The Human Cost of Higher Energy Prices in Oregon

Today’s record transportation fuel prices have sensitized the American consciousness to the reality that affordable energy is an engine which drives economic prosperity and allows individuals the opportunity to obtain the quality of life traditionally expected within our culture.  

The "wake-up call" served by grossly higher fuel prices teaches us that affordable energy is not something that happens by default.  Rather, in today’s and tomorrow’s global energy markets, affordable energy is the result of competitive behavior by market participants.  That behavior must be weighted with careful stewardship of existing energy resources, informed by technological achievements that further the use of existing and alternative energy resources, and overshadowed by sound, market-oriented governmental policies that strive to harmonize the various goals of reliable delivery of energy at affordable prices, with global climate change issues and other societal concerns.

Higher energy prices reduce personal disposable income, increase costs to  business, reduce the availability of investment capital, impose social costs through higher unemployment and loss of consumer confidence, and even affect public health, including higher mortality rates.

Household energy prices over the past 5-10 years required increasing transfers of public funds, utility subsidies, and private contributions, to cushion adverse impacts of higher prices on lower income segments of the population. 

Growth in the number of participants in energy assistance programs, coupled with increasing numbers of eligible households being turned away due to funding constraints, signal how rapidly energy costs may be approaching the upper bounds of affordability and sustainability. 

Energy Assistance through federal funding, state and local programs, utility subsidies, and private contributions can serve as a proxy reflecting the impact of energy costs upon consumer pocketbooks.

Oregon Energy Assistance 2008

Taken together, the total level of 2008 funding of the energy assistance programs available in Oregon can potentially provide an average annual benefit of $275, allocated over only approximately 24% of the total number of households eligible to receive  energy assistance payments.  Most benefits are paid over the initial months of the winter heating season, leaving a funding shortfall  that precludes enrolling new households and serving existing enrollee’s full needs.  The shortfall also means that many times payments are not available during times of peak cooling needs later in the year.  

Source: Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007);

Energy Affordability Not For All

Nationally, at the median income level home energy costs average 3.5% of household expenses.  Under the energy affordability model developed by Fisher, Sheehan & Colton, 6% is taken to be the upper bound of affordability for home energy costs. 

A 2005 nation-wide survey by the National Energy Assistance Directors’ Association found that those meeting the eligibility income threshold for LIHEAP assistance experienced home energy costs averaging 14.1% of household expenses; receipt of assistance under LIHEAP reduced that average to roughly 11%.  This is still almost double what is considered by Fisher, Sheehan & Colton to constitute an affordable home energy bill.  The same survey found that the highest energy burdens were reported by respondents located in the U.S. West and South.    

According to a Spring 2007 NEADA survey, states reported that 1.2 million households nationwide were cut off from natural gas or electric service due to nonpayment of their energy bills

Sources: “2005 National Energy Assistance Survey, Final Report,”  September 2005. prepared under the auspices of the National Energy Assistance Directors’ Association and funded by the U.S. Department of Health and Human Services; Source: On The Brink: 2007 -  The Home Energy Affordability Gap, Fisher, Sheehen & Colton (April 2008); NEADA Press Release, Mark Wolfe, Executive Director, April 25, 2008; Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007)

The number of households receiving energy assistance has been rising rapidly.  This reflects a significant rise in home energy prices and in the number of low income households. Between 2002 and FY 2007 the number of households receiving LIHEAP heating assistance has risen from 4.2 million to an estimated 5.8 million.  Even at FY 2007 levels, LIHEAP served only 15.6% of eligible households, and a majority of households served had at least one member who is elderly (41%), disabled (43%), or a child under the age of five.  About one-half of these household have incomes below $10,000 per year.

Nationally,  a significant percentage of home heating fuels are purchased with  LIHEAP funding.  Although the percentage today has slipped somewhat from that in 2003, the slippage is a result of a federal funding gap, rather than a decrease in home energy prices relative to household income.  For example, in Oregon between 2002 and 2007, the home energy affordability gap has grown b approximately $125 million whereas over the same period, federal LIHEAP funding allocated to Oregon has grown by only about $3.5 million.

Sources: Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007); On the Brink : 2007 -  The Home Energy Affordability Gap, Fisher, Sheehen & Colton (April 2008)

Source: Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007).

Energy Affordability and Oregon’s Experience

The number of households in Oregon receiving energy assistance under LIHEAP rose from 57,318 in FY 2007 to an estimated 61,000 in FY 2008 – an increase of 6.4 percent, which compares to the national FY 08 average growth rate of 3.7%. 

The  number of households in Oregon receiving energy assistance in 2006 under the Oregon Energy Assistance Program (OEAP) was 22,514; of these 2,570 households included senior citizens and 5,615 included at least one household member who was disabled.  The average OEAP payment received  in 2006 by participating beneficiaries was $321 per household. 

