RMI expert urges targeted low-income programs, not across-the-board rate cuts, to end energy poverty – Citizen Portal AI

Report on Household Energy Affordability and Alignment with Sustainable Development Goals

1.0 Addressing Energy Poverty and Inequality (SDG 1, SDG 10, SDG 3)

A recent address to the Utility Consumers Board by Joe Daniel of RMI highlighted the critical issue of household energy affordability, defining it as the capacity to meet monthly energy costs without sacrificing basic necessities or endangering health and safety. This directly impacts several Sustainable Development Goals (SDGs).

• Energy Burden and Poverty (SDG 1: No Poverty): The energy burden, or the percentage of household income allocated to energy costs, is a key indicator of poverty. An affordable burden is considered under 6%, while burdens exceeding 20% are deemed catastrophically unaffordable. Low-income families in the United States face an average energy burden of 20%, placing them in a cycle of energy poverty.
• Health and Well-being (SDG 3: Good Health and Well-being): The consequences of energy unaffordability, such as utility disconnections, pose significant health risks. These include the loss of refrigeration for essential medicines and potential intervention by child protective services, undermining fundamental well-being.
• Reducing Inequalities (SDG 10: Reduced Inequalities): The disproportionately high energy burden on low-income households represents a significant societal inequality. Addressing this gap is essential for achieving the goal of reduced inequalities.

2.0 Strategic Approach: Targeted Interventions for Sustainable Energy Access (SDG 7)

RMI advocates for a strategic framework centered on targeted support for vulnerable households rather than broad, system-wide cost reductions. This approach aligns with SDG 7 (Affordable and Clean Energy) by focusing on ensuring affordable and reliable energy access for all.

• Inefficiency of System-Wide Reductions: Analysis indicates that an improbable 75% reduction in overall energy system costs would be required to resolve the low-income energy burden through general measures alone.
• Efficacy of Targeted Transfers: A more feasible and impactful solution involves a targeted transfer equivalent to approximately 2% of total system costs directed specifically to low-income customers. This measure could achieve the same outcome as a massive system-wide cost reduction.
• RMI’s Three Levers: The proposed strategy involves a three-pronged approach:
  1. Reduce system costs where feasible.
  2. Preserve customer agency and predictability.
  3. Utilize targeted cost allocation.

3.0 Policy Framework for Equitable Energy Access and Sustainable Communities (SDG 11)

A portfolio of five key policy tools was presented to create a comprehensive framework for tackling energy poverty and building more sustainable communities (SDG 11).

1. Low-Income Energy Efficiency: A high-value intervention that reduces energy consumption and costs for vulnerable households. Its full value is often underestimated in standard cost-effectiveness tests.
2. Low-Income Discount Rates: Direct financial relief provided through reduced energy rates for qualifying low-income customers.
3. Percentage-of-Income Payment Plans (PIPs): Programs that cap energy bills at an affordable percentage of a household’s income. A pilot in Michigan demonstrated a 90% reduction in arrearages for participants.
4. Disconnection Protections: Policies that prevent utility shut-offs under specific conditions. While some protections exist (e.g., for extreme weather), there are gaps for vulnerable groups such as seniors, veterans, people with disabilities, and households with infants.
5. Arrearage Management Plans: Structured plans to help customers manage and pay down past-due bills. It was noted that practices like third-party debt sales can perpetuate the energy poverty cycle, undermining SDG 1.

4.0 Recommendations for an Integrated Policy Implementation

A multi-faceted approach combining various policy tools and innovative funding is recommended for maximum impact. The RMI energy poverty policy simulator was highlighted as a tool for modeling the effects of different program combinations.

• Layered Policy Application: It is advised not to rely on a single policy lever. A recommended strategy is to begin with cost-effective low-income energy efficiency programs and layer them with targeted discounts and PIPs.
• Creative Funding Mechanisms: To support these programs, creative funding sources should be explored, including:
  • Settlement-driven investor contributions
  • Securitization
  • Performance-based sharing models where utilities assume a portion of the financial risk.
• Addressing Implementation Challenges: Further research and tailored solutions are needed for complex issues such as the landlord-tenant dynamic in efficiency upgrades and the mixed outcomes of prepayment programs, which can increase disconnections if not paired with arrears management.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty – The article focuses on the financial struggles of low-income households, specifically their “energy burden” and the risk of falling into an “energy-poverty cycle.”
• SDG 7: Affordable and Clean Energy – The core theme is household energy affordability, discussing the challenge of paying monthly electric and gas bills and proposing solutions to ensure energy is affordable for all.
• SDG 10: Reduced Inequalities – The article highlights the disparity in energy burden, where low-income families pay a disproportionately high percentage of their income on energy compared to the general population. It also calls for targeted programs for vulnerable groups.
• SDG 3: Good Health and Well-being – The text directly links energy unaffordability and disconnections to negative health outcomes, such as the “loss of refrigeration for medicine” and risks to health and safety.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance.
   • Explanation: The article directly addresses access to the basic service of energy (electricity and gas). It discusses policy tools like low-income discount rates, percentage-of-income payment plans (PIPs), and arrearage management to ensure vulnerable, low-income households can maintain access to this essential service.
2. Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services.
   • Explanation: The entire article is centered on making energy “affordable.” Joe Daniel defines energy affordability as “the ability to pay your monthly electric and gas bill without foregoing basic necessities.” The discussion of reducing energy burden and implementing payment plans directly supports this target.
3. Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.
   • Explanation: The article advocates for targeted programs for low-income households to reduce the inequality of energy burden. It also points out that Colorado’s disconnection protections lack specific carve-outs for “seniors, people with disabilities, veterans and households with infants,” identifying a need to better protect these vulnerable groups and promote their inclusion in energy security.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Energy Burden Percentage
   • Explanation: The article explicitly defines this indicator as “the percentage of household income spent on energy.” It provides specific metrics, stating that affordability is considered under 6%, while low-income families in the U.S. pay an average of 20%. This can be used to measure progress towards making energy affordable (Target 7.1) and reducing poverty (Target 1.4).
2. Rate of Utility Disconnections
   • Explanation: The article discusses “disconnection protections” and the “human impacts of disconnection.” While not giving a specific number, it implies that the frequency of disconnections is a key metric. The mention of prepay programs sometimes increasing disconnections further solidifies this as a measurable indicator of energy insecurity.
3. Level of Customer Arrearages (Debt)
   • Explanation: The article discusses “arrearage management plans” and warns against “third-party debt sales.” It cites a Michigan pilot that “reduced arrearages by roughly 90 percent,” demonstrating that the amount of customer debt is a quantifiable indicator used to measure the success of affordability programs.
4. Participation in Energy Assistance Programs
   • Explanation: The article mentions several programs: “low-income energy efficiency,” “low-income discount rates,” and “percentage-of-income payment plans (PIPs).” The number of households enrolled in and benefiting from these programs is an implied indicator of the reach and effectiveness of policies aimed at reducing energy poverty and inequality.

4. Table of SDGs, Targets, and Indicators

Source: citizenportal.ai