Politics The poor pay more for energy — the US can correct the imbalance
Bonus pay for essential workers varied widely across states
JEFFERSON CITY, Mo. (AP) — For putting their health on the line during the coronavirus pandemic, prison guards in Missouri got an extra $250 per paycheck. Teachers in Georgia received $1,000 bonuses. And in Vermont, nurses, janitors, retail workers and many others got as much as $2,000. Over the past year, about one-third of U.S. states have used federal COVID-19 relief aid to reward workers considered essential who dutifully reported to jobs during the pandemic. But who qualified for those bonuses -- and how much they received — varied widely, according to an Associated Press review. While some were paid thousands of dollars, others with similar jobs elsewhere received nothing.
Recently there's been a lot of attention focused on the inequities in our taxation system that allow . Energy costs are another area that can raise similar concerns because poor households sometimes pay more for energy - certainly as a percentage of their income but also even on a per-unit basis - than higher-income consumers. The Biden administration can take a small but important step to address this problem by establishing a task force to identify where this happens and what can be done about it.
Many studies show that lower-income households . In part, this is just math: if a grocery store worker making $25,000 a year and an investment banker making $1 million a year pay the same price for a gallon of gasoline or a kilowatt-hour of electricity, the grocery worker is paying a much higher percentage of their income for this energy. Moreover, many low-income consumers live in housing with substandard insulation or older appliances, . This is a problem that adversely affects particularly .
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What is perhaps more surprising is that poor consumers also sometimes pay a higher price per unit of energy than higher-income ones, and in other cases are actually subsidizing wealthier consumers. So just as the , the same can happen with energy prices.
For example, as recently described by the , "" programs - which provide financial benefits to encourage installation of home solar systems - result in ones (e.g., because they do not own houses with large roofs). Simply put, poorer people pay higher rates because of benefits flowing to those with higher incomes.
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Another example are the efforts by utilities and regulators to use fixed charges rather than volumetric rates to recover revenue from electricity customers. Because poor people use less energy, than higher-income consumers.
What may seem like small amounts to some are often significant for poorer households or when the aggregate impact on all these households is considered. For example, . Once again, .
To address this problem, here's what needs to happen.
The critical first step is to identify those instances where the poor are in fact paying more for their energy or where costs are being shifted from rich to poor. Cataloguing these will be difficult, in large part because of the complex calculations required, but also because there are vested interests who benefit from the current system and will resist efforts to change it.
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But cataloguing prices and cost shifts is not enough. People pay for electricity not for its own sake, but because they want a cool house in the summer, a warm home in the winter, cold beverages in the refrigerator, etc. Poorer families living in homes with inadequate insulation, or with older and more inefficient HVAC systems and appliances, use more electricity to get the actual energy-supplied services they want and need, as many . This issue is already being addressed under , but to remedy the disproportionate energy burdens faced by poorer families.
The second is to answer the question "why is this happening?" In some cases, the driver is government regulation. Often, the regulation may have a laudable purpose such , but it can end up shifting costs to low-income consumers or making them pay higher per-unit costs than wealthier consumers. In other cases, the , but the government is well placed to address the issue (e.g., ).
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The third step is to identify pragmatic and implementable solutions. Sometimes this may be a technical exercise (e.g., revising ). In other cases, the best solution may not involve undoing the burden, but rather compensating poor families in other ways. These distributional efforts should be complemented by initiatives to reduce energy costs overall to alleviate the expenses borne by the poor.
So, what can be done? President Biden should establish a task force, led by the , to address this energy burden faced by low-income families. The task force should produce within one year a report making recommendations for consideration by the administration, Congress and the states.
Identifying the problems and devising solutions will require deep technical skills, and the engagement of a diverse group of stakeholders. In addition to the Department of Energy, the Department of Housing and Urban Development, the Department of Health and Human Services, the , and others should contribute. Non-governmental stakeholders, including civil society organizations, affected communities and poor families themselves, have important roles to play and should be represented on the task force.
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Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what's going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue! © Provided by Washington Examiner DOE Default Image - July 2021 WAITING ON INTERIOR: Industry groups growing impatient with the Biden administration’s indefinite oil and gas leasing pause saw this week as a prime opportunity for the Interior Department to release its report on the future of the leasing program.
Now is an opportune time to address this issue given the in and the . Moreover, the extensive being undertaken to meet the challenge of climate change also provides an opening to tackle the energy system's adverse impact on poorer families.
Ultimately, more than rectifying inequities in the energy cost structure, this effort is about trying to find ways to empower poor people to spend more of their own resources on adequate housing, transport, leisure and more, without overpaying for energy. The Biden administration should launch this effort now, so America's poor can benefit as quickly as possible.
Philippe Benoit and David R. Hill are both adjunct senior research scholars at Columbia University's . Hill was previously general counsel of the U.S. Department of Energy and of NRG Energy, Inc. and is currently a principal at Newlin Road Advisors. Benoit is managing director, Energy and Sustainability, at . The views expressed are those of the authors in their individual capacities.
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HAPPY THURSDAY!!! Welcome to Overnight Energy, your source for the day's energy and environment news. Please send tips and comments to Rachel Frazin at email@example.com . Follow her on Twitter: @RachelFrazin . Reach Zack Budryk at firstname.lastname@example.org or follow him at @BudrykZack . Today we're looking at a House-passed budget package, a new study on potential climate deaths, and automakers reportedly joining the Biden administration in an EV push.