Residential Energy Consumption Varies by Income Cohort

EIA’s Residential Energy Consumption Survey (RECS) provides information on household energy consumption and many physical and demographic household characteristics. RECS is based on a representative statistical sample of nearly 6,000 U.S. households. Among the data available are household income categories, occupant information, energy expenditures and whether a household is eligible for government assistance with energy costs though programs related to the Department of Health and Human Services’ Low Income Home Energy Assistance Program (LIHEAP). From these data, poverty-level statistics and energy expenditure shares of income can also be calculated. The following discussion is based on RECS energy expenditures with adjustments for projected energy prices under the reference case and the S.139 case.

The most recent expenditure data available are from the RECS 1997 survey. A summary by income category, poverty status and eligibility for energy assistance programs is provided in Figure 4.2. The first four bars represent the number of households by four income categories as reported in the RECS summary report.¹¹⁶ These four income categories account for all 101 million households in 1997. The fifth and sixth bars are subsets of total households drawn primarily from the two leftmost bars of the chart (i.e., the lower income levels). The fifth bar represents the subset of 15 million households that were classified as below the poverty line in 1997. The sixth bar represents the subset of 34 million households—including all of the below poverty households—that were eligible to receive energy assistance in 1997 (either below 150 percent of the poverty level or below 60 percent of median State income). Above each bar are the estimated annual expenditures on home energy as well as the average share of income spent on energy consumed in the home. (Note that RECS estimates of home energy exclude vehicle fuel which is not covered by the survey; however, vehicle fuel expenditures and energy consumption are covered in the transportation section of this report.)

A general observation from Figure 4.2 is that as income rises, expenditures on home energy rise; however, the rise is less than proportional. Thus, households earning less than $10,000 spent 16 percent of their income on home energy, while households earning $50,000 or more, spent only 2 percent of their income on home energy.

Households below the poverty level had an estimated average income of $7,800 and spent on average $1,088 on home energy annually. Households eligible to receive assistance paying their energy bills in 1997 had an estimated average income of $12,700 and spent on average $1,140 on home energy. Total energy expenditures of poverty-level households in 1997 were $16.0 billion in 1997 dollars. Expenditures of the LIHEAP-eligible households were $38.9 billion in 1997 dollars.

Assuming that the 1997 shares of total households by income category remain fixed, the rising number of households over the projection interval implies a rising number either aid-eligible or classified as poverty level.¹¹⁷ The expenditure data in the next figure are from RECS 1997 adjusted for projected prices and converted to 2001 dollars to be consistent with the financial data presented elsewhere in this report. A comparison of the number of projected households and average expenditures per household for the S.139 case versus the reference case is illustrated in Figure 4.3. Under the projected provisions of the bill, annual energy expenditures per LIHEAP-eligible household and poverty-level household in 2025 increase by $316 and $306 over the reference case, respectively. These increases calculated as percentages of reference case expenditures, in both cases, round to 27 percent. Also in both cases, higher electricity prices account for 95 percent of the increase in total annual expenditures. Higher electricity prices result, because the electricity sector is covered and greenhouse gas permit costs are reflected in residential electricity prices (via the cost of permits for the electricity generation sector).¹¹⁸ The prices of other fuels do not include greenhouse gas permit costs, because the residential sector is not defined as a “covered” sector.

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