Energy Bills Challenge America’s Fixed-Income Seniors

Energy, like food and housing, is an indispensable necessity of life. Air conditioning, lighting, and heating are critical for the survival of elderly and infirm citizens. High electricity and other energy prices are disproportionately impacting America’s senior citizens today.  The United States has 27 million households aged 65 or more (“65+”), representing nearly one-quarter of the nation’s 116 million households. Low- and fixed-income seniors are among the most vulnerable to electric rate and other energy price increases.

Current and pending U.S. EPA regulations will increase the price of electricity in America at rates above the general rate of inflation and cause the closure of many coal plants and lost jobs. Electric prices will increase up to 20% in some states. Just maintaining the energy budget status quo for America’s 65+ fixed-income population requires stable electricity and other energy prices that do not increase above the rate of inflation (CPI) and the cost of living adjustments (COLA).

  • The Census Bureau reports that the median pre-tax household income of 65+ households in America was $33,848 in 2012, 41% below the $57,353 median income of younger households.
  • More than 40% of America’s 65+ households had gross annual incomes below $30,000 in 2012, with an average pre-tax household income of $17,032, or $1,419 per month.
  • The prices of all essential consumer energy products – electricity, natural gas and gasoline- have increased at rates exceeding both the CPI and Social Security COLAs for the past decade, and these trends are expected to continue.
  • The average annual electric bill for 65+ households, $1,164 in 2009, represented 61% of total residential energy bills.
  • 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 projects a 5.9% to 6.5% average retail electric price increases for the proposed Clean Power rule in 2020, with increases as high as 10% to 12% in some regions (CPP RIA Table 3-21). This projection is highly uncertain because it assumes that states will follow EPA’s prescribed “building blocks” approach to emission reductions. EPA’s projections for the Clean Power rule will follow a 3.1% average national price increase in 2015 for compliance with EPA’s 2011 Mercury and Air Toxics Standards rule (EPA MATS RIA, Table 3-12).
  • EPA’s projected electric rate impacts may be conservative. 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 (NERA/ACCCE, March 2014). These price increases are in addition to those expected in 2015-2017 due to the implementation of the EPA mercury rule.
  • 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 (CPP RIA, June 2014). 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).
  • The CPP will cause the retirement of 30 to 49 Gigawatts of coal generating capacity by 2020 (CPP RIA, Table 3-12). This is in addition to more than 50 Gigawatts of coal capacity expected to be retired over the next few years as a consequence of compliance with EPA’s 2011 MATS rule, low natural gas prices, and other factors (DOE/EIA AEO 2014).
  • A new ozone air quality standard could dramatically increase energy costs for all American consumers and industries. EPA plans to revise the 2008 National Ambient Air Quality Standard for ozone, currently set at a level of 75 parts per billion (ppb), in December 2015.  A July 2014 analysis of a potential new ozone standard set at a level of 60 ppb indicates that such a standard could impose $348 billion in annual compliance costs.