Equity is a core societal issue. Energy affordability is how utilities can make an impact.
Electric and gas utilities have long understood that the more their communities thrive economically, the healthier their business. Yet historically, even despite efforts to address ability-to-pay issues with customers in disadvantaged communities, these communities continue to struggle.
With social justice and equity rising as one of the most critical issues of our time, employees, investors, and stakeholders of all kinds are asking utilities what they can do. Where can they make an impact?
The most direct answer: energy affordability.
About 27% of U.S. households—36 million in total—earn below twice the federal poverty level. However, these low-income households, which tend to aggregate in disadvantaged communities, use more than 30% of the electricity consumed in the U.S. Low-income households also face an energy burden three times higher than other households. An energy burden is considered “high” when a household must spend more than 6% of its income on energy; low-income households on average spend 8.6%.
High energy burdens can threaten a household’s ability to pay for energy and force tough choices between paying energy bills and buying food, medicine, or other essentials. It’s an unsustainable situation that contributes to decreased health, financial instability, and many other challenges in disadvantaged communities.
By addressing energy affordability, customers can afford other essentials. This leads to improved health, which increases the ability to earn income. Dwellings also tend to be safer because the members of low-income households don’t have to resort to unsafe coping tactics, such as trying to heat with dangerous home heaters.
Energy affordability is a win-win for disadvantaged communities and utilities
Utility leaders know that, to have the greatest positive impact on society, efforts to contribute to community stability must also ensure financial stability for the business. Fortunately, delivering more affordable energy—particularly in disadvantaged communities—does just that.
For example, enhanced energy affordability reduces the number of unpaid bills and ensures system costs can be spread across more customers. Those improvements directly boost the bottom line. However, there are other key benefits that build a stronger business, too:
- A more progressive approach to addressing energy justice issues can help position a utility for more favorable regulatory treatment.
- When a utility’s most disadvantaged customers can afford their utility bills, it prevents the start of a vicious cycle in which uncollected accounts lead to higher system costs spread across fewer paying customers, which then leads to more uncollected accounts.
- Utilities will have an easier path to achieving greenhouse gas emissions reduction goals by improving energy efficiency—one of the most achievable paths to energy affordability—in disadvantaged communities.
- Company culture, employee morale, and employee retention all benefit when a utility takes a meaningful stance to solve equity and justice issues. Utility employees increasingly view energy justice as a core way their companies can benefit society.
The case for utilities to develop a serious strategy to deliver energy affordability, and thereby contribute to social equity in disadvantaged communities, is clear. What’s less clear are which solutions utilities should adopt—and what challenges are likely to stand in the way.
To understand the landscape of opportunities and challenges facing your utility, start taking action, and chart a course to the best long-term outcomes, read seven recommendations to assess and enhance affordability in my new white paper: How to advance energy affordability with an integrated utility strategy.