Conquering Energy Scarcity for Income-Qualified Customers
March 1, 2021 •Franklin Energy
Energy scarcity and energy inequality certainly aren’t new issues, but the COVID-19 pandemic amplified their effects and forced thousands more Americans into a precarious position.
Nearly 1 in 5 adults—including around 1 in 4 people of color—reported being behind on their rent at the end of 2020. The average renter is behind in rent by $5,600 or about 4 months’ rent according to a survey by the U.S. Census Bureau. And household expenses like car payments, student loans, medical expenses, and utility bills set even more Americans in precarious financial straits: 38 percent of American adults said it was either somewhat or very difficult to cover their usual expenses over the prior seven days. Those numbers were even higher for Black and Latino respondents (55 percent and 51 percent, respectively).
The number of people being forced to make difficult financial choices—between paying the rent and paying the utilities, for instance—is at a level we haven’t seen in recent history. The good news is that utilities are in a position to help these people avoid needing to make such difficult trade-offs.
Bridge the Gap for Income-Qualified Multifamily Communities
Multifamily communities that offer lower rental costs, therefore attracting families struggling to cover their everyday bills, are difficult to qualify in federal income-qualified energy efficiency programs. Because of this, multifamily communities aren’t a target for federal programs. But they should be.
Utilities are no strangers to helping households in need. In fact, in light of the COVID-19 pandemic, many utilities have stepped up to do even more—waiving late fees, reconnecting shut-off households, offering flexible payment plans, and suspending disconnections, for instance. Other utilities have created income-qualified multifamily programs to fill programmatic gaps.
Ease the Energy Burden
However, the overwhelming number of customers who are unable to pay their bills has posed a complicated set of challenges, and this crisis isn’t expected to end any time soon. In order to continue meeting the exponentially growing demands for affordable energy, utilities will need to take an innovative approach to identifying and meeting changing needs, according to a report by West Monroe Partners (WMP).
Focusing simply on income levels is an inefficient way to address need. Instead, utilities should work to understand customers’ needs in more nuanced ways—for instance, looking at their energy burden (household energy costs divided by household income) and their Urban Hardship Index.
The Urban Hardship Index looks at six potentially confounding factors that contribute to a household’s economic challenges:
- Income level per capita
- Crowded housing
Using data appends and advanced market segmentation to identify both energy burden and economic hardship makes it possible for utilities to act proactively and help either entire communities or individual customers before they fall into a cycle of debt. This assistance is important because the “low-income” qualification on its own, such as is used for programs like LIHEAP, leaves many customers and segments of customers unable to qualify. For instance, depending on housing costs in a particular community, an income above 150% of the federal poverty level—the threshold for LIHEAP qualification—won’t provide enough to cover energy costs.
Identifying these program gaps makes it possible for utilities to develop additional programs to fill them. Then once programs for low or low-moderate customers are instituted, analytics allow utilities to track effectiveness and adjust if necessary.
Get into Action: Help Customers in Need
Now is the time for utilities to step up and care for those in their communities who are struggling to make ends meet. With the right approach and a solid partner, utilities are poised to break the cycle of debt and help their customers keep the lights on.