data from the Energy Information Administration (EIA). .... recent Short-Term Energy Outlook (STEO) to analyze past heat
WINTER HEATING COSTS REPORT (November 2014) Winter Heating Costs to Fall, but Still Challenge Older Households
Heating expenditures for the 2014-15 winter season are projected to be lower than experienced last winter for most older households in the US. Despite this, older low-income households will still struggle to pay as LIHEAP assistance fails to cover these costs.
Heating Costs Expected to Fall This Winter Average heating expenditures for older households during winter 2014-15 are expected to be less than last winter. This projection is based on anticipated lower heating fuel prices and decreased consumption this winter. Expenditures for older households heating with fuel oil and propane are expected to decrease most sharply—15 percent and 34 percent respectively.
Winter Heating Costs for Householders Age 65+ by Heating Fuel Type Natural Gas Fuel Oil Electricity Propane
$3,000 $2,500
Projected
$2,313 $1,983
$2,000 $1,715
$1,500
$1,230
$1,000
$702 $519
$594
$625
$636 $534
$650
$500 $340
$380
$403
$417
$465
$459
$2,390 $2,022
$1,779
$1,552
$1,400
$2,141
$1,987
$904
$701 $521
$494 $438
$586 $467
$520
$389
$369
$394
$421
$0
$659 $497 $412
Winter Season
Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, http://www.eia.gov/forecasts/steo/report/October 2014 (Table WF01). Tabulations by the AARP Public Policy Institute, October 2014.
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Projected expenditures are based on the average consumer price of fuel and projected consumption data from the Energy Information Administration (EIA). Consumption projections1 are based on a variety of factors, including historical usage data and anticipated weather conditions. The EIA estimates that this winter average heating degree days will be 12 percent lower than last.2 The EIA cautions that colder than forecast temperatures would lead to increased consumption and higher expenditures. For example, a 10 percent increase in heating degree days (HDD) would send average natural gas and electricity expenditures above 2013-14 levels. Since almost half (48 percent) of older households in the United States use natural gas as their primary heating fuel, changes in the price and consumption of natural gas tend to have the biggest influence on the heating costs of older consumers, with electricity the second most common heating source.
Primary Heating Fuel Used by Households Age 65+ Propane Other 4% 5% Heating oil 6%
Natural gas 48% Electricity 37%
Source: American Community Survey, 2013. Tabulated by the AARP Public Policy Institute.
1
EIA’s residential consumption and expenditure predictions are derived from the National Energy Modeling System Residential Sector Demand Module, available at http://www.eia.gov/FTPROOT/modeldoc/m067%282010%29.pdf. 2 The EIA uses weather predictions to help project household fuel consumption and expenditures over the winter heating season. Colder weather will cause households to use more fuel to heat their homes whereas milder weather will necessitate less fuel. See Methodology section for a more detailed explanation.
2
An estimated 11 percent (about 12 million) of older households use fuel oil or liquid propane to heat their homes. These households will experience the sharpest decrease in heating expenditures. In comparison to last winter, propane reserves are 17 percent higher, the highest level since 19933. Replenished and adequate supplies have caused spot prices4 of propane to fall to normal pre-shortage5 levels. Households age 65+ heating with propane in the Northeast can expect expenditures to decrease by 9 percent and those in the Midwest by 32 percent.
Propane Heating Costs for Households Age 65+
$2,000 $1,563
$1,500
$1,362
$1,243
$1,093
$1,060
$942
$1,000
$500
$0 2012–13
2013–14
2014-15 (Projected)
2012–13
Northeast
2013–14
2014-15 (Projected)
Midwest
Sources: Residential Energy Consumption Survey, 2009; Short term Energy Outlook, October, 2014. (Table WF01); Tabulated by the AARP Public Policy Institute, October 2014.
