September 18, 2014

Spike in energy costs could push 840,000 Americans into poverty

A 10-percent increase in home energy costs would push 840,000 more Americans below the poverty line, according to a new report from two Republican senators.

Sens. Lisa Murkowski of Alaska and Tim Scott of South Carolina released their report on energy insecurity to highlight some of the repercussions from regulations that they say could raise energy costs, although the study does not advocate a specific policy.

"The lack of affordable energy disproportionately impacts minorities and the working poor, and many families feel the sting of higher energy costs," wrote Scott and Murkowski, the top Republican on the Energy and Natural Resources Committee. They are set to introduce the report Thursday at a Washington event hosted by the Manhattan Institute.

The report also said that for nearly one-fifth of American families of four, a 10-percent hike in energy costs would equal the amount spent on groceries for two to three weeks.

"Any policy proposal that would tend to increase the cost of energy should therefore be fully evaluated for its impact on energy insecurity, in order to give policymakers a complete picture of its potential consequences," the report said.

Energy insecurity means that people lack access to fuel, can't afford to keep their home at a reasonable temperature or have their service cut off for failing to pay bills, the senators said.
Whether it's realistic to assume a 10-percent increase in energy costs is a matter of debate.

The U.S. Energy Information Administration, the statistics arm of the Energy Department, forecasts an average 3.1 percent increase in electricity prices this year — but those projections take only current policies into account. Implicit in the analysis from Murkowski and Scott is that proposed Environmental Protection Agency regulations will further raise those rates.

"A 10-percent increase in energy costs was chosen because it is realistic, and could be the result of the enactment of public policies, shifting market conditions, or unexpected events. Higher increases are also possible," they wrote.

The report examined the effect of household energy spending increases in three areas: The number of homes that see a reduction in "spendable budget"; the number of households pushed into poverty; and the amount a household spends on energy as a percentage of average gross income, which the senators called the "average household energy burden."

Murkowski and Scott found that Midwest and Southeastern states — the ones conservatives and industry groups said would be disproportionately hit by the EPA's proposal to cut emissions at power plants — are more likely to have a "high household energy burden" and be in poverty than others. For Southeastern states, that ranged between 12-18 percent of homes. In the Midwest, the spread was between 9 and 12 percent in states such as Indiana, Ohio and Michigan.

The EPA, however, has said its proposed power plant rule — due for finalization next June — would reduce electricity bills 9 percent by the time it is fully implemented in 2030. That's because it expects states to improve energy efficiency at an annual clip of 1.5 percent, driving down energy use.

The EPA also says the proposal would save billions of dollars in medical costs by pushing older, dirtier coal-fired power plants into retirement — many families who are most susceptible to emissions from those power plants are lower-income as well. The agency also says its proposal would blunt the effects of climate change by reducing use of greenhouse gas-emitting fossil fuels, which most climate scientists say drives global warming.

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