Lower income families struggle to pay their home energy bills. The US Bureau of Labor Statistics Consumer Price Index, which tracks inflation in basic goods and services, reported this month that the home energy price of electricity increased 11 percent natural gas increased 22.7 percent in the last 12 months. In dollar amounts, lower income families spent an average of $3,420 for electricity and natural gas in 2021, up from $2,991 the year before. And if current price increases continue, we expect the typical lower income family to pay about $3,800 for home energy this year.
It should come as no surprise that families are reporting that they are falling behind on their utility bills. More than 20 million families are now more than $22 billion behind on their utility bills, up from an average of $12 billion two years ago.
Families also have to pay for energy to run their car. Last year, the average lower income family paid about $1,550 for gasoline, up from about $1,035 the year before. And if current price trends continue, lower income families will spend about $2,000 for gasoline this year.
Combined with the home energy increases, households could end up spending $1,775 more this year on energy and gasoline than they did last year. For many struggling families, these higher prices can mean being forced to choose between heat, food or medication. About 29 percent of Americans who were surveyed had to reduce or forego expenses for basic household necessities to pay an energy bill in the last year, according to the U.S. Census Bureau’s Household Pulse Survey.
The reasons for the increase are many, including the recovering economy and the war in the Ukraine. Markets prices have continued to move higher with no end in sight. While these price increases might be manageable for higher income families, lower income families have few resources to fall back on. A study by the Federal Reserve, for example, found that only 64 percent of adults could pay for an unexpected bill of more than $400 with cash or savings.
There is no program to help with skyrocketing gasoline bills, but we do have one that can help with home energy bills – the federal Low Income Home Energy Assistance Program (LIHEAP). But the current federal funding for LIHEAP is not sufficient to meet the needs of lower income families in light of the alarming increase in electricity and natural gas prices.
The LIHEAP appropriation is not designed to increase when energy prices rise. When the cost of fuel goes up, the amount of product LIHEAP can purchase decreases. As a result, the purchasing power of the FY 2022 appropriation has effectively been reduced by $1.4 billion, from $3.8 billion to $2.4 billion, and the approximately $2.5 billion in remaining stimulus funds were reduced by $945 million to $1.56 billion for a net reduction of about $2.3 billion in the purchasing power of available LIHEAP funds.
I represent the state LIHEAP directors. Recently, we sent a letter to the Congressional leadership asking for an additional $5 billion to help struggling families pay their home energy bills, including a portion of their outstanding arrears. This is the right thing to do. No family should have to cut back on food or medicine to pay their home energy bills.