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ENERGY INSECURITY FUNDAMENTALS FOR THE SOUTHEAST February 2021

Key Findings Millions of Southerners struggle to pay their monthly electric and gas bills. More customers are costburdened in the South than in any other part of the country, and one out of every three people in the region has trouble paying their energy bills. SEEA believes “energy insecurity” is a vital framework for understanding how the benefits and burdens of generating, transmitting, and consuming energy are distributed across communities in the Southeast. Energy insecurity is the product of multiple factors, including the lack of access to efficient housing and advanced building technologies, low household incomes, high energy costs, and coping behaviors that can place residents at a higher risk of health and safety threats. The physical, economy, and behavioral dimensions to energy insecurity cannot be fully captured by a single metric like energy burden. Rather, energy insecurity is most accurately measured through a combination of metrics and approaches. Energy cost burden is a valuable metric to understand the economic dimensions of energy insecurity, but it has limitations and should not be used as a stand-in for energy insecurity.


Table of Contents Introduction

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What is Energy Insecurity? 6 Measuring Energy Insecurity 7 Physical Energy Insecurity 7 Behavioral Energy Insecurity 7 Economic Energy Insecurity 7 Specific Approaches

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Energy Burden 11 Why Energy Burden? 11 Limitations

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Determing Burden Thresholds 12 Income Considerations

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The Geography of Burden 16 Other Terminology

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Conclusions 19

Authors William D. Bryan, built environment project manager Maggie Kelley, built environment project manager Acknolwedgements Support for this work was generously provided by the Educational Foundation of America and the JPB Foundation. The authors would like to thank Cyrus Bhedwar, director of energy efficient policy, Wesley Holmes, director of strategy and development, and Sarah Burgher, communications manager for their assistance with this report. We would also like to thank Jacquie Moss, research fellow for the Texas Energy Poverty Research Institute (TEPRI), and Ariel Drehobl, senior research associate at the American Council for an Energy-Efficient Economy (ACEEE), for providing valuable feedback on this report. About SEEA Founded in 2007, SEEA is a regional energy efficiency organization (REEO), serving eleven states including, Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia. We are a nonprofit, nonpartisan organzation and work to optimize the use and impact of energy to enhance the quality of life in the Southeast. We believe that all people in the Southeast should be able to live and work in healthy and resilient buildings, utilize clean and affordable transportation, and thrive in a robust and equitable economy.


Introduction The Southeast has the lowest electric rates in the contiguous United States, but the highest residential bills. Millions of Southerners struggle to make their monthly electric and gas payments. More customers are cost-burdened in the South than in any other part of the country, and more than a third of the region’s population has trouble paying their energy bills.1 These households live in a state of energy insecurity, where they struggle to maintain vital residential energy services, like heating and cooling. Energy insecurity is acute in the Southeast, where incomes are low on average and many homes use significant amounts of energy.2 Energy costs for low-income households in the region can exceed 20% of household income, and access to efficient building technologies and quality housing are sharply stratified by race and class.3 Five of the ten American cities with the highest energy cost burdens for low-income residents are in the South (Memphis, New Orleans, Birmingham, Atlanta, Dallas), where median energy costs for low- and moderateincome households hover between 10% and 13% of annual income, compared to a national average 1 Energy Information Administration (EIA), Residential Energy Consumption Survey (RECS), Table HC11.1: Household Energy Insecurity, 2015. 2 Ariel Drehobl and Lauren Ross, Lifting the High Energy Burden in America’s Largest Cities: How Energy Efficiency Can Improve Low Income and Underserved Communities (Washington, DC: American Council for an Energy-Efficient Economy, 2016), 5. See also Ariel Drehobl, Lauren Ross, and Roxana Ayala. How High Are Household Energy Burdens?: An Assessment of National and Metropolitan Energy Burden across the United States (Washington, D.C.: American Council for an Energy-Efficient Economy, 2020). 3 Lee, Hyun-Jeong and JoAnn M. Emmel. 2009. “Energy Practice Clusters of Virginia Limited-Resource Households,” Housing and Society, Vol. 26, No. 2: 171-94; Reina, Vincent J. and Constantine Kontokosta. 2017. “Low hanging fruit? Regulations and energy efficiency in subsidized multifamily housing.” Energy Policy 106: 505-13; Emmel, JoAnn M., Hyun-Jeong Lee, Ruby H. Cox, and Irene Leech. 2010. “Low-Income Households’ Response to Higher Home Energy Costs,” Family & Consumer Sciences, Vol. 38, No. 4 (June 2010): 37286; Hernandez, Diana, Yang Jiang, Daniel Carrion, Douglas Phillips, and Yumiko Aratani. 2016. “Housing hardship and energy insecurity among native-born and immigrant low-income families with children in the United States,” Journal of Children & Poverty, Vol. 22, No. 2: 77-92.

of 7.2%. Only 67 counties out of more than 1,000 in the Southeast have affordable energy costs for low- and moderate-income households, below 80% of area median income. Energy costs in the other 941 counties exceed 6% of annual income, the standard threshold for affordability.4 Rural and elderly residents are particularly at risk from energy insecurity. In rural Washington, Georgia, 73-year-old Barbara C. lives in a house built more than four decades ago and struggles to cover her energy bills each month with her fixed monthly $1,000 SSI benefit. Her experience is all-too typical in a region where one out of three people struggle to pay their bills each month.5 The region’s energy insecurity crisis is rooted in historical racial and economic inequities, which still shape the energy sector and circumscribe access to affordable power.

Figure 1: Average county energy cost burden as a % of income. Data: Low Income Energy Affordability Data (LEAD) Tool, U.S. Department of Energy. Map: William D. Bryan.

More than a century ago white political leaders disenfranchised Black voters to exclude them from the region’s energy decision-making process, ensuring the benefits of the South’s first wave of electrification flowed primarily to 4 U.S. Department of Energy, Low Income Energy Affordability Data (LEAD) Tool. 5 Ross Terrell, “High Energy Burdens Keep Low Income Georgians From Benefits of Solar Power,” GPB News, July 12, 2019; Lauren Ross, Ariel Drehobl, and Brian Stickles, The High Cost of Energy in Rural America: Household Energy Burdens and Opportunities for Energy Efficiency (Washington, DC: American Council for an Energy-Efficient Economy, 2018).

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white Southerners. The legacies of residential segregation continue to impede access to healthy and affordable housing for Black and Hispanic communities. Policy decisions in ensuing years have compounded housing and energy inequities. There has been little state or local action to stimulate the construction of affordable housing and prevent displacement in rapidly growing areas. Policymakers and building industry trade groups have resisted minimum acceptable standards in energy codes for new buildings. A lack of investment in green infrastructure in communities of color and low-income neighborhoods has resulted in above average outdoor temperatures and higher cooling costs. Just two state public utility commissions in the region have adopted moratoria that prevent electricity and gas from being shut off for nonpayment in periods of dangerous heat or cold. Low-income tenants cannot directly control the efficiency of their housing but often pay the costs of inefficient and dangerous residences. Utility energy efficiency programs have excluded lowincome customers due to the cost of participation, yet low-income customers pay fixed fees on their bills to fund these programs. Federal assistance programs like the Low-Income Home Energy Assistance Program (LIHEAP) and Weatherization Assistance Program (WAP) are chronically underfunded, and until 2006 state disbursements were calculated using a formula that gave preference to heating-dominant climates outside of the Southeast. Diverse representation in any industry strengthens insight and connection to the customers they serve. Despite consistent growth in energy efficiency jobs, this workforce lacks diversity and underrepresents the communities who would benefit most from energy efficiency.6 6 Jeremy S. Hoffman, Vivek Shandas, and Nicholas Pendleton, “The Effects of Historical Housing Policies on Resident Exposure to Intra-Urban Heat: A Study of 108 Urban Areas,” Climate 8, No. 12 (2020): 1-15; Matthew Desmond, “Unaffordable America: Poverty, Housing, and Eviction,” Institute for Research on Poverty Fast Focus, No 22-2015, 2015: 1-6; William D. Bryan, Construction, Codes, and Commerce: Commercial Construction Data Review, 2007-2017 (Atlanta: Southeast Energy Efficiency Alliance, 2019); Meg Anderson and

As these issues have intertwined, they have created energy and housing systems in the Southeast where low-income households and people of color pay a higher financial and health price to power their homes, while reaping few of the benefits of clean energy.7 High energy bills have cascading effects. Forced to choose between shutting off utilities versus paying for food, clothing, or medicine can have deadly consequences. Extreme heat and cold carry risk in equal measure. In summer, rising temperatures can make living without air conditioning untenable. In winter, people may use inefficient and dangerous equipment like an oven to heat their home. Unaffordable energy bills are a marker of inefficient housing stock, appliances, and HVAC systems that can place residents at greater risk of chronic illnesses like asthma. High energy bills are one of the leading drivers of exploitative, high-interest payday loans, which lenders use to prey on the lack of ready cash and fear of utility shutoffs among people struggling with energy costs.8 The effects of energy insecurity ripple far beyond Sean McMinn, “As Rising Heat Bakes U.S. Cities, The Poor Often Feel It Most,” NPR, September 3, 2019; U.S. Department of Health and Human Services, “Seasonal Termination Protection Regulations,” LIHEAP Clearinghouse; Stephen Bird and Diana Hernandez, “Policy Options for the Split Incentive: Increasing Energy Efficiency for Low-Income Renters,” Energy Policy 48 (September, 2012): 506-14; Drehobl and Ross, Lifting the High Energy Burden in America’s Largest Cities, 27; Rachel Cluett, Jennifer Amann, and Sodavy Ou, Building Better Energy Efficiency Programs for Low-Income Households (Washington, DC: American Council for an Energy-Efficient Economy, 2016); Libby Perl, The LIHEAP Formula: Legislative History and Current Law (Washington, DC: Congressional Research Service, 2012), 1-4. 7 Eva Lyubich, “The Race Gap in Residential Energy Expenditures,” Energy Institute WP 306, Energy Institute at Haas, June 2020: 1. 8 Deborah A. Frank, et. al., “Heat or eat: the Low Income Home Energy Assistance Program and nutritional and health risks among children less than 3 years of age,” Pediatrics 118, No. 5, 12931302; Rosie Day, Gordon Walker, and Neil Simcock, “Conceptualising energy use and energy poverty using a capabilities framework,” Energy Policy 93 (2016): 256; Marilyn Brown, Amnol Soni, Melissa V. Lapsa, and Katie Southworth, Low-Income Energy Affordability: Conclusions from a Literature Review (Oak Ridge, TN: Oakridge National Laboratory, 2020), 14-15; The Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why (Washington, DC: The Pew Charitable Trusts, 2012), 5.

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the region’s energy sector, contributing to the economic struggles and health risks faced by millions of residents of the Southeast. The COVID-19 pandemic has exacerbated these disparities. Historic job losses and increases in energy use while sheltering in place have simultaneously raised household costs and made it more difficult to pay those bills. This discord often leads to the difficult choice between paying utility bills or covering other necessary expenses. Disconnection moratoria put in place during the COVID-19 pandemic prevented households from losing access to energy but did not provide long-term solutions to accumulating energy debt and the growing number of shutoffs after the moratoria ended.9 Recognizing the depth and immediacy of this crisis, advocates, utilities, and policymakers are developing programming and policies targeted at reducing energy insecurity in vulnerable communities. This is a step toward acknowledging the existing racial, income-based, and geographic inequities built into the energy economy. Still, the solutions to these issues are complex. Understanding how to accurately identify the groups most vulnerable to utility cost burdens is essential to creating effective and equitable policies to address the cascading effects of high energy bills. This report provides an overview of common metrics used to identify energy insecure households in the Southeast and a brief consideration of how these metrics can support effective policies that serve communities who struggle to maintain vital energy services. A more detailed overview of the landscape of energy insecurity is available in SEEA’s “Energy Insecurity in the South” StoryMap.

