Low-Income Programs
Researcher conducts energy efficiency tests inside a mobile home.
Especially during peak heating and cooling periods, high energy costs often create a huge burden for low-income families. Moreover, these households spend a much higher percentage of their annual income on energy. Low-income families spend up to 14% of their annual income on energy versus 3.5% spent in most other households. This results from their lower total income and the fact that low-income housing tends to be less energy efficient.
This significant difference is the reason that every state, in one form or another, sponsors low-income energy-efficiency programs. Often referred to as weatherization, these programs fund energy-efficient improvements in low-income houses. Improvements are free to program-eligible consumers, but expenditures are limited by program caps.
Every state receives federal funds to assist low-income households with energy, primarily through two programs.
Low-Income Weatherization Assistance
The U.S. Department of Energy's (DOE) Weatherization Assistance Program, disburses funds to all states, which in turn weatherize low-income households, using the services of more than 1,000 local community partners. A recent study shows that for each dollar invested, this program delivers $1.88 in nonenergy benefits and saves $1.78 each month on energy bills for low-income households.
Low-Income Home Energy Assistance Program
The Low-Income Home Energy Assistance Program (LIHEAP) is a program of the U.S. Department of Health and Human Services. LIHEAP provides block grants to the states to use for reducing low-income energy bills through bill payments and limited energy-efficiency improvements.
In addition to federal funds, some states fund low-income programs directly with System Benefits Charges (SBCs) or through other state funds. Of the states that have SBCs, every one specifically collects and disburses funds for low-income programs. In general, state funds are used to supplement federally funded programs in the state rather than create separate networks. These additional funds allow these programs to reach additional needy recipients.
Low-income energy programs are successful largely because they focus on identifying proven, cost-effective, energy-saving measures for each home. These measures include, but are not limited to, installing insulation, reducing air infiltration (including caulking), performing heating and cooling tune-ups and modifications, and replacing inefficient and/or unsafe units when necessary.
The implementation of low-income energy programs varies by state. Generally, funds flow from federal, state, and utility programs to local governments and their low-income service networks. These service networks perform the actual weatherization services for eligible recipients. Additional information is available through the National Association for State Community Services Programs (NASCSP). This organization represents the Community Action Network, which includes many of the community-based weatherization organizations.
Each state has a unique delivery network and, where allowed, may use different eligibility requirements across each low-income program. For example, a state may require that a low-income applicant be at or below the federal poverty level in one program; another program in the same state may require that the applicant be no more than 50% above the poverty level. Most states are as lenient as is allowed under federal law: the emphasis is to get the funding into the hands of the people who need it as soon as possible.
Arguments for Low Income Energy Efficiency Programs
With utility funding for energy-efficiency programs reduced by 50% since 1994, mandating low-income programs is an appropriate role for public policy makers. The private sector will not do it.
Almost half the states are already using System Benefits Charges for low-income programs: the mechanism has been tested and proven.
There is already an extensive local network of low-income energy program providers. Providers are well organized and results oriented.
If the state does not raise or provide funding to match federal funds, the state forfeits the federal dollars.
All ratepayers benefit from low-income energy programs, since utilities recover financial losses resulting from inability to pay through rate increases levied on all ratepayers.
DOE's Weatherization Assistance Program has extensive experience and technical assistance to offer each state.
Warm homes in winter and cool homes in summer generally reduce health care costs incurred by the low-income population. During summer heat waves, many elderly persons on low or fixed incomes succumb to the heat.
Arguments against Low Income Energy Efficiency Programs
It is not the role of government to provide energy services to the low-income population or pay utility companies on their behalf.
Churches and charities may better serve low-income energy needs.
Receiving federal funds for low-income energy programs requires paperwork and administrative processes.