WINTER HEATING COSTS REPORT

Transcription

1 WINTER HEATING COSTS REPORT (March 2014) Winter Heating Costs for Older and Low-Income Households Record-breaking cold weather associated with the winter heating season is projected to result in many older American households facing higher heating costs than last year. Consequently, many older low-income consumers will likely struggle to afford the cost of adequately heating their homes. Heating Costs to Rise This Winter Current projections for winter heating costs indicate that expenses for households using natural gas, electricity, and fuel oil will all increase compared with the winter. Households heating with propane will experience the highest percent increase. Winter Heating Costs for Consumers Aged 65+ by Heating Fuel Type Natural Gas Fuel Oil Electricity $3,000 $2,500 $2,000 $1,500 $1,400 $1,715 $2,313 $1,983 $1,552 $1,964 $1,757 $2,115 Projected $2,268 $1,000 $500 $0 $519 $594 $625 $650 $534 $520 $439 $457 $503 $380 $403 $417 $459 $465 $389 $370 $394 $413 Winter Seasons Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, (Table WF01). Prepared by the AARP Public Policy Institute, March

2 Projected expenditures are based on the average consumer price of fuel and projected consumption data from the Energy Information Administration (EIA). The consumption projections 1 are based on a variety of factors, including historical usage data and anticipated weather conditions. The EIA estimates that average heating degree days have been 13 percent higher this winter compared with the winter. 2 Because more than half (53 percent) of older households in the United States use natural gas as their primary heating fuel, changes in the price of natural gas tend to have the biggest influence on the heating costs of older consumers. Primary Heating Fuel Used by Consumers Aged 65+ Electricity 30% Natural Gas 53% Other 4% Fuel Oil 7% Propane 6% Source: Residential Energy Consumption Survey, Prepared by the AARP Public Policy Institute, February An estimated 6 percent of households that heat their homes (6 million households) use liquid propane. This year, price increases for this fuel have been significant, and households using propane as their primary source of heating fuel have faced shortages and higher prices. Age 65+ households heating with propane can expect to face a significant increase in heating costs as the winter progresses. 1 EIA s residential consumption and expenditure predictions are derived from the National Energy Modeling System Residential Sector Demand Module, available at 2 The EIA uses weather predictions to help project household fuel consumption and expenditures over the winter heating season. Colder weather will cause households to use more fuel to heat their homes whereas milder weather will necessitate less fuel. See Methodology section for a more detailed explanation. 2

3 Heating Costs for Households Age 65+ Using Propane as Primary Heating Fuel, Winters and (Projected) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ $1,563 $1,362 $1,093 $942 Northeast Midwest Sources: Residential Energy Consumption Survey, 2009; Short term Energy Outlook, March, (Table WF01); Prepared by the AARP Public Policy Institute, March Older households in the Midwest heating with propane are projected to experience an almost 46 percent increase in heating costs while those in the Northeast are expected to experience an almost 20 percent increase. 3

4 Costs Vary by Region Heating costs differ by geographic location. Costs are highest in the New England census division, where heating oil is the primary heating fuel used, followed by the Middle Atlantic census division. Heating Costs for Consumers age 65+ by Region and Main Heating Fuel, Winters and (Projected) $3,000 $2,366 $2,393 $2, $2,000 $1,500 $1,000 $500 $0 $821 $700 $596 $636 $547 $584 $223 $295 $301 $328 $373 $367 $381 $227 $291 $302 Census Division (Main Heating Fuel) Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, March 2014 (Table WF01). Prepared by the AARP Public Policy Institute, March According to the EIA, 3 temperatures in the Midwest and South regions have been 19 percent colder than last winter and the Northeast region has been13 percent colder than last winter. EIA reports that the West region has been 5 percent warmer than last winter. 3 Short-Term Energy Outlook, March 2014: 4

5 Source: Energy Information Administration. This image is available at 5

6 Older, Low-Income Consumers Will Be Hit Hardest Although consumption data show that low-income older consumers tend to use less heating fuel than higher-income groups, high winter heating costs are likely to be a greater burden on this group than on higher-income older consumers who have greater financial resources available to meet these costs. Thirty percent of older households have total family incomes of less than $20,000, 4 and they typically experience the greatest energy burden. 5 This trend is projected to continue throughout winter The burden is highest for those using fuel oil for heating. For example, age 65+ households with incomes of less than $20,000 and heating with fuel oil will spend more than 15 percent of household income on heating costs, while all income households heating with fuel oil will spend about 5 percent of total household income on heating costs. Income Projected Winter Heating Costs for Consumers Aged 65+, by Income and Fuel Type Median Income Percent of 65+ Families Natural Gas Energy Burden Cost Fuel Oil Energy Burden Cost Energy Burden Electricity Cost Average Heating Assistance FY 2013 $0-9,999 $ 7, % 6.0% $ % $ 1, % $ 528 $406 $10-19,999 $ 14, % 3.4% $ % $ 2, % $ 358 $20-29,999 $ 24, % 2.3% $ % $ 2, % $ 406 $30-39,999 $ 34, % 1.7% $ % $ 2, % $ 374 $40-74,999 $ 52, % 1.0% $ % $ 2, % $ 353 $75,000+ $ 106, % 0.6% $ % $ 2, % $ 556 All Incomes$ 32, % 1.1% $ % $ 2, % $ 413 Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, March 2014 (Table WF01); National Energy Assistance Directors Association s 2013 National Energy Assistance Survey Summary; Current Population Survey, 2012 March Supplement. Prepared by the AARP Public Policy Institute, March LIHEAP Funding Continues to Trail Costs The Low Income Home Energy Assistance Program (LIHEAP) 6 is a federal block grant that provides funding to the 50 states and other jurisdictions to operate home energy assistance programs for lowincome households. LIHEAP helps eligible low-income households pay heating and/or cooling bills. Throughout this decade, the average LIHEAP grant has remained well below average heating costs faced by older consumers. Consequently, the gap between heating expenditures and LIHEAP assistance received by eligible participants remains substantial. Further, the average heating assistance amount received by LIHEAP recipients fell to $406 in fiscal year 2013 from $502 in In 4 Current Population Survey, 2012 March Supplement. 5 Burden, or energy burden, represents the portion of household income needed to meet projected winter heating costs. For purposes of the table above, burden is estimated by dividing the median income for each income group in Table 1 by the average projected fuel cost for each income group. 6 LIHEAP was established through the Low Income Home Energy Assistance Act, Title XXVI of the Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35). 6

7 addition, the National Energy Assistance Directors Association estimates 7 that the total number of households receiving LIHEAP assistance in fiscal year (FY) 2013 was 6.7 million, down 17 percent from 8.1 million in Expenditures for Heating Fuels vs. Average LIHEAP Grants, All Age Groups ( to ) Average LIHEAP Heating Grant Average Heating Expenditures $1,250 $1,000 $750 $500 $250 $0 $952 $378 $362 $975 $914 $918 $909 $844 $502 $429 $417 $406 Sources: Short-Term Energy Outlook, October 2013 (Table WF01); LIHEAP Home Energy Notebooks, ; NEADA 2013 Energy Assistance Survey Summary. Prepared by the AARP Public Policy Institute, March The US Department of Health and Human Services (HHS) has released approximately $2.9 billion in regular block grant funding and an additional $452 million in contingency funds, bringing funds released in FY 2014 to almost $3.14 billion. FY 2014 LIHEAP funds are provided under the Continuing Appropriations Act, 2014 (P.L ). 7 National Energy Assistance Directors Association s 2013 National Energy Assistance Survey Summary. 7

8 Methodology This data digest uses variables from both the Residential Energy Consumption Survey (RECS) and the most recent Short-Term Energy Outlook (STEO) to analyze past heating-related energy consumption and expenditures among consumers age 65 and older, and to project heating-related energy consumption and expenditures for the upcoming winter season. The RECS is a national statistical survey that collects energy-related data for occupied primary housing units; the most recent survey was conducted in This report relies primarily on household-level consumption data from the 2009 survey. RECS provides information on the use of energy in residential housing units in the United States, including demographic characteristics of the household, energy consumption and expenditures for natural gas, electricity, fuel oil, and other fuel types, as well as other information that relates to energy use. The Energy Information Administration is the statistical agency of the U.S. Department of Energy and produces energy data, analysis, and forecasting. EIA issues weekly, monthly, and annual reports on energy production and prices, demand, imports, and other topics, and prepares analyses and special reports on subjects of current interest. The STEO is a monthly publication of the EIA and contains current and projected prices and related expenditures of fuel, including natural gas, fuel oil, electricity, and petroleum. The STEO also contains projected consumer expenditures on fuels. As expenditures vary with fuel price and consumption, greater consumption of fuel will result in greater expenditures for heating fuel. The EIA uses a standardized measure, heating degree days, to aid projections. Degree days are a simplified form of historical weather data used to help model the relationship between the energy needed to heat or cool a building and outside air temperature. Ann McLarty Jackson and Neal Walters AARP Public Policy Institute 601 E St., NW Washington, DC ; ppi@aarp.org March