Report: Energy Costs Are a Higher Burden on the Rural Poor

 Gabrielle Levy

LOW-INCOME FAMILIES living in rural areas pay more of their monthly incomes to energy costs than families in other parts of the country, a burden on households and communities that could often be mitigated by making energy-efficiency improvements.

The percentage of monthly income that low-income rural residents spend on energy – called their energy burden – is three times as high as the national average, according to a new report by the American Council for an Energy-Efficient Economy and the Energy Efficiency for All coalition.

The median urban household pays an estimated $1,812 – about $151 a month – or 3.1 percent of an annual income of $57,800 on energy bills. The median rural household, comparatively, has an income of $43,000 but spends $1,905 – $159 a month – on energy, or 4.4 percent, according to the report. And while the rural poor pay less – $1,580, or $132 a month – energy bills make up nearly 9 percent of their median annual income of $17,952.

For rural residents, spending a higher percentage of their income on energy can have a ripple effect for families and for communities.

"When you're looking at much higher percentage of your income going to essentially meeting your basic needs on a monthly basis, that not only reduces your discretionary income. That's going to impact essentially every other aspect of your life," says Tom Cormons, executive director of Appalachian Voices, a North Carolina-based nonprofit that advocates for renewable energy and energy-efficiency policies.

"The impact that this has on communities, when people have less disposable income because their monthly bills are a high percentage of their income, that has a crippling effect on local economies," he says.

A big part of the problem is income. Rural areas have a higher concentration of people – 41 percent – living at less than 200 percent of the federal poverty level than urban areas, where about a third of households fall under that threshold.

But other issues exacerbate the divide.

Rural homes are more likely to have a number of traits that mean they use more energy or are less energy efficient. They tend to be be older on average than urban homes: While the national average age of occupied housing is 37 years old, according to data from the American Community Survey, the average age of a rural housing unit is 45 years old. And while natural gas is the most common heating fuel in the country, rural homes are more likely to rely on alternatives that have more volatile prices and are often more expensive. Fuel oil, commonly used to heat homes in rural areas of New England, the South Atlantic and Mid-Atlantic, and propane, often used in the Midwest and southern parts of the country, can be more costly than natural gas.

These challenges can be more severe in mobile homes, 70 percent of which are in rural areas. Although manufactured homes tend to be smaller and use 35 percent less energy than site-built houses, they use 70 percent more energy per square foot.

Rural residents are less likely to have access to energy-efficiency programs that can help lower the energy burden, including insulation and weatherization or subsidies that help residents pay for the replacement of older large appliances, such as refrigerators and washing machines, with newer, more energy-efficient models.

"It's expensive to be poor," Cormons says. "A lot of times, folks without resources may end up facing higher monthly costs because they don't have the resources to make the investment that's going to save them money in the long term, such as upgrades to the house."

The report suggests that the median low-income rural household could save about $420 per year in energy costs if homes were retrofitted to meet higher efficiency standards.

Energy costs in rural areas can also have a disproportionate burden on certain vulnerable populations, which the report says have traditionally been more likely to live in substandard housing. Non-white rural residents – many of whom are immigrants in agricultural regions and may face a language barrier that can make it more difficult to deliver assistance programs, for example, pay 1.2 times more of their monthly income than white rural residents toward energy. Many elderly residents are on a fixed income, resulting in an energy burden that is 1.4 times higher than their non-elderly neighbors. And renters, who make up about a quarter of rural residents and are more likely than their urban counterparts to live in substandard housing where owners are not incentivized to make energy improvements, have an energy burden 1.3 times higher than rural homeowners.

Advocates push in particular for adoption of energy-efficiency policies as a relatively low-cost means of lowering energy costs. Energy-efficiency standards vary in the 27 states in which they have been adopted but tend to require utilities to implement improvements to their production and delivery systems so they waste less energy. They also subsidize programs for residents that reduce the cost of making home improvements, buying energy-efficient appliances or switching to an electric or hybrid car.

"It's unfortunate that rural Americans are bearing such a large energy burden," Khalil Shahyd, senior policy advocate with the Resilient Communities program at the Natural Resources Defense Council, said in a statement, "but the good news is that with the right programs and support from utilities and others, energy efficiency can go a long way toward solving this problem."

Federal regulations, however, are often a roadblock. Cost-of-service regulations, which guarantee about 10 percent rate-of-return on spending on investments, end up encouraging utilities to spend on big projects such as construction of a new power plant, which can cost billions, rather than on programs that make energy production and delivery more efficient for a fraction of the price.

"Frankly, they're in the business of selling energy," Cormons says. "They make their money when they can justify or build out generation or transmission or infrastructure."

"Though they can make a rate of return on energy efficiency, because it's more cost effective, they make less money providing energy efficiency," he says. "It's a perverse incentive."

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