy costs.
In the District of Columbia, the median energy burden is only 2 percent, but lower-income households pay a lot more. Half of the low-income District households (defined by ACEEE as those which earn less than or equal to 200 percent of the federal poverty level, or $55,500 for a family of four) pay more than 7.5 percent of their income in energy costs (a household making $55,000 annually pays $340 or more per month). One in fourteen of District households are “severely” energy-burdened—meaning they pay more than 10 percent of their income in energy costs.
In 2018, half of all District households made more than $90,600, and half made less. The half that make more than $90,600 pay just 1 percent of their income in energy bills. In contrast, District households earning less than $27,000 per year spend almost 20 percent of their income on energy.
There are also racial/ethnic disparities in energy burdens both in the District and across the United States. According to ACEEE, households of color face higher energy burdens compared to their white counterparts. The inequitable distribution of energy burdens is confounded by several other disparities facing racial/ethnic minority populations. For example, because of historical and systemic racism, racial/ethnic minorities on average earn less income, are less likely to own a home, and have poorer health outcomes.
Most policies to address energy burdens aim to either provide energy bill relief (e.g., the Low-Income Home Energy Assistance Program (LIHEAP) or the Weatherization Assistant Program (WAP)) or rebates for energy efficiency upgrades that reduce energy consumption. For instance, the District‘s Sustainable Energy Utility (DCSEU) offers rebates for the purchase of energy-efficient appliances, making energy savings more attainable for low-income households. More recently, states have started to work towards capping energy burden. For example, New York State developed an initiative called Reforming the Energy Vision (REV), which sets an energy cost target of 6 percent of income for low-income customers. Similar policies exist or are in the works for California and New Jersey.
In our report, Equity Assessment of Electrification Incentives in the District of Columbia, we identify three priorities to ensure equitable decarbonization efforts; one of which is to prevent existing energy burdens from worsening. Addressing disparities in energy burden provides more money to spend on other key expenditures that maintain household’s quality-of-life, such as healthcare, childcare, and college tuition. This increased spending also puts more money into the community, spurring economic growth.
