By Ava Cohen
What Are Energy Burdens?
Energy. We use it every day — for school, for work, to cook food, power our homes, wash our clothing, to bathe. We need it for our day-to-day living and survival. But why is it that with our modern level of societal advancements some people are forced to choose between keeping their lights on and feeding their family for the week?
The answer is simple: inequitable energy burdens for low-income households. According to the U.S. Department of Energy, energy burden is the percentage of gross household income that is spent on energy-related costs. For households with particularly low incomes, spending large portions of it on energy costs just isn’t feasible when there are other needs affecting health and well-being that must be met.
Wisconsin Energy Burdens
Madison has the same average energy burden as the state of Wisconsin — 2%. But why do the city’s low-income households face energy burdens twice that size, with 4% of their income going toward utility bills? The gap widens even further when looking specifically at Madison’s extremely low-income households, which can face energy burdens as high as 9%. Unfortunately, these highly uneven cost burdens are likely due to the fact that Wisconsin’s power prices happen to be ranked second highest in the Midwest and 13th highest in the nation, as utility companies raise rates every year. This pattern of unequal energy burdens holds for areas outside Madison as well:
The issue of disproportionate energy burdens is not confined to one city or county; low-income households across Wisconsin are distressed by growing energy costs.* Unfortunately, the problem doesn’t end there. Not only are households with lower incomes paying bigger portions of their earnings to utilities, but extremely low-income households have been found to be paying 26% more for energy per square foot of living space than higher income households. This indicates that lower income households are most likely living in residences that are energy-inefficient. Energy-inefficient homes are usually older, often with older appliances or a lack of insulation that increases the amount of energy used, and thus the amount due at the end of the month. Retrofitting a home to become more energy-efficient costs a lot of money, and low-income earners should not be expected to have to cover yet another additional cost.
Hearing from Highly Impacted Communities
It is imperative that utility companies hear directly from these lower income customers, as opposed to just seeing words and numbers on a page. Utility rate cases offer customers the opportunity to describe their specific situations and the ways they are affected by rate increases, amplifying their voices.
Because the modern economy is designed for two-income households, households that are particularly likely to be energy overburdened are often made up of people with disabilities, single people with fixed incomes, retirees, single-parent families, and people of color. A retiree living on fixed income voiced these concerns to the Wisconsin Public Service Commission during Madison Gas & Electric’s (MGE’s) 2023 rate case, stating,
Unnecessary rate increases cause many of us to choose between buying groceries, medication, paying rent and missing utility payments…. Those who are most vulnerable are again being targeted.
Another Madison resident commented in the same case:
I live in a community full of students and retired and disabled adults. I cannot afford the every year increase any longer. I have tried the budget plan and they are not affordable. I live on a fixed income and am a disabled adult with a disability that is temperature affected. My energy bill can be slightly less than half my income sometimes. While these rate increases may not seem like much to utilities, when you only receive a limited amount of money coming in, these rate increases make a big impact on essential aspects of people’s everyday lives, their health, and their well-being.
Corporate utilities rank shareholder profitability as their highest priority. While incremental rate changes may seem miniscule to a corporation dealing with millions of dollars, they make very real and very impactful changes to the daily lives of hard-working customers, many of whom live paycheck to paycheck. We Energies utility company services counties near Dane, and in their 2022 rate case, customer Gina Alvarez perfectly captured this focus on profitability when she made this public comment:
There is no reason to increase our bills other than greed and profit. I am sure that the We Energies corporation is not increasing employees’ wages 8%, so where is this profit going to? If you want us to pay more you have to think of each individual that you will be affecting. Do you even think about how much 8% changes our lives? Living alone, my We Energies bill is $45 dollars. With this increase, it becomes $48.60 — that may not seem like a lot, but that is a total increase of $43.20 per year. That is costing me a gallon of milk per month. I do not make enough to counteract this adjustment.
Energy Justice as a Civil Rights Issue
With nearly half of all households in Madison falling under the low-income household category, energy affordability has become a serious social justice issue as utilities raise rates and expect these people to be able to afford the rising costs. When factoring in the legacy of discriminatory housing policies in the US, energy affordability becomes a civil rights issue as well. Historic policies like redlining have led to a disproportionate number of people of color ending up in older, energy-inefficient residences and thus having to spend more on energy bills. According to the American Council for an Energy-Efficient Economy, Black households face on average a 43% higher energy burden than their white counterparts; for Hispanic and Native American households, the energy burdens are 20% and 45% higher, respectively.
David Hart is a longtime Madison resident and pastor at Sherman Avenue Church, one of the few United Methodist churches that serves a truly urban congregation. He voiced his opposition in the MGE rate case, explaining,
The folks in our congregation have discussed this, and as it sits now, they have real, real trouble paying for their utility bills. Many of them live on fixed incomes. Many of them have trouble making it as it is.… The stories that I’ve heard are particularly harmful and hurtful to me because many of these people are folks of color. They’re marginalized, they’re oppressed, and they come from oppressed neighborhoods; and so I’m urging you to consider these individuals from my congregation but to also consider the individuals on the north side of Madison when hearing this case and making your decision. So I’m urging you to oppose these rate hikes.
Energy burdens are just another way that vulnerable populations are disparately impacted by our changing climate. It is the less affluent communities that contribute the least to climate change yet experience its impacts first and worst. The term energy justice refers to making energy accessible and affordable to everyone, especially the people who have been historically marginalized and systematically oppressed in this country. Energy justice is racial, social, and climate justice!
Unjust Rate Increases
So why are our utilities raising their prices? As the world transitions towards renewable energy sources to mitigate climate change, utilities raise their rates to finance new clean energy resources. Somehow they are expecting their customers to cover both the costs of their current energy usage and the upfront costs of future renewable energy projects. Citizens Utility Board Executive Director Tom Content has expanded on this, stating,
Customers are paying for premium utility investments to support the clean energy transition, and they shouldn’t also have to pay for a costly power plant that no longer contributes to keeping the lights on.
Customers should not be paying for a utility to decommission its coal plants, especially customers who fall within the low-income category and are dually burdened by the cost. It is the shareholders who privately own these utilities who should be absorbing these costs, as they have the financial status and ability to do so. The ”double whammy” of old and new energy costs weighing down low-income households is perfectly explained by Jana Rose Schleis in her December 2023 article in The Cap Times.
Every year, utilities request permission from the Wisconsin Public Service Commission (PSC) to raise their rates. As previously mentioned, rate cases are a great way for the public to provide input, which is why groups like 350 Wisconsin, Blacks for Social and Political Action of Dane County, and the Citizens Utility Board all became intervening parties in the Madison Gas & Electric and Wisconsin Power & Light 2023 rate cases to advocate for energy equity. As a result, the Wisconsin PSC rejected the low-income assistance programs that the utilities proposed and ordered them to work with the intervening parties to develop adequate programs to address low-income energy affordability!
Ultimately, a successful transition to clean energy infrastructure must factor in the existing hardships faced by low-income households. Assessing this energy transition through an equity lens means understanding not only that low- or fixed-income households cannot contribute the same way high-income households and utility shareholders can, but also that low-income households are stuck in a cycle of home energy inefficiency requiring them to pay more for their power.
* To find out more about how select communities in Dane and Rock Counties are impacted by energy burdens, check out the detailed community reports produced by the Energy Equity Team of 350 Wisconsin’s Community Climate Solutions Team.