For households struggling to pay their energy bills, it could be a long, cold winter ahead.
According to US census data, roughly 22 percent of American households were unable to pay an energy bill in the last year. Even when they have paid, tens of millions of households have faced some kind of hardship to keep up with their bills — whether that means forgoing food or medicine, keeping a home at an unhealthy temperature, or using broken equipment.
And prices are rising. Compared with last winter, the average household will spend 28 percent more this year to heat a home with gas, according to the US Energy Information Administration. That number will be higher still if the winter turns out to be colder than expected, and it conceals some regional variation: in Southern California, one utility is warning of “shockingly high” January bills.
Headed into the worst of winter, low-income families are already “very stressed and stretched,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association and the Energy Programs Consortium, an organization that assists low-income consumers.
Certain buffers that have helped families, like the enhanced child tax credit, have also ended, giving consumers less disposable income to handle inflation.
“I don’t think many people think about utility bills being something that put people in precarious positions,” said Karishma Chouhan, one of the founders of a Chicago-area mutual aid group, Community Utility, that helps people pay their bills. “Utility bills isn’t something that a lot of people think about every month — unless they suddenly need to start thinking about them, because it’s something that they’re going to struggle to pay.”
The US has a well-established program — the Low Income Household Energy Assistance Program, or LIHEAP — meant to help people afford utility bills. But the program never has enough money to help every household in need. And this year, it’s on a collision course with a projected spike in what people pay to heat their homes.
Why are prices rising?
Gasoline prices are now lower than they were a year ago, coming down from the highs seen this August. That isn’t true for the price of natural gas, used for heating in homes or used at power plants to generate electricity.
December was an especially bad month. The wholesale price for natural gas, called the Henry Hub, was 47 percent higher than it was a year ago. So everything that runs on gas is more expensive too.
The war in Ukraine and subsequent ban on Russian gas by many countries have raised prices globally, but that’s not the full story. Natural gas prices have normalized since the war began. Even the Henry Hub price has fallen since the summer highs. Instead, something else is happening — and there’s another way US policies are driving the price increase.
Since 2016, the US has built new terminals that are capable of exporting gas in its more condensed liquid form. For most of the past decade, the US had a gas glut — hydraulic fracturing unleashed more supply than the US could consume, driving down the price to unprofitable levels for producers. But exports have now cut into that glut of gas, because there’s now a global market American consumers have to compete with.
The rising prices primarily affect the nearly half of US households that combust gas for heating. The Energy Information Agency estimates the retail price of consumers for gas will be 22 percent higher than last winter. (The total price they expect customers will pay is higher, because they also expect people to use more gas than last year.) But those running on electricity still face the impact of higher gas prices, because the fuel is now the dominant source in the power sector. EIA expects a 6 percent increase in electricity prices, depending a lot on variable factors, like weather, in how high prices go.
There are other challenges expected to make this winter more difficult than the last few years. One is that it’s poised to be slightly colder. That will also translate into higher prices, because there is more demand for heating, and possibly less supply when winter storms cause disruptions, as happened when power outages recently struck the East Coast during a winter storm.
The true effects of a cold winter, supply-chain disruptions, and energy inflation will play out differently depending on where you live. There’s no one national price of gas; markets are all priced differently depending on the difficulty and distance of transporting the gas from its source. The EIA expects the Midwest will see the highest price increases, at 27 percent, followed by 23 percent in the West, 17 percent in the Northeast, and 15 percent in the Southeast.
There’s a lot of uncertainty baked into all of the estimates. “If spot prices continue to rise, retail prices this winter could be even higher than our forecast,” the EIA said.
LIHEAP should be an answer, but is falling short of meeting rising need
We’re coming away from a year where US natural gas prices were the highest seen since 2008. This winter looks like it will be worse weather than the last, which would cause even more disruptions. And people are barely able to catch up from other economic pain like inflation and higher energy prices this summer.
LIHEAP was created to address this need. It’s a federally funded program, administered by states, to help with utility bills for people with income up to about 150 percent above the poverty line, though income limits can vary a bit by state. That’s roughly $20,385 or $41,000 for a family of four based on 2022 numbers. It has typically reached 6.7 million households annually.
But the details of the program vary widely state by state, including what time of the year it covers. In Chicago, for instance, applications are only accepted between September and May, when heating needs are greatest. States rely on federal money for LIHEAP, but they can also top up the program’s funding. Some red states wind up with less funding for programs overall because of lack of investment.
These problems continue even though there’s actually more money than ever for LIHEAP. LIHEAP’s total funding is usually $4.1 billion through regular appropriations, but this year Congress appropriated an extra $2 billion in an attempt to keep up with rising inflation and energy prices. Even this temporary boost in funding isn’t enough to keep up.
“We have that 32 million households eligible for energy assistance,” Wolfe said. “We have enough money to reach about 6 million.” And it’s going to be a harder sell in the Republican-controlled House of Representatives for more funding this year, even though there is some bipartisan support for the program.
But people are falling through the cracks of this system all the time. Michelle Graff, a professor at Cleveland State University studying LIHEAP, said that 82 percent of the eligible population uses SNAP benefits for food, but just 16.7 percent of those eligible for LIHEAP use it.
The experience of Community Utility, the Chicago mutual aid group, offers a window into how the program can fall short.
Since May, the group says it’s helped raise money to fill 44 requests to pay off around $10,000 in utility debt in the Chicago area. Some of those requesting help noted they tried LIHEAP first, only to miss its application window, or they never heard back because of an administrative error, or that the program simply ran out of money later in the year. These kinds of situations make it harder for LIHEAP to help in an emergency.
Nor do all energy crises happen in winter months, when LIHEAP nationally spends up to 85 percent of its funds. Energy bills don’t usually peak until the winter, but over the summer, Community Utility received requests to help with energy bill debt that ran in the thousands of dollars. They’re seeing these problems compound — high summer bills make getting through the winter even harder.
The problem isn’t one mutual aid groups can fix. Energy costs are rising, and the programs meant to help aren’t keeping the same pace.
“This is a problem of basic income,” Wolfe said. “Because our problem isn’t energy, it is an income problem. In our country we’ve fragmented all the social services so there’s SNAP for food, and other programs have energy, instead of just recognizing that the problem is the family just does not have enough money to cover basic needs.”