9 Michelle Graff and Trevor Memmott, “Coronavirus is creating a crisis of energy insecurity,” Environmental Health News, July 1, 2020. Michelle Graff and Sandra Carley. “COVID-19 assistance needs to target energy insecurity.” Nature Energy 5 (2020): 352–354.

What is Energy Insecurity? People who struggle to pay their monthly electric and gas bills live in a state of energy insecurity, defined by sociologist Diana Hernandez as “an inability to adequately meet household basic energy needs,” including heating, cooling, and lighting.10 Energy insecurity takes a wide view of the many factors that can result in difficulty maintaining energy services, while also calling attention to how vulnerable households are impacted by the compounding effects of unaffordable and inaccessible energy.11 Energy insecurity has multiple dimensions. Economic energy insecurity encompasses all financial challenges households face to maintain steady energy services, especially the disproportionate costs carried by low-income households. Physical energy insecurity considers how the home structure impacts energy access and affordability. Low-income households have limited means to upgrade their home’s structure or technology to increase energy savings. Inefficient homes can place them at a higher risk for health problems and high energy costs. Behavioral energy insecurity highlights the ways in which households adapt to energy costs through behavior modification. While certain behaviors can help households cope with high costs and prevent utility shutoffs, strategies to heat or cool the home with nontraditional means can put residents at risk of health and safety problems.12 SEEA believes energy insecurity is a key metric for understanding the inequitable distribution of energy benefits and burdens on residents of the Southeast. Energy insecurity calls attention to the many factors that influence energy access and affordability. These include the age and quality of housing stock, presence of advanced building 10 Diana Hernandez, “Understanding ‘Energy Insecurity’ and why it matters to health,” Social Science Medicine, Vol. 167 (October 2016): 1-10. 11 Hernandez, “Understanding ‘Energy Insecurity’ and why it matters to health,” 1-10. 12 Hernandez, “Understanding ‘Energy Insecurity’ and why it matters to health,” 1-10.

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technologies, siting of energy infrastructure, and the non-energy implications of energy unaffordability. Understanding the multiple dimensions of energy insecurity can also shed light on groups who are in danger of becoming burdened by energy costs or face disruptions in their access to energy services. Energy insecurity extends beyond issues of affordability, encompassing energy access as well as the burdens that the generation, transmission, and consumption of energy places on residents of the Southeast. Energy insecurity also reflects the ways that resident behavior impacts energy use. Residents do not passively accept energy insecurities. They modify behavior to cope with unaffordable energy, sometimes reducing the chance of shutoffs and arrearages, but in other cases exposing themselves to health and safety risks. Understanding these congruent issues allows for more effective engagement with the causes and effects of unaffordable energy. Energy insecurity is a useful frame for grappling with the full range of household impacts that high energy costs can have is a necessary component of any policy or program designed to address energy inequities. Measuring Energy Insecurity Energy insecurity encompasses a wide range of conditions is most accurately measured through a combination of metrics and approaches. Physical Energy Insecurity One approach is to focus on how energy infrastructure in the home disproportionately puts low-income households at high risk for health, safety, and affordability problems. By considering how the performance and safety of HVAC systems, appliances, and hot water heating infrastructure compares with these elements in other homes, it is possible to measure how energy services in the home are stratified by income, geography, housing type, and quality.

Behavioral Energy Insecurity Another approach is to obtain qualitative data from residents to demonstrate the impact of energy insecurity and countering behaviors. Economic and physical measures cannot account for issues like the thermal comfort and health of the home as experienced by the resident. Stefan Bouzarovski argues that it is “important to consider the individual, household and community-level determinants of energy dynamics in the residential environment, by taking into account environmental, cultural, technical and architectural factors.”13 A qualitative approach helps determine whether coping mechanisms like using an oven or space heater to stay warm places increases residents’ health and safety risks. Economic Energy Insecurity Economic measures of energy insecurity are often conflated with energy insecurity writ large. There are several general approaches to measuring economic energy insecurity. The simplest approach considers any household that cannot pay its bill as cost burdened. Another approach is to measure the annual expenses required by a household to pay all energy costs. The most common way to measure the economic dimensions of energy insecurity, and the way this report explores in detail, is to normalize energy costs by dividing all annual costs by household income to calculate the energy cost burden (as a % of annual income).

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Bouzarovski, Energy Poverty, 19.

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Specific Approaches Household Energy Insecurity Indicator Stefan Cook and affiliated researchers developed a three-category approach to measuring energy insecurity. Households with no issues with energy affordability or access are considered “energy-secure.” Households that have faced a possible utility shutoff in the preceding year are “moderately energy insecure.” Households forced to use dangerous methods to heat their home (e.g. an oven), have had their power shutoff for nonpayment, or have spent one or more days without heating/cooling in the past year are “severely energy insecure.” This approach was developed to provide physicians with a way to understand potential home-based medical risks to children who were visiting the emergency room. Although this is a useful measure, Hernandez, Aratani, and Jiang rightly note that “more comprehensive measures of EI are needed.”14 Residential Energy Consumption Survey (RECS) Qualitative indicators are behind the U.S. Energy Information Agency’s (EIA) Residential Energy Consumption Survey (RECS), which has examined energy insecurity since 2005. The EIA survey includes questions about whether residents have had to reduce spending on food and medicine to pay utility bills, how often their residence was kept an unsafe temperature, how frequently the household has received a disconnection notice, and how often residents were unable to use heating and/or cooling equipment because they could not afford the cost of repairs. Using the responses from surveys, EIA staff conduct a logistic regression analysis based on the data points listed below to estimate the number of households experiencing energy insecurity:15 What is the income of the survey respondent’s household? Especially: is it below $20,000 or between $20,000 and $59,999? Is the respondent 60 years old or older? How many children live in the respondent’s household? Does the respondent identify as Hispanic? Does the respondent identify as African American? Does the respondent identify as a race other than white or black? Does the respondent lives in a house built before 1990? Is the respondent a renter? Is the respondent is receiving some form of energy assistance (i.e. LIHEAP, WAP)? Does the respondent’s home have single-pane windows? Does the respondent live in a mobile home? Does the respondent live in an apartment building? Each of these questions indicates a risk factor for energy insecurity, and when combined provide an accurate sense of what proportion of households surveyed by RECS are at risk for or are experiencing energy insecurity. RECS data on energy insecurity is freely available for analysis by interested stakeholders.16 14 John T. Cook, et al. “A brief indicator of household energy security: Associations with food security, child health, and child development in US infants and toddlers.” Pediatrics, Vol. 122, No. 4: 867-75; Diana Hernandez, Yumiko Aratani, and Yang Jiang. Energy Insecurity among Families with Children. National Center for Children in Poverty, 2014. 15 Chip Berry, Carolyn Hronis, and Maggie Woodward. “Who’s Energy Insecure? You Might be Surprised.” ACEEE Summer Study on Energy Efficiency in Buildings: Making Efficiency Easy and Enticing. Washington, DC: ACEEE, 2018. 16 APPRISE, LIHEAP Special Study of the 2005 Residential Energy Consumption Survey: Dimensions of Energy Insecurity for Low Income