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EIA Short-Term Energy and Winter Fuels Outlook Spot price is the current price of propane at a particular location and at a specific time. Prices paid by consumers are higher than the spot price because transportation, distribution, delivery, and tax costs are added to the final price. 5 The Department of Energy estimates that 6 million households, mostly in the Midwest and Northeast, use propane as their primary source of heating fuel. Low inventories and high demand for the fuel during Winter 2013-14 caused shortages and higher prices. 4
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Costs Vary by Region Heating costs differ by geographic location. Costs are highest in the New England census division, where heating oil is the primary heating fuel used, followed by the Middle Atlantic census division.
Heating Costs for Consumers Age 65+ by Census Region and Main Heating Fuel $3,000 $2,500
$2,639 $2,232
$2,000 $1,500 $1,000
$826 $750
$699 $674 $640 $618 $304 $371 $355 $384 $377 $305 $299 $233 $230 $308
$500 $0
2013-14
2014-15 (Projected)
Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, October 2014 (Table WF01). Tabulated by the AARP Public Policy Institute, October 2014.
According to the EIA,6 temperatures in the South Atlantic, East South Central, and West South Central divisions (South region) are forecasted to be 12 percent warmer than last winter; in the East North Central and West North Central divisions (Midwest region) 16 percent warmer; and in the New England and Middle Atlantic divisions (North East region) 11 percent warmer. The Mountain and Pacific divisions in the West region are forecasted to be 5 percent warmer than last winter. Warmer temperatures across all regions are expected to lead to a decrease in heating fuel consumption and heating costs.
6
Short-Term Energy Outlook, February 2014: http://www.eia.gov/forecasts/steo/.
4
Source: Energy Information Administration. This image is available at http://www.eia.doe.gov/emeu/reps/maps/us_census.html.
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Older, Low-Income Consumers Will Continue to Struggle Although heating costs for winter 2014-15 are projected to be lower than last winter, older consumers with limited funds will continue to be challenged to pay high heating costs. Twenty-seven percent of older households have median family income of less than $20,000,7 and they typically experience the greatest energy burden.8 This trend is projected to continue throughout winter 2014–15. The burden is highest for those heating with fuel oil. For example, age 65+ households with incomes of less than $10,000 and heating with fuel oil will spend almost one-fifth of household income on heating costs. Lowest- income older households heating with other fuels (propane, electricity and natural gas), can expect to spend about 7 percent of household income on heating costs. . Projected Winter 2014-15 Heating Costs for Consumers Aged 65+, by Income and Fuel Type Natural Gas Income
Median Income
$0-9,999 $ 7,859 $10-19,999 $ 14,964 $20-29,999 $ 24,840 $30-39,999 $ 34,519 $40-74,999 $ 55,118 $75,000+ $ 110,435 All Incomes $ 35,575
Fuel Oil
Percent Energy Energy of 65+ Cost Burden Burden Families 7.2% 20.2% 15.4% 12.1% 25.1% 20.0% 100.0%
7.2% 4.0% 2.8% 2.1% 1.2% 0.7% 1.1%
$ $ $ $ $ $ $
568 603 691 708 664 722 607
18.1% 13.6% 8.4% 5.7% 4.0% 2.2% 5.2%
Cost $ $ $ $ $ $ $
1,421 2,028 2,094 1,975 2,219 2,407 2,022
Electricity
Propane*
Energy Energy Cost Burden Burden 7.3% 2.6% 1.8% 1.2% 0.7% 0.6% 1.0%
$ $ $ $ $ $ $
577 392 444 409 386 608 451
6.9% 4.9% 3.2% 1.8% 1.7% 0.9% 2.3%
Cost $ 545 $ 732 $ 800 $ 630 $ 911 $ 1,006 $ 806
Sources: Residential Energy Consumption Survey, 2009; Short-Term Energy Outlook, October 2014 (Table WF01); National Energy Assistance Directors Association’s 2013 National Energy Assistance Survey Summary; Current Population Survey, 2014 March Supplement. Tabulated by the AARP Public Policy Institute, October 2014.
LIHEAP Funding Continues to Trail Costs The Low Income Home Energy Assistance Program (LIHEAP)9 is a federal block grant that provides funding to the 50 states and other jurisdictions to operate home energy assistance programs for lowincome households. LIHEAP helps eligible low-income households keep their homes at safe temperatures by helping them pay heating and/or cooling bills. From the year 2000 to present, the average LIHEAP grant has remained well below average heating costs faced by older consumers. Consequently, the gap between heating expenditures and LIHEAP assistance received by eligible participants remains substantial and is growing. The average heating
7
Current Population Survey, 2014 March Supplement. Burden, or energy burden, represents the portion of household income needed to meet projected winter heating costs. For purposes of the table above, burden is estimated by dividing the median income for each income group in Table 1 by the average projected fuel cost for each income group. 9 LIHEAP was established through the Low Income Home Energy Assistance Act, Title XXVI of the Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35). 8
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assistance grant received by LIHEAP recipients fell to $406 in fiscal year 2014 from $502 in 2009, the highest funding year for LIHEAP. In addition, the National Energy Assistance Directors Association estimates10 that the total number of households receiving LIHEAP assistance in fiscal year (FY) 2014 was 6.9 million, down 17 percent from 8.3 million in FY2009.
Expenditures for Heating Fuels vs. Average LIHEAP Grants, All Age Groups (2008–09 to 2013–14) Average LIHEAP Heating Grant
Average Heating Expenditures
$1,250 $975
$1,000
$918
$914
$964
$909
$844
$750 $500
$502
$417
$429
$406
$406
$362
$250 $0
Sources: Short-Term Energy Outlook, October 2014 (Table WF01); LIHEAP Home Energy Notebooks, 2005–2009; NEADA 2013 Energy Assistance Survey Summary. Tabulated by the AARP Public Policy Institute, October 2014.
The US Department of Health and Human Services (HHS) has released approximately $3.1 billion in regular block grant funding for FY 2015 under the current continuing resolution, (Public Law No: 113-164) compared to the $2.9 billion released in FY 2014.
10
National Energy Assistance Directors Association’s 2013 National Energy Assistance Survey Summary. http://neada.org/sequester-cuts-300000-poor-families-from-low-income-home-energy-assistance-program/.
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Methodology This report uses variables from both the Residential Energy Consumption Survey (RECS) and the most recent Short-Term Energy Outlook (STEO) to analyze past heating-related energy consumption and expenditures among consumers age 65 and older, and to project heating-related energy consumption and expenditures for the upcoming winter heating season (October 2014 through March 2015). The RECS is a national statistical survey that collects energy-related data for occupied primary housing units; the most recent survey was conducted in 2009. This report relies primarily on household-level consumption data from the 2009 survey. RECS provides information on the use of energy in residential housing units in the United States, including demographic characteristics of the household, energy consumption and expenditures for natural gas, electricity, fuel oil, and other fuel types, as well as other information that relates to energy use. The Energy Information Administration (EIA) is the statistical agency of the U.S. Department of Energy and produces energy data, analysis, and forecasting. EIA issues weekly, monthly, and annual reports on energy production and prices, demand, imports, and other topics, and prepares analyses and special reports on subjects of current interest. The STEO is a monthly publication of the EIA and contains current and projected prices and related expenditures of fuel, including natural gas, fuel oil, electricity, and petroleum. The STEO also contains projected consumer expenditures on fuels. As expenditures vary with fuel price and consumption, greater consumption of fuel will result in greater expenditures for heating fuel. The EIA uses a standardized measure, heating degree days, to aid projections. Degree days are a simplified form of historical weather data used to help model the relationship between the energy needed to heat or cool a building and outside air temperature.
Ann McLarty Jackson AARP Public Policy Institute 601 E St., NW Washington, DC 20049 202-434-3910; email
[email protected] November 2014
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