Energy Costs, Conservation, and the Poor

Meeting monthly payments for household energy use is increasingly difficult for families with incomes at or near the poverty level. While the system of extraction, generation, and distribution of energy in usable form has many other economic and environmental impacts on most sectors of society, for the poor, the monthly bill is this system's most direct consequence. Living in (often forced to rent) the least efficient housing in the country, the typical poor household faces energy costs of up to 25% of its total income. This household has but two options: reduce consumption and/or look for aid in meeting unmanageable energy costs. Federal funding for both of these options, however, has been dwindling since the mid-80s; more and more responsibility for controlling these costs to the poor falls on local governments and groups.

In a recently published study, "Utility-Financed Low-Income Energy Conservation: Winning for Everyone," one of the Energy Policy and the Poor series, the National Consumer Law Center, Inc. (NCLC) studied the relationship between energy use and failure to pay among low-income families relative to the nation as a whole. The study showed that the inability of a family to pay its energy bill is not, as many have thought, strictly the result of high energy bills, or of energy "wastage." In fact, low-income households generally use about 20% less energy than the non-poor; this conclusion is valid for the various fuels (electricity, fuel oil, and natural gas) used for different household tasks. The study found that the higher the portion of income needed for energy bills, the higher the rate of failure to pay. Payments for this fuel, though, can equal 25% of the total income of a poor family, as opposed to around 7% for the non-poor.

It will be difficult for the typical poor family acting alone to make further cuts in energy use. One reason for this is that low-income dwellings generally use more energy per unit area; this fact is largely a reflection of the low quality of poor people's housing. A 1986 study by the Economic Opportunity Research Institute showed that the average poor family spends up to 94% of its income on housing, food, and home energy. Very little remains for other items which can also be considered as basic needs: health care, clothing, transportation, etc. In short, the poor are under immense economic pressures to conserve energy, and are making a large daily effort toward that end.

Some accepted programs designed to help the poor or to promote energy efficiency in general, have had inequitable impacts. The classic "renter's dilemma" hits low-income tenants especially hard: since tenants pay the energy costs of wasteful buildings and appliances, owners have little incentive to pay for improvements. Two pertinent examples are given here: in one case, energy efficiency programs have actually discriminated against the poor; in the other, a federal housing and energy subsidy program costs the poor more than allowed by law.

In the previously mentioned study, the NCLC shows that utility appliance rebate programs can effectively result in the poor's subsidizing the efficiency appliances of the more wealthy. In general, in order to receive a rebate on, say, a refrigerator, one must have the money for a new refrigerator in the fist place—this de facto requirement serves to "screen out" the poor, who are not in the market for new refrigerators. The poor's utility payments do, however, subsidize these utility programs. The poor, then, in many cases have ended up helping the wealthy save energy and money. Some progressive utilities though, are working to eliminate this type of inequity by offering low-income rates or substantially larger subsidies for the poor. One electric utility in rural Minnesota is experimenting with low-income appliance purchasing programs which require no initial investment by the ratepayer.

Hidden energy costs in housing subsidized by the Department of Housing and Urban Development (HUD) provide another example of the inordinate impacts of inefficiency, both organizational and with respect to energy, upon the poor. Here we are referring to privately-owned housing. Public, or HLD-owned, housing uses enormous amounts of energy too, but these costs are not passed directly to the residents. But about 40% of HUD units are not public-owned but rent-subsidized under the various HUD Section 8 programs. Briefly, the Section 8 programs work like this: landlords agree to receive a "fair market" rent, established by the Housing Authority (HA), in exchange for renting units in their buildings to low-income tenants. So long as tenant energy use is less than a "ceiling," also established by the HA, the tenant is to pay no more than 30% of adjusted family income for rent/ utilities; the difference is paid by a HUD Section 8 subsidy. Energy usage above the ceiling must be paid by the tenant. One recent survey of Housing Authorities, conducted by Steven Ferrey of Suffolk University, found that, largely due to both artificially low usage ceilings and inaccurate calculations by HAS, families under Section 8 programs pay on average over 36% of total income for rent and utilities, or 20% more than the law allows.

Though the physical condition of Section 8 dwellings is variable, as a group these units represent one of the most neglected housing sectors in terms of energy efficiency. HUD's management of these units is characterized by inadequate contact with building owners and limited capacity to evaluate not just energy costs but even building soundness. HUD can provide an illustration of lack of action to promote conservation in low-income housing. A brief look at HUD's energy expenditure woes will help us understand the complicated relationship between the provision of energy and the quality of life of the nation's poor.

Nationwide, HUD directly subsidizes the rents and/or energy payments of around 3.5 million units, or about 12% of the rental units in the country. Most public housing in the U.S. was built before 1973, when the first oil price shocks occurred and energy efficiency began to work its way into building construction. Much of the public housing stock, therefore, is very inefficient, especially in urban areas, where older multifamily buildings are the main low-income dwellings.

Energy conservation, affecting as it does realities of equity and environment, is essentially an issue of community development. Community groups are in an ideal position to equip themselves to enter the conservation field and help to lessen the energy burden on their poor. Particularly in urban areas, where inefficient buildings are inhabited largely by low-income renters, and where detailed local connections can be needed to gain the trust of owners and renters alike, community groups are essential. In communities where Community Development Organizations (CDOs) exist, these would seem to be logical managers of low-income weatherization programs.

Community-based groups have proven to be one of the most convenient and effective means to implement conservation programs. The most longstanding and successful utility program in California, as relied on community action agencies (CAAs), local contractors, and other community-based organizations for the installation of weatherization measures. In Minneapolis, a utility-sponsored non-profit works with a variety of other organizations to fund, install, maintain, and monitor energy-conserving retrofits; this group has at times cooperated with HUD and the local Housing Authority to contact owners of multifamily buildings in need of conservation work. In Portland, Oregon, the city's Energy Office coordinates with utilities and the CAA to put technicians and funding where they might do the most; they condense all relevant programs into one "conservation package," easily understood by the owner/tenant. There are many other examples of this type of coordination at the local level; the catalyst is a local group, in many cases a non-profit.

Community-based low-income weatherization programs throughout the country have been working against the general trend of neglect at the federal level; programs are getting much more effective even as program stability would seem to be more uncertain. Both the technical expertise and the marketing ability of weatherization agencies have developed as smaller-scale collaboration supplants federal leadership.

Entrance into the field of low-income energy conservation services, then, offers great opportunities for local groups to help their communities by reducing the negative impacts of energy costs on low-income residents.

Unfortunately, weatherization programs are usually evaluated by policymakers in strictly economic terms rather than within the context of community development For the CDO trying to get involved with weatherization, this fact presents some problems: 1) competition for money and contracts is a fact of life for weatherization firms, especially those bidding for demand-side management contracts; 2) similarly, groups which possess a high level of technical expertise have an edge over those that do not. Currently, there is a great need for trained weatherization personnel. For local groups, particularly non-profits which may have social goals such as job creation and basic skills training in mind, hiring and keeping qualified personnel can be difficult.

Small-scale, locally-run programs can help largely low-income communities begin to control their own energy destinies while creating jobs and teaching weatherization skills. In the face of decreased federal funding for weatherization, though, non-profits involved in weatherization are having to streamline their operations and compete for survival. There is a real danger of non-profits being locked out of the weatherization industry. The challenge for groups interested in community development and weatherization is to reconcile these opposing pressures.


Energy       ?õ¬?       Vol. 2 No. 2      ?õ¬?       Summer 1991

Related stories: