If you spend more than 10 percent of your income on electricity, natural gas, and other household energy costs, then you are afflicted by energy poverty. It is a tragedy that forces some families to choose between keeping the lights on, or putting food on the table, because they cannot afford both.
The problem is growing worse. In a 2011 survey, 52 percent of respondents said that they were having a more difficult time affording their energy bills compared to the prior year.
Unfortunately, energy bills could become even more unaffordable if a misguided plan being pushed in Washington, DC goes forward. The so-called Clean Power Plan aims to reduce greenhouse gas emissions generated by power plants. Several states, including Colorado, sued the federal government, arguing that the Administration did not have the power to implement the plan without an act of Congress. It is currently being reviewed in federal court. The Clean Power Plan’s future is also in question now that Donald Trump has been elected President.
How would the Clean Power Plan affect your electricity bill? I recently authored a new study with the Pacific Research Institute called, The Clean Power Plan’s Economic Impact. It explores how the new government mandates in the Clean Power Plan would impact household electricity costs, and the power bills of all Colorado residents. You can read the study – and view an interactive map to see what it will mean for Denver-area residents – at www.pacificresearch.org.
My research found that the Clean Power Plan will raise electricity costs across Colorado, disproportionately impacting low-income communities in Denver County and surrounding areas.
Poor families in Denver County could face average annual electricity costs equal to 8.58 percent of their income once the Clean Power Plan is fully implemented. On average, Colorado residents could soon find themselves paying nearly $1,200 a year for electricity.
Average annual electricity costs could increase by 16.3 percent for Denver County residents under the Clean Power Plan. Nearby, in Adams County, average annual electricity costs could increase by 15.9 percent. Arapahoe County residents could see their energy burdens rise 16.1 percent.
The Clean Power Plan is yet another example of a big government program from Washington D.C. that, despite its intentions, creates unintended consequences that overwhelm any potential benefits.
In this case, Colorado residents and millions of others could soon endure a harsh economic reality for a program that won’t meaningfully reduce emissions or improve the environment.
Perhaps the biggest concern about programs like the Clean Power Plan is that they will trap more people in a life of poverty.
The federal government provides financial assistance to help the poor afford the high costs of energy. The number of U.S. households receiving energy assistance from the government was 40 percent higher in 2014 than before the Great Recession.
The poverty trap ensnares families because rising incomes threaten their eligibility for assistance programs. Ironically, Colorado’s poorest families may find that they are better off financially if they do not try to work their way up the economic ladder in favor of remaining eligible for their current energy subsidies.
Instead of looking to government for big programs and costly new mandates, we should look to the free market. By encouraging innovative, market-based solutions, we can reduce emissions in Denver and across Colorado – without increasing costs to taxpayers or pushing more into a life of energy poverty.