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Indicators of Energy Insecurity (IEI) Developed by Senators Lisa Murkowski (R-AK) and Tim Scott (R-SC) in 2014, the Indicators of Energy Insecurity (IEI) approach focuses on the financial impacts of energy price increases. As Murkowski and Scott explain, “The IEIs illustrate real-world impacts that rising energy prices have on domestic households, including how many Americans will face energy insecurity or outright poverty.”17 Their framework considers the interplay between three IEI metrics. One IEI is calculated by subtracting energy costs from gross income and considering how available income changes with potential energy price increases. A second IEI compares available household income (after factoring energy price increases into account) to measure the number of households with incomes that fell below the poverty line because of the price increase. This IEI assumes incomes remain static as prices increase. The final IEI considers how energy cost burdens (% of income spent on energy bills) will potentially change as a result energy price increase.18 While these metrics can potentially illuminate the impacts of energy price changes, they are less useful in showing the broad dimensions of energy insecurity and should be avoided. Murkowski and Scott offer no method of weighting each IEI or using them to determine whether a price increase is or is not acceptable. IEIs only provide an estimate of how price changes could impact energy insecurity and cannot shed light on the present state of energy insecure households. The IEI approach has a simplistic understanding of the experience of households living in energy insecurity. IEIs only consider the financial dimensions of energy insecurity, which prevents them from shedding light on the complex factors that contribute to energy insecurity. The Ability to Pay Index Led by Jessica Lin, researchers at the U.S. National Renewable Energy Laboratory (NREL) combined multiple variables into a single resource which provides a more robust understanding of energy insecurity than a single factor measure like energy burden. NREL created an “Ability-to-Pay Index” which considers a combination of housing and income data on a scale of 0 to 1,000, with 1,000 indicating households with the least ability to pay their utility bills due to low incomes and high housing costs. Using a geospatial tool, NREL corresponds their Ability-to-Pay Index to 57 other variables, including energy expenditures, fuel prices, housing costs, measures of the risk of extreme weather, and prevalence of asthma and infant mortality rates, among others. They concluded level of education, mortality rate, housing tenure, energy burden rate, rate of income inequality, and race most accurately predicted whether a household can pay its utility costs.19 This approach points us toward best practices for measuring the full range of energy affordability impacts on vulnerable populations.

Households (APPRISE, 2010), i. RECS data on energy insecurity is freely available for analysis by interested stakeholders. 2015 RECS survey form, U.S. Energy Information Agency, Residential Energy Consumption Survey (RECS). 17 Lisa Murkowski and Tim Scott, Plenty at Stake: Indicators of American Energy Insecurity, Energy 20/20 White Paper, 2014, 3. 18 Murkowski and Scott, Plenty at Stake, 5-14. 19 Jessica Lin, “Affordability and access in focus: Metrics and tools of relative energy vulnerability,” The Electricity Journal 31, No. 6 (July 2018): 23-32; National Renewable Energy Laboratory (NREL), Energy Affordability and Access in Focus: Metrics and Tools of Relative Energy Vulnerability.

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Energy Burden Energy burden is one of the most common metrics used to measure the economic aspects of energy insecurity. While energy burden can shed light on the financial dimensions of energy insecurity, it does not provide a holistic picture of the state of energy insecure households. Energy burden is defined as the percentage of household income required to cover residential energy costs, typically electricity, natural gas, or propane, and it is calculated by dividing household energy costs by household income. Energy burden should be based on annual income and cost data because of seasonal variations in energy use and income, especially for low-income households.

have lower incomes. It is important to note that low-income households use less energy overall, but have higher energy use intensities (EUI), suggesting their residences are less efficient and there is potential to lower burdens through efficiency gains.21 Energy burden is often incorrectly assumed to be a stand-in for energy insecurity. Energy burden is nested within energy insecurity and it provides a good indication of the presence of the economic dimensions of energy insecurity, but a household with high energy burdens is not always energy insecure. In the following sections, we explain the benefits and limitations for using energy burden to understand the economic dimensions of energy insecurity. Why Energy Burden?

It is common to use gross income to calculate energy burden. However, a household’s eligibility for federal bill assistance payments through the Low Income Home Energy Assistance Program (LIHEAP) is typically determined by state agencies using net income, which provides a more accurate measure, though data on net income can be difficult to obtain.20 Burdens can only change due to alterations in income, energy costs, or the amount of energy used. Increasing income decreases energy burden if costs stay the same, while lowering energy rates and reducing fixed charges decreases burden if income is unchanged. A key part of the equation is understanding low-income households have higher energy burdens simply because they 20 Applied Public Policy Research Institute for Study and Evaluation (APPRISE), LIHEAP Energy Burden Evaluation Study (Princeton, NJ: APPRISE, 2005), iii.

