Energy bills are crushing low-income families. Here’s how state and local policymakers can help
By Roxana Ayala
High prices for housing, food and other essentials are top of mind for many Americans. Energy costs, which have risen along with others in recent years, are a big part of the problem. While state and local policymakers can’t do much about the price of eggs, they can lower energy bills for their most vulnerable constituents. With a new administration that has pledged to roll back energy efficiency programs that reduce utility bills, actions taken by state and local government to address energy costs are more important than ever.
Those actions are badly needed. Recent research from the American Council for an Energy-Efficient Economy (ACEEE) shows that a quarter of low-income households in the U.S. spend more than 15% of their income on energy bills, compared to the overall median of just 2.9%. Black and Hispanic families carry the heaviest energy burdens.
In some metropolitan areas, it’s even worse. Across both low-income renters and homeowners, the Baltimore area has the highest energy burdens among the regions ACEEE analyzed, with one in four paying more than a quarter of their income on energy bills. In the Boston; New York; and Rochester, N.Y., metropolitan areas, energy burdens for these low-income households top 20%. And in San Jose, low-income homeowners spend an astonishing 31% of their income on energy bills.
Crushing energy burdens mean that families face impossible choices: should we refill that prescription or keep the lights on? Should we turn up the heat — or eat?
Part of the problem is that low-income families are more likely to live in older and less energy-efficient homes that have inadequate insulation, drafty air leaks, and outdated heating and cooling systems. These households are also least able to afford the upfront costs of weatherization and efficient appliances.
There are a variety of approaches that states and cities can take. They can offer low-cost, energy-saving appliances (including heating or cooling systems) or other energy efficiency upgrades. They can collect and analyze data on households’ housing characteristics, income and energy expenditures to identify areas with disproportionately high energy burdens for more targeted assistance. State and local governments can build on the success of utility-run programs that offer rebates for installation of a range of energy efficiency products and offer free energy audits.
Local governments and utilities are working to reduce energy use while preserving housing affordability. For example, Fort Collins, Colo.’s municipal utility administers a one-stop shop for energy efficiency upgrades for owner- and renter-occupied single-family homes. The program offers streamlined energy assessments and on-bill financing that allows households to pay for improvements, like insulation, air sealing and windows, without the burden of upfront costs.
There’s more that policymakers and utility regulators can do. Several states have adopted “percentage of income payment plans” (PIPPs), which cap monthly utility payments for income-eligible households at an affordable percentage of a household’s income — often 6%. These programs got started in the 1980s and have now been adopted by 10 states.
Debt forgiveness is another option. For example, the New York Public Service Commission forgave more than $1 billion in energy bill debt for extremely low-income households in 2021 and 2022. The commission also created an Energy Affordability Guarantee — essentially a PIPP — that limits energy bills for 20,000 low-income households.
Increasingly, states are combining cost relief with energy efficiency. New York’s EmPower+ program links debt forgiveness and income-based limits on energy bills with energy efficiency and electrification investments. And Virginia — the latest state to offer a PIPP for low-income households — requires participants to reduce electricity consumption through weatherization or energy efficiency programs.
Right now, energy costs are high, and winter is still here. But there’s much that policymakers can do to ease the burdens of their low-income community members. Reducing energy bills is critical, and it should be paired with energy efficiency to ensure that households in marginalized communities are not left in inefficient, uncomfortable and unsafe homes with needlessly higher utility bills. Policymakers can provide both short-term relief and long-lasting energy affordability for struggling families.
Roxana Ayala assists the local policy program at the American Council for an Energy-Efficient Economy (ACEEE), a nonprofit research organization. Ayala’s research focuses on city-led clean energy policy, including inclusive workforce development, energy affordability and energy equity.
This article was published in collaboration with the Island Press Short-Form Program, which is supported by The Kresge Foundation and The JPB Foundation. It was originally published February 28, 2025, on American City & County.
