It’s one thing to pay more for electricity to power a big house and lots of high-tech gadgets. For many of the poorest households in the U.S., though, the bill is disproportionately high—precisely because they are poor.
There’s a shift underway in how Americans consume energy. That’s largely due to increasing efficiency, decreasing demand per capita, and the rapid expansion of renewable-energy sources. Still, the share of income that low-earning households spend on electricity rose by one-third in the last decade, according to a new analysis by the nonprofit renewable-energy advocacy group Groundswell. In fact, the bottom 20 percent of earners spend almost 10 percent of their income on electricity, more than seven times the portion of income that the top 20 percent pays. The report tracks the cities where the poor are hit hardest by electricity bills, and the results show stark inequalities.
Groundswell ranked cities by their proportion of poor residents who pay $200 or more for electricity each month. The $200 threshold is just shy of 10 percent of the monthly income for a family of four living in poverty. It’s also significantly higher than the median monthly electricity bill in the U.S., which was $114 in 2013.
The Lowest Segment of Earners Pays Considerably More of Their Income for Electricity
The highest energy bills for the poor are clustered around the South—that’s where 46 percent of households with high energy burdens live. Jacksonville tops the list with 14.5 percent of its poor paying $200 or more. Baltimore, Miami, Orlando, and Austin follow, all with at least 10 percent.
These are parts of the country that get really hot, so it’s not surprising that people there use more energy. What’s notable is how that burden is distributed across the population: It disproportionately falls on black and poor residents. Fifty percent of all families that spend 10 percent of income on power bills are black, the report notes. In addition, more than half of those energy-insecure households are below the Federal Poverty Level, says Groundswell’s CEO, Michelle Moore.
Percentage of Poor Families Paying $200 or More Per Month for Electricity, by City
“People who earn less aren’t just paying more for electricity as a percentage of their income—they’re paying more because it actually costs them more per square foot,” Moore says.
Part of that results from market forces: When new gadgets hit the markets, wealthier customers can afford to be early adopters, and it takes time for the prices to come down. That’s what happened with flat-screen TVs and electric cars, but also with new high-efficiency home improvements that can cut electric bills.
Families Earning Less Than $40,000 a Year Use Energy More Intensively Than Wealthier Families
“Energy is not a luxury good,” Moore says. “We can’t afford the social cost of leaving economically challenged communities behind. The people who can least afford the cost are paying the biggest electricity bills.”
Low-income households also face a split-incentive problem. They’re much more likely to rent compared to wealthier families, and in almost all cases, the renter pays the utility bill. That means, on one hand, renters can’t make efficiency upgrades because they don’t own the property. Landlords, on the other hand, don’t have an incentive to pay for upgrades that would only save their tenants money.
Efficiency upgrades and renewable-energy installations cost money up front, which can put them out of reach for poor families who can make upgrades. They’re unlikely to have the cash for capital expenses, and they might also have difficulty getting loans for a project—and that only intensifies the lack of opportunity, Moore says. Families with inefficient heating systems are paying more and getting less, so they might need space heaters to stay warm through the winter, adding even more to their monthly bills.
To tackle this disparity, Groundswell recommends making energy efficiency and renewable energy more easily available to poor households. The growing sector of community solar offers encouragement here, because it makes it possible for renters or residents of multi-family housing to access cheap, clean energy without having their own roof. The exact details may vary by location, but there are certainly ways for cities to address their disproportionate energy bills.