As of January 18, 2008, over 9,000 Oregon households are on various counties’ waiting lists for energy assistance; local community agencies, in the aggregate, reported receiving over 10,000 telephone calls in just one week, during the early 2008 winter heating season.  Current funding levels only allow approximately 24% of eligible Oregon households to receive direct energy bill payment assistance.* 

OEAP funding consists of Public Purpose funds collected through meter charges imposed by the state’s two investor-owned electric utilities.  The annual collection amount was recently increased by the Legislature from $10 million to $15 million.

Sources: Oregon Energy Assistance Program, Report to the 74th Legislative Assembly, Oregon Housing & Community Services Dept. (December 31, 2006).  * 2008 Oregon Low-Income Energy Assistance  Snapshot, Community Action Partnership of Oregon (Jan. 28, 2008).

The Human Toll From Higher Energy Prices

Higher  energy prices disproportionately affect vulnerable members of society by absorbing income otherwise needed for food, housing, transportation, health care and other necessities.

According to the Report to the Oregon 74th Legislative Assembly prepared by the Oregon Housing & Community Services Department (December 31, 2006), low-income households often incur the following adversities due to higher energy prices:

During 2007 NEADA surveyed families receiving LIHEAP assistance.  Among the findings were:

• 44% skipped paying, or paid less than their entire home energy bill.  Households with children (67% of that class) and those with income below 50% of the federal poverty level (62% of that class) were more likely to do so.
• 8% had their electricity or gas serve was shut off for nonpayment.  16% of households with children and 22% with income below 50% of the federal poverty level reported a service termination.
• 18% were unable to use their main source of heat either because they lacked means to afford repairs, ran out of bulk fuel and could not afford to purchase more, or they were disconnected from their utility supplier.  Households with children (27%) and household with income below 50% of the poverty level (36%) faced this problem.
• 13% were unable to use their air conditioners either due to disrepair or termination of electric service.  Households with a disabled member (19%) and households with children (19%)were somewhat more likely to report this problem.
• 73% of those surveyed reported that they reduced expenses for household necessities, such as food, medical needs and other basics, in order to make energy payments and avoid disconnection.*

Sources: Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007). * Putting LIHEAP into Context, Addressing American’s Unmet Need for Low-Income Energy Assistance , Edison Electric Institute, Low -Income  Best Practices Workshop, Jan 30,- Feb. 1, 2007 (Washington, D.C.)

Public Health Consequences of Unaffordable Energy: Unaffordable home energy prices present a threat to public health and safety in the following ways:

Not heating or cooling homes at adequate levels, particularly in households with those inflected with respiratory afflictions.  Use of unsafe means to heat or illumine homes, such as candles for lighting and use of an oven, barbeque grill, or indoor use of outdoor heating, such as kerosene heaters.  

Financial trade-offs in which households forego purchases of food or medications in order to maintain utility service.  I.e., in northern states, poor families with children spend less on food, and children receive fewer calories, compared with high-income families (Bhattacherya, et al., 1993).  Poor seniors in the north are also more likely to go hungry in late winter/early spring, while Seniors in the south, where air conditioning bills can be high, are more likely to go hungry in late summer (Nord and Kantor, 2006).

Researchers from the Children’s Sentinel Nutrition Assessment Program  at the Boston Medical Center conclude that babies and toddlers who live in energy insecure households are more likely to be in poor health, have a history of hospitalization, be at risk of developmental problems, and lack adequate food.

Seasonal differences in heating and cooling costs explain much of the difference in hunger prevalence .  Among families eligible for LIHEAP assistance, families not receiving assistance are more likely to have children that are small for their age and more likely to need hospital admission on the day of a health care visit (Frank, et al., 2006).

Source: Issue Brief: The Low Income Home Energy Assistance Program, Providing Heating and Cooling Assistance to Low Income Families, National Energy Assistance Directors’ Association (Nov. 25, 2007)

Risk factors associated with secondary heating sources:

Using in-home coal, kerosene, propane, portable electric heaters, electric ovens, wood pellets or fuel oil as a heating source carries with it risks that are not present with central heating.  These include both direct and indirect risks.  Examples of direct risks are:

Indirect risks include health injuries due to poor indoor air quality, particularly respiratory distress to those with asthma or emphysema, as well as gradual and cumulative deterioration of general health due to prolonged exposure to indoor, airborne contaminants.      

Sources:  Low Income Energy Assistance Program (LIHEAP Report to Congress on Preventing Loss of Life Due to Extreme Indoor Temperatures, U.S. Department of Health and Human Services (Nov. 9, 2006);  Climate Change in California: Health, Economic and Equity Impacts ,  published by Redefining Progress  (Jan. 2006)

Higher Energy Prices and Health Insurance

According to one recent California study:*

*Climate Change in California: Health, Economic and Equity Impacts ,  published by Redefining Progress  (Jan. 2006)

Higher Energy Prices and Water

Source: Climate Change in California: Health, Economic and Equity Impacts ,  published by Redefining Progress  (Jan. 2006)