Energy burden is vital to crafting prescriptive policies and programs to support the energy and housing needs of the most vulnerable residents in the Southeast. Because energy burden is calculated relative to income, it provides a useful snapshot of household energy expenditures compared across different population groups and locations. It can also be used to easily compare how energy costs have changed or remained static over time. Energy burden calculations are closely linked to the cost of housing, shedding light on the overall affordability of housing and having the potential to inform affordable housing policies and practices. Energy burden is easy to understand and can be used to effectively communicate complex energy issues with different stakeholder groups. For these reasons, energy burden is used by a range of federal, state, and local agencies, and open access data needed to calculate energy 21 Bednar, Dominic J., Tony Gerard Reames, and Gregory A. Keoleian. 2017. “The intersection of energy and justice: Modeling the spatial, racial/ethnic and socioeconomic patterns of urban residential heating consumption and efficiency in Detroit, Michigan,” Energy and Buildings 143 (May, 2017): 25-34.

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burden is readily available from the U.S. Census Bureau, U.S. Energy Information Agency (EIA), and U.S. Department of Energy. Limitations Energy burden is useful in highlighting energy inequities, but it has crucial limitations.

Determining Burden Thresholds

Policymakers and researchers do not always agree about what constitutes an unaffordable energy burden. Other than showing the expenditures necessary to cover utility bills, energy burden does not provide a detailed picture of the cascading financial effects of high energy costs on households. It cannot capture differences in the social and financial safety net available to communities, who may face similar expenses but have far different means to pay these costs. As an economic measure, energy burden provides little insight into the non-financial effects (e.g. poor health, poverty, etc.) or non-energy impacts related to high energy use and living in inefficient housing stock. Households forced to make difficult trade-offs to pay their bills by reducing the consumption of food, medicine, or other essentials cannot be identified through energy burden calculations. Energy burden, in short, cannot indicate whether a household is able to pay its energy bills or not – a key marker of energy insecurity. Energy burden only sheds light on the financial dimensions of energy insecurity, and even suggests these issues can be solved by reducing utility rates or improving incomes and access to capital through targeted low-income programs. While these measures can help, they cannot address deep-seated inequities associated with high levels of energy insecurity. Programs and policies that must identify energy insecure households can, and should, use energy burden as a measure. Yet, focusing on only reducing energy burdens omits the true energy and non-energy impacts on low-income

households. Rather, energy burden should inform programs and policies in conjunction with an array of other metrics relevant to context and scale to ensure vulnerable communities are fully supported.

Energy burden is an imprecise and even misleading phrase. The word “burden” implies energy costs are too high anytime they are labeled an “energy burden,” but this is not strictly true. Energy burden is a measure of household expenditures on energy as a percentage of annual income. A household paying 1% of their overall income, for instance, has an energy burden of 1%, while a household paying 15% of income has an energy burden of 15%. Both figures are labeled “energy burdens” even though only one of these households potentially faces unaffordable energy costs. For this reason, the effectiveness of programs and policies that use energy burden hinges on what threshold is employed. Different approaches use either mathematical distributions, threshold values, or behavioral characteristics to determine when household energy costs are unaffordable. One method is to designate a percentage of the population who pays the highest bills as experiencing unaffordable energy costs. A similar approach considers any household paying just above the average cost as highly burdened. The most widely used and accepted approach uses a predetermined threshold value to determine when energy costs are unaffordable.22 Determining the proper burden threshold, however, is a delicate business, and threshold values have changed – sometimes significantly – over time. Fisher, Sheehan & Colton, an economic consulting firm and leading expert on energy affordability, has determined households no longer have an “affordable burden” when they pay more than 6% of their annual income for 22

APPRISE, LIHEAP Energy Burden Evaluation Study, 8-12.

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energy costs. Their calculation is pegged to the price of housing. The U.S. Department of Housing and Urban Development (HUD) has determined the total cost of shelter is unaffordable when it exceeds 30% of household income. Energy costs should make up approximately 20% of the total cost of shelter, so an energy burden higher than 6% will cause a household to exceed the 30% affordable housing threshold.23 The 6% threshold developed by Fisher, Sheehan, & Colton is widely used, including by the U.S. Department of Health and Human Services (HHS) to administer LIHEAP grants, states like New York and Florida, cities like Atlanta, and researchers and practitioners. The authors of a recent ACEEE study argue a high energy burden exists when a household pays more than 6% of household income, while a severe energy burden results when a household pays more than 10% of income on energy costs.24 Other researchers believe residents are not cost burdened unless energy costs make up a higher proportion of their household income. The Applied Public Policy Research Institute for Study and Evaluation (APPRISE), ties energy burden to housing costs, but uses a different calculus than Fisher, Sheehan, & Colton. For APPRISE, a “severe shelter burden” results when shelter costs exceed 50% of income, not 30%. They estimate energy costs should equate to 21.8% of the total cost of shelter, and conclude paying more than 10.9% of income for energy is necessary to create a “high residential energy burden.”25 APPRISE researchers acknowledge paying less than this threshold can still lead to burdensome energy costs, and consider spending more than 6.5% of a household’s income on energy as a “moderate 23 Fisher, Sheehan, & Colton, “What is the Home Energy Affordability Gap?,” in Home Energy Affordability Gap. 24 Drehobl, Ross, and Ayala, How High Are Household Energy Burdens?, 51-61. 25 APPRISE considers total residential energy consumption in calculating its “residential energy burden” and only considers the costs associated with home heating and cooling to calculate its “home energy burden.” See APPRISE, LIHEAP Energy Burden Evaluation Study, 2.

