Report

DC Families Need Help to Pay Rising Heating Bills this Winter

PDF of this report

  • Heating costs are expected to be 33 percent higher in the DC area this winter. This will place a tremendous burden on lower-income families, who typically must sacrifice basic necessities to pay such bills.
  • DC’s energy assistance program (LIHEAP) serves just 38 percent of the eligible population. Last winter, the program ran out of funds in January.
  • This winter, the DC Energy Office is increasing benefits 30 percent in response to higher energy costs. But current funding is only five percent higher than last year. To pay higher benefits, the city will have to reduce the number of households served by 4,000 ‘ from 22,400 to 18,100.
  • Congressional efforts to increase federal funding failed earlier this fall. To address the rising energy costs of DC’s low-income families, additional local funding of $5.3 million is needed this year.

Home heating costs will rise by 33 percent in the DC area this winter, primarily as a result of hurricanes Katrina and Rita.  While the increases will affect all DC households, low-income households will be especially hard hit.  Research has shown that low-income families facing high winter heating bills often keep their homes at unhealthy temperatures, cut back on other necessities ‘ such as food ‘ or skip rent or other bills.

The District helps low-income families pay heating bills through the Low Income Home Energy Assistance Program (LIHEAP), a federally funded program that also has received some local funding in recent years.  This program helps thousands of District households, but growth in funding for the program has not matched the sharp increases in energy costs.  In 2005, fewer than 40 percent of eligible households received assistance, and winter heating funds were depleted by January ‘ just three months after the fiscal year began and in the middle of the peak heating season.  In addition, average LIHEAP benefits in DC were lower than in 35 states.

Funding for LIHEAP this year is only five percent higher than in FY 2005, which means that the program will not be able to address the 33 percent increase in energy costs.  The DC Energy Office has increased the average benefit it will offer by 30 percent this year, but given the limited increase in funding, this will force the city to cut the number of families served from 22,400 to 18,100 or just 31 percent eligible households.

An effort in the U.S. Congress to increase federal funding for LIHEAP failed in October.  This means that an increase in local funding is needed to help cover the higher heating bills that low-income families will face.  It is estimated that the District will need $7.7 million above its FY 2005 funding level to protect current LIHEAP beneficiaries from escalating energy costs and address an increased demand for aid.  Because local funding for LIHEAP in the adopted budget is $1.5 million higher than in FY 2005, the needed local increase is $6.2 million.

An increase of this level would allow the District both to increase benefits and to serve a larger number of families.  For example, the District could provide an average benefit of $500 to 28,000 households, compared with an average benefit of $311 to 22,000 households in FY 2005. This still would mean only slightly more than half of all eligible families.  To further increase the number of families served, a higher funding increase would be needed. 

 

LIHEAP Funding Has Not Been Adequate in Recent Years

An analysis of DC’s LIHEAP program over the past six fiscal years finds that funding has not increased to accommodate higher energy prices.  DC’s LIHEAP program, like LIHEAP programs in the states, serves only a small share of eligible households.

  • Funding for LIHEAP benefits fell from $7.7 million in FY 2001 to $6.1 million in FY 2004.  All figures are adjusted for inflation to equal 2006 dollars.
  • LIHEAP funding then increased to $7.3 million in FY 2006, because the District appropriated local funds to augment the program’s limited federal funds.  The FY 2006 LIHEAP budget includes $4.8 million in federal funds and $2.5 million in local funds.  Nevertheless, total funding remains below the FY 2001 level, after adjusting for inflation.

Despite funding constraints, the District has acted in recent years to increase the number of households receiving LIHEAP aid, by reducing the average benefit amount.  Nevertheless, DC’s LIHEAP program still serves a relatively small share of eligible households.

  •  The number of households receiving LIHEAP aid has doubled ¾ from 11,145 in FY 2000 to 22,403 in FY 2005.  This is 38 percent of the 58,600 DC households eligible for assistance.  The LIHEAP eligibility level is 150 percent of poverty, or roughly $24,000 for a family of three.
  • The program’s funds for the 2004-2005 winter season ran out in January 2005, just three months into the FY 2005 fiscal year and in the middle of the peak heating season.  This not only means that families who needed assistance for the rest of the winter were not served, but also that families who needed help cooling their homes during the hot summer months were not served.
  • The average LIHEAP benefit in DC in FY 2005 ‘ $317’ was lower than in 33 states.  This is 31 percent lower than the average benefit in FY 2001 ‘ $460 ‘ and 44 percent below the average benefit in FY 2002 ‘ $564.  (All figures are adjusted for inflation to equal 2006 dollars.)

 

DC’s LIHEAP Program is Not Prepared to Address Rising Energy Costs This Year

The DC Energy Office has increased benefit amounts per household by 30 percent in response to rising energy costs, with the average benefit from $317 to $404.  This will help families address some, but not all, of the increase in energy costs.  If heating costs rise 33 percent this year, a family that spent $800 on heating last winter would face heating costs of $1,064 this year.

At the same time, total funding for LIHEAP benefits in FY 2006 is just five percent higher than in FY 2005, not adjusting for inflation. This means that the increase in benefits will require a reduction in the number of households served.  With an average benefit of $404 in FY 2006, the $7.3 million available for benefits will serve just 18,100 households — or over 4,000 fewer than in FY 2005.  According to the LIHEAP office, the program already had some 13,000 households signed up for program as of November.  At that rate, the office may run out of funds before January.

Moreover, even with a 30 percent increase, benefit levels remain fairly low.  For example, a family of three with income just at the poverty line ‘ $16,100 ‘ will qualify for a maximum benefit of $218 this winter. [1]  As noted, the relatively low benefit levels reflect the District’s decision to serve more families but offer smaller benefits.  It also should be noted that the Energy Office also allows households to seek an emergency payment of up to $520 to avoid a utility shut-off.[2]

 

Families Facing High Winter Heating Bills Are Forced to Make Drastic Choices

 LIHEAP serves households with very low incomes who have little room in their budgets for increasing costs.  Research shows that rising utility costs force these families to cut back on other necessities.  A recent study by researchers from Stanford University, the RAND Corporation, the University of Chicago, and UCLA found that poor families facing rising heating bills reduce spending on food by about the same amount as the increase in utility bills.[3]  Another recent study found that children in families that receive LIHEAP assistance are less likely to be underweight than children in families that are eligible for LIHEAP but do not receive it because of program funding limitations.[4]  Moreover, the National Energy Assistance Director’s Association surveyed recipients and found that, without LIHEAP, 63 percent would have had to keep their homes at unsafe temperatures and 54 percent would have faced a disconnection of service.

 

Additional Local Funding is Needed to Help Poor Families Avoid Problems this Winter

Given the failure of congressional efforts to increase federal LIHEAP funding, