Editor’s Note: Mark Wolfe is an energy economist and serves as the executive director of the National Energy Assistance Directors’ Association (NEADA), representing the state directors of the Low Income Home Energy Assistance Program. He specializes in energy and housing affordability and related finance issues. The opinions expressed in this commentary are his own.
Prices for gasoline, food and other essentials have all risen over the past few months, straining family budgets across the US. And now, prices for natural gas, the most common way to heat homes, are at their highest level in the last seven years. If it’s a cold winter, prices could go even higher. For struggling families and low-income Americans, increased heating costs will be yet another necessity they can no longer afford.
Over the past year alone, natural gas prices have skyrocketed more than 180%. The situation is even worse in Europe, where prices are reaching record levels because of limited domestic production capacity, cutbacks in deliveries from Russia and reduced capacity to use other fuels as countries reduce consumption of coal.
The US is experiencing similar issues, with demand for air conditioning over the summer depleting supplies, and natural gas exports to other countries 48% higher than they were a year ago. As a result, rates of natural gas storage — which utilities use to help prevent shortages — are down 15% from last year’s levels, providing limited price protection in the event of a cold winter.
Natural gas utilities try to dampen price increases for their customers by hedging and purchasing natural gas in advance at lower prices, but there is nothing they can do about global supply shortages. Ultimately, the price increases are passed on to customers, who have no option but to pay the higher bills.
About 61 million households use natural gas to heat their homes. Last year, the US Energy Information Administration forecast that it would cost approximately $572 just to heat the average home with natural gas during the 2020-21 heating season. For the coming winter heating season, prices could rise significantly higher because of the rapidly rising price of natural gas, assuming an average winter and average consumption levels. Plus, a few cold snaps this winter could lead to increased demand, which would result in spiking of prices even further.
For many struggling families, higher prices can mean being forced to choose between heat, food or medication. About 29% of Americans who were surveyed had to reduce or forego expenses for basic household necessities to pay an energy bill in the last year, according to the US Census Bureau. And that was before natural gas prices started to rise.
Congress should view these higher prices as a wake-up call. It should increase funding for federal programs, such as the Weatherization Assistance Program (WAP), that help to increase the energy efficiency of low- and moderate-income housing. WAP has a proven record of reducing annual household heating consumption by 18% and saving households an average of $283 in energy bills annually.
Congress should also authorize the Clean Energy and Sustainability Accelerator, a national green bank, to start pilot programs in low- to moderate-income communities. Currently under consideration as part of the reconciliation bill, the bank would help finance clean energy projects in disadvantaged communities, which could save households money, improve public health and reduce emissions.
I represent the state directors of the Low Income Home Energy Assistance Program (LIHEAP), which provides heating and cooling assistance to more than six million low-income households. Congress should increase LIHEAP’s funding to $5.1 billion from the current funding level of about $3.8 billion. The additional $1.3 billion in funding would allow states to increase grants to cover higher costs associated with natural gas this winter, as well as cover higher costs associated with rising heating oil and propane prices.
Congress can also provide a supplemental grant to Americans who rely on Social Security for all their income, and increase the Child Tax Credit and the Earned Income Tax Credit to families with incomes below the federal poverty line.
These are the right things to do. The federal government should step in and help struggling families when national and global market conditions are making essential commodities even more difficult to afford.