residential energy burden.”26 The APPRISE threshold is similar to the measure of “fuel poverty” in Europe, a metric based on maintaining healthy indoor temperatures. A threshold of 10% of all disposable income spent to maintain home heating and other essential energy uses is the common definition of fuel poverty in Europe, and one scholar notes this is “the most well documented and copied measure of energy poverty.”27 This Ten Percent Rule (TPR) was developed in the late 1980s by Brenda Boardman, who arrived at a 10% threshold by averaging costs as a proportion of income for all households in the bottom 30% of incomes in the United Kingdom.28 In 1991, the TPR was written into law as the measure of fuel poverty for the U.K., though it has been recently criticized as outdated and is no longer the national measure of fuel poverty.29 Although the U.K. is currently exploring new ways of measuring fuel poverty, a 10% threshold has been adopted by researchers in the United States. Sociologist Diana Hernandez, contends “both energy burden and fuel poverty ensue when energy expenditures exceed ten percent of a household’s income,” though she does not view energy affordability simply as meeting a predetermined threshold.30 26 This is based on the idea of a “moderate shelter burden,” which APPRISE defines as having to pay between 30% to 50% of income on shelter. To calculate “home energy burden” – a metric that only considers the energy costs associated with household heating and cooling – APPRISE calculates that energy costs above 2.6% will result in a “moderate home energy burden” and costs exceeding 4.3% will result in a “high home energy burden.” See APPRISE, LIHEAP Energy Burden Evaluation Study, 12. 27 Harriet Thomson, Stefan Bouzarovski, and Carolyn Snell, “Rethinking the Measurement of Energy Poverty in Europe: A Critical Analysis of Indicators and Data,” Indoor and Built Environment 26, No. 7 (2017): 883. 28 Brenda Boardman, Fuel Poverty: From Cold Homes to Affordable Warmth (London: Belhaven Press, 1991). At the time, the TPR also represented double the national median of energy costs in the U.K. Recently the double-median rule has become popular, though it is no longer close to the 10% threshold. See Peter Heindl and Rudolph Schussler, Dynamic Properties of Energy Affordability Measures, Discussion Paper No. 15-019 (Mannheim, Germany: Centre for European Economic Research, n.d.). 29 Thomson, Bouzarovski, and Snell, “Rethinking the Measurement of Energy Poverty in Europe,” 883; Heindl and Schussler, Dynamic Properties of Energy Affordability Measures, 3. 30 Diana Hernandez, “Understanding ‘Energy Insecurity’ and

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Some researchers and practitioners disassociate energy burden from the cost of shelter. Working in a European context, Christine Liddell and Richard Moore argue energy costs become burdensome when they equal or exceed double the median for energy costs in a set area.31 The Low Income High Costs (LIHC) metric that replaced the 10% fuel poverty measure as an official condition in England and Wales in 2012 considers energy costs burdensome when they exceed the national median and would cause the household to fall below 60% of the median poverty line.32 Determining the right threshold is not just an academic debate. In policymaking, if threshold values are too high people are excluded from potentially beneficial programs, while lower threshold values can expand the number of people who qualify for assistance but potentially reduce the amount of assistance available for each household. After the U.K. shifted to the from the TPR to the LIHC approach in 2012, overall government funding for addressing fuel poverty was slashed by 26% while support for energy efficiency for households experiencing fuel poverty was reduced by 44% because the number of qualifying households was cut in half.33 On the other hand, in 2019 Efficiency Vermont changed the qualifications of their Targeted High Use program to include households that pay an energy burden greater than or equal to 3% of household income in order to allow more households to qualify for assistance.34 Inclusive definitions of why it matters to health,” Social Science Medicine 167 (October 2016): 2. 31 Christine Liddell, Chris Morris, S. J. P. McKenzie, and Gordon Rae, “Measuring and Monitoring Fuel Poverty in the U.K.: National and Regional Perspectives,” Energy Policy 49 (October, 2012): 27–32; Richard Moore, “Definitions of Fuel Poverty: Implications for Policy,” Energy Policy 49 (October, 2012): 19–26; Drehobl and Ross, Lifting the High Energy Burden in America’s Largest Cities, 10. 32 Thomson, Bouzarovski, and Snell, “Rethinking the Measurement of Energy Poverty in Europe,” 883-84. 33 Stefan Bouzarovski, Energy Poverty: (Dis)Assembling Europe’s Infrastructural Divide (London, Palgrave Macmillan: 2018), 10-11; Caitlin Robinson, Stefan Bouzarovski, and Sarah Lindley, “’Getting the measure of fuel poverty’: The geography of fuel poverty indicators in England,” Energy Research & Social Science 36 (February 2018): 79-93. 34 Drehobl, Ross, and Ayala, How High Are Household Energy Burdens?, 24.

what constitutes a high burden are therefore critical to ensure households in need are able to receive assistance. Common Measures of High Energy Burdens 6% Threshold

Households that pay over 6% of their income in energy costs have an “unaffordable burden.” Households that pay less than 6% of their income have an “affordable burden.”

Standard Devia�on

Households that pay one standard devia�on above the mean energy burden are burdened.

Mean

Households that pay more than the mean energy burden are burdened.

Media/ Double Mean

Households that pay any amount over the median energy burden are burdened. Households that pay any amount above 2x the median energy burden are highly burdened.

Low Income High Costs (LIHC)

Households that pay an amount equal to or exceeding the na�onal median for fuel costs and will cause the household to fall below 60% of the na�onal poverty line.

Unable to Pay

Households are burdened if they are unable to pay their u�lity bills.

Apprise Residen�al Energy Burden

Households that pay more than 10.9% of their income in energy costs have a “high residen�al energy burden.” Households that pay more than 6.5% of their income in energy costs have a “moderate residen�al energy burden.”

Apprise Home Energy Burden

Households that pay hea�ng/cooling costs that exceed 4.3% of their income have a “high home energy burden.” Households that pay hea�ng/cooling costs that exceed 2.6% of their income have a “moderate home energy burden.”

Ten Percent Rule

Households that pay more than 10% of all disposable income are in a state of “fuel poverty.”

