Energy, like food and housing, is an indispensable necessity of life. In Alabama’s hot climate, air conditioning is essential to the survival of many elderly and infirm citizens. Rising electricity and gasoline prices are disproportionately impacting Alabama’s senior citizens today. Alabama has 447,000 households aged 65 or more (“65+”). Future energy cost increases, driven in large measure by petroleum supply and demand trends and by current and pending U.S. EPA regulations, are likely to outstrip real household incomes among the 70% of Alabama’s 65+ households with gross annual incomes less than $50,000. EPA’s newest proposal to regulate greenhouse gas emissions from existing power plants will further strain the budgets of low‐ and fixed‐income seniors who are among the most vulnerable to electric rate and other energy price
Key findings of this energy brief include:
- The average pre‐tax household income of 65+ households in Alabama was $46,141 in 2012, 20% below the average.
- Alabama household income of $57,372, and 34% below the national average gross household income of $69,677.
- For Alabama’s 447,000 65+ households, electricity represents 74% of their total residential bills.
- The price of electricity per kilowatt‐hour (kWh) in Alabama has increased by 41% since 2005, more than twice the 19% rate of inflation in the Consumer Price Index, due in part to higher fuel costs and the costs of compliance with EPA regulations.
- The modest Cost of Living Adjustments (COLA) received by Alabama’s Social Security recipients, representing more than one‐third of all Alabama households in 2012, do not keep pace with inflation.
- Energy costs are adversely impacting lower‐income seniors afflicted by health conditions, leading them to forego food for a day, reduce medical or dental care, fail to pay utility bills, or become ill because their home was too cold. (APPRISE, 2009).
- EPA’s CPP will increase electric prices for Alabama’s 65+ households. The proposed rule sets forth “building blocks” of options for reducing emissions in Alabama, focused on decreasing the use of coal in favor of natural gas, while increasing energy efficiency and renewable energy resources.
- EPA’s Regulatory Impact Analysis (“RIA”) for the CPP projects national costs of $5.4 to $7.4 billion annually in 2020. EPA’s projections assume billions of dollars of annual savings from reductions of electric demand through widespread investments in energy efficiency measures.
- EPA projects modest Alabama retail electric price increases for the proposed CPP, 3.4% in 2020. This projection is highly uncertain because it assumes that Alabama will follow EPA’s prescribed “building blocks” approach to emission reductions. If the flexibility measures in EPA’s proposed rule prove unworkable, or are limited by judicial decisions, higher rate impacts could result. A March 2014 analysis by National Economic Research Associates of a CO2 reduction proposal very similar to the EPA.
- Clean Power rule estimated national average residential electricity price increases of 3.0% to 11.4% over 2018‐2033, depending upon the degree of flexibility in implementation. Average electricity prices in Alabama over 2018‐2033 were estimated at 15% to 20% above baseline levels (in addition to a 3.1% increase in 2015 due to the EPA MATS rule) in a
“maximum flexibility” scenario similar to a national cap‐and‐trade program (NERA/ACCCE, March 2014).
- The CPP will lead Alabama to greater dependence on natural gas as a main source of electric generation. U.S. DOE projects that the price of natural gas delivered to electric utilities will increase at a compound annual rate of 3.1% above the rate of inflation between 2012 and 2040, the highest rate of real price increase for any delivered fuel in any sector of the economy (DOE Annual Energy Outlook 2014). EPA projects that the Clean Power Plan will lead to further increases in delivered natural gas prices of 7.5% to 11.5% in 2020 (EPA CPP RIA, June 2014). Just maintaining the energy budget status quo for Alabama’s 65+ fixed income population requires stable electricity and other energy prices that do not increase above the rate of inflation.