SEEA recommends tailoring energy burden thresholds to the living expenses of the target

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area. To determine this threshold is it critical to weigh local housing costs, the distribution of income, and the effects of climate on home energy use. These factors may not dramatically change energy burden calculations but can significantly affect the ability of households to pay their bills. The most useful threshold for Jackson, Mississippi, for instance, will not be helpful for understanding energy burdens in Alexandria, Virginia due to significant differences in housing markets and living expenses in these locations. Without localized data, the 6% threshold provides a serviceable standard for policymakers and program designers in the Southeast to determine when household energy costs are burdensome. Because this value is calculated relative to the cost of housing, it considers energy burden as a part of overall housing affordability. The 6% threshold is an important reminder that affordable housing is not just determined by keeping rent and mortgage payments reasonable – it is also ensuring reasonable utility costs. The 6% approach is also the most widely used threshold and is employed by HUD, HHS, and other government stakeholders. Income Considerations Energy burden cannot capture differences in savings, property, or other financial resources apart from income. Higher-income households typically have a more substantial safety net to pay their bills and are less likely to be financially burdened by energy costs even if they make up a “burdensome” percentage of household income. Energy burden is therefore most effective when it is used to measure energy costs for low- or moderate-income households. These households can be identified either by their relationship to area median income (AMI), which is determined by HUD based on location-specific fair market rents (FMR), or the federal poverty line (FPL).35 35 Jessica Lin, “Affordability and access in focus: Metrics and tools of relative energy vulnerability,” The Electricity Journal 31, No. 6 (July 2018): 23-32.

Income Extremely Low Very Low Low Moderate Not Low or Moderate

% of Area Median Income (AMI)

% of Federal Poverty Line (FPL)

0–30% 30–50% 50–80% 80–120% 120%+

0–100% 100–150% 150–200% 200–300% 300%+

Researchers have found energy insecurity is not just limited to low-income households. Households in the “moderate” income bracket also experience significant incidences of energy insecurity.36 Additionally, moderate-income households often cannot access energy efficiency and housing programs designed to reach lowincome groups. Programs designed to reduce energy insecurity and ensure equitable access to energy efficiency should consider both low- and moderate-income households. Households in the “not low or moderate” categories are more likely to have financial resources to manage high costs and are less likely to be burdened by paying a higher proportion of their income for energy bills. For this reason, energy burden is most useful as a metric when focused on households under 120% of AMI or 300% of FPL. The Geography of Burden Energy burden is a valuable metric in understanding the geographic dimensions of energy insecurity, but it is critical to ensure the geographic scale fits the policy or program being developed for energy burden to be an effective tool. The most accurate data is obtained by gathering utility bill data at the household level and income data from a utility or other local source, though this can be difficult to access.37 American Housing Survey (AHS) data allows for the calculation of household-level energy burdens, but without 36 Berry, Hronis, and Woodward. “Who’s Energy Insecure?,” 13-9. 37 ACEEE, “Best Practices for Working with Utilities to Improve Access to Energy Usage Data,” ACEEE Policy Toolkit, June 2014.

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the possibility of mapping the location of specific households. In the absence of household-level data, it is possible to use average incomes and average energy bills to calculate an average geographic energy burden. It is important to note these average burdens do not reflect any specific household’s actual burden. With enough granularity, however, these averages can still be useful in uncovering energy burden disparities among different areas. Researchers from the National Renewable Energy Laboratory (NREL) discovered energy burden is not as effective as other metrics in showing differences between rural and urban areas. While energy burden remains relatively static whether measured in rural or urban settings, there are significant differences in energy affordability across these geographic divisions. Using an “Ability-to-Pay Index” they have found households in urban areas (cities and towns) had more difficulty paying their bills compared with rural and suburban areas. NREL researchers concluded that “by leveraging more precise, granular data such as the ‘town’ designation rather than the more generic ‘rural’ designation,” policymakers could be more prescriptive and design programs focused specifically on families living in small towns with little available income rather than wealthy retirees in rural areas.38 In the absence of household-level data other sources can provide a useful window into energy cost burdens. The geographic dimensions of energy affordability are complicated by the different, and sometimes incompatible, locations where energy burden data is collected. One of the most useful sources of publicly accessible energy burden data is the U.S. Department of Energy’s Low-Income Energy Affordability Data (LEAD) Tool, which aggregates data from the American Community Survey (ACS) in an interactive tool.39 38 Lin, “Affordability and access in focus,” 23-32. 39 The U.S. Department of Energy has compiled energy burden data with the Low Income Energy Affordability Data (LEAD) Tool;

The ACS and EIA’s Residential Energy Consumption Survey (RECS) also sheds light on aspects of energy insecurity based on survey-derived estimates for housing and residential energy use.40 The American Housing Survey (AHS) provides information on energy cost burdens that can be calculated down to the household level, though with limited geographical identifiers.41 Researchers have found energy insecurity is not just limited to low-income households. Households in the “moderate” income bracket also experience significant incidences of energy insecurity. Additionally, moderate-income households often cannot access energy efficiency and housing programs designed to reach lowincome groups. Programs designed to reduce energy insecurity and ensure equitable access to energy efficiency should consider both low- and moderate-income households. Geography

LEAD

ACS

AHS

RECS

Census Region Climate Region Census Division

No* No* No*

Yes No* Yes

Yes No Yes

Yes Yes Yes

State

Yes

Yes

Select States Only

No

County Census Tract Census Block Group Census Block Zip Code Tabula�on Area (ZCTA)

Yes Yes No No

Yes Yes Yes No

No No No No

No No No No

No

Yes

No

No

Zip Code

No

No

No

No

Metropolitan Areas

Yes

Yes

Select Areas Only

No

Rural/Urban Household

No* No

Yes No

No Yes

Yes No

*can be aggregated manually from available data

Ookie Ma, et. al. Low-Income Energy Affordability Data (LEAD) Tool Methodology (Golden, CO: National Renewable Energy Laboratory. NREL/TP-6A20-74249, 2019). 40 United States Census Bureau, Geography and the American Community Survey: What Data Users Need to Know (Washington, DC: U.S. Government Printing Office, 2020), 2. 41 U.S. Department of Housing and Urban Development, American Housing Survey Methodology.

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Households in the “not low or moderate” categories are more likely to have financial resources to manage high costs and are less likely to be burdened by paying a higher proportion of their income for energy bills. For this reason, energy burden is most useful as a metric when focused on households under 120% of AMI or 300% of FPL. Other Terminology Energy insecurity is a valuable metric to describe disparities in access to affordable energy, and the inequitable distribution of the burdens and benefits of the Southeast’s housing and energy sectors. Yet it is often conflated with other criteria or labels. Energy Security: Energy insecurity is distinct from “energy security,” a term commonly used in foreign policy circles to refer to efforts by nationstate actors to ensure a dependable supply of fuels, primarily oil. According to the International Energy Agency (IEA), energy security is “ensuring the uninterrupted availability of energy sources at an affordable price.”42 The terminology overlaps, but energy insecurity and energy security have separate and distinct sets of stakeholders. Energy insecurity is focused on residential consumers and the household level, while energy security is focused on the level of the nation-state. Energy Arrearages: Energy arrearages and shutoffs are important symptoms for energy insecurity. They are “direct indicators of households in payment trouble.”43 Arrearages accumulate when households have an unpaid balance on their account, and typically are caused when a household struggles to pay for its energy. Many utilities offer management plans to customers who fall behind on their bills, though these plans 42 International Energy Agency (IEA), “Energy Security,” 2020. 43 John Howatt, Jerry McKim, Charlie Harak, and Olivia Wein, Tracking the Home Energy Needs of Low-Income Households Through Trend Data on Arrearages and Disconnections (National Energy Assistance Directors’ Association, May 2004): 14.

vary significantly in the types of support they provide to customers and in their effectiveness at reducing arrearages. Arrearages are a precursor to service disconnections that shut off energy access and are a leading cause for high-interest payday loans.44 The expenses required for arrearage management programs and shutoffs are often placed on consumers via higher rates and fees on bills, raising energy costs for all households and placing more pressure on those households struggling to pay their bills.45 Fuel Poverty: Another widely used concept is “fuel poverty.” Fuel poverty is closely aligned with energy insecurity, though they are measured by different criteria. Fuel poverty emerged out of in the 1970s and 1980s, and it describes a condition where households cannot afford to pay utility costs to “achieve a satisfactory indoor temperature regime.” The focus of fuel poverty is on establishing standards for maintain warmth in the home, not cooling. When the U.K. made fuel poverty an official condition they established the minimum acceptable temperature for households as 21°C (~70°F) and 18°C (~64°F), depending on the location in the home. There is no maximum acceptable temperature, making this approach less effective for the Southeast.46 Energy Poverty: “Energy poverty” is often conflated with fuel poverty, though these refer to different issues. Rather than measuring the high cost of energy faced by low-income households, energy poverty refers to “a lack of access to modern energy services,” and is typically used to describe conditions in developing areas.47 Comparatively few households in the United States totally lack access to energy services, and 44 The Pew Charitable Trusts, Payday Lending in America, 5. 45 Drehobl and Ross, Lifting the High Energy Burden in America’s Largest Cities, 12. 46 Kang Li, Bob Lloyd, Xiao-Jie Liang, and Yi-Ming Wei, “Energy Poor or Fuel Poor: What Are the Differences?,” Energy Policy, Vol. 68 (May 2014): 476–81. 47 Harriet Thomson, Carolyn Snell and Christine Liddell. “Fuel Poverty in the European Union: a concept in need of definition?” People, Place and Policy, Vol. 10, No. 1 (2016): 5-24; Li et al., “Energy Poor or Fuel Poor,” 476-81.

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therefore “energy poverty” is not a useful term for policies targeted at low-income households in this country. More recently, however, scholars have started to redefine “energy poverty” to reflect concerns about unaffordable energy costs. Stefan Bouzarovski, for instance, argues energy poverty “occurs when a household is unable to secure a level and quality of domestic energy services— space cooling and heating, cooking, appliances, information technology—sufficient for its social and material needs.” Bouzarovski argues fuel poverty is too limiting because it focuses only on the costs of heating fuel rather than the sum of the energy use of a household, and he sees energy poverty as a way to expand the conversation.48 Energy Vulnerability: Because of the limitations of energy poverty and fuel poverty, scholars have started to reframe energy unaffordability in broader terms. One example is energy vulnerability, a model used to predict when households will become energy poor. Energy burden, energy poverty, and fuel poverty only identify households experiencing energy burden at the moment data is collected. They do not reflect the conditions that lead to energy burden or that could put households at risk for energy unaffordability.49 Energy vulnerability was developed as a corrective to this limitation. The term captures infrastructural vulnerabilities in the energy system that transport energy and use it in the home. By considering the influence of built environment factors as well as conditions that could lead households to become energy burdened, energy vulnerability provides a useful way of capturing the multiple factors that contribute to energy unaffordability and identifying households at risk of becoming burdened.50

48 49 50

Bouzarovski, Energy Poverty, 1. Bouzarovski, Energy Poverty, 17-22. Bouzarovski, Energy Poverty, 17-22.

Conclusions Energy insecurity is a vital framework for understanding how the benefits and burdens of generating, transmitting, and consuming energy are distributed across communities in the Southeast. Energy insecurity is the product of multiple factors, including the lack of access to efficient housing and advanced building technologies, low household incomes, high energy costs, and high-risk coping behaviors. This framework clarifies the range of factors influencing energy affordability and access as well as the long-term impacts of the energy sector on utility customers. Successful programs to address the inequities built into the energy sector will grapple with each of these causes. Addressing energy insecurity does not guarantee an equitable the energy sector. Energy insecurity and energy equity are not the same; rather, energy insecurity is nested within energy equity. Equity in the energy sector requires additional work beyond solely addressing the distribution of the energy sector’s benefits and burdens. It requires a commitment to an inclusive decisionmaking process and recognition of an unjust history.51 Reckoning with these more difficult components of equity facilitates policies and programs that offer health and prosperity to communities burdened by the cost of energy. 51 See Brown, Soni, Lapsa, and Southworth, Low-Income Energy Affordability, 2-4.

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Energy Insecurity Fundamentals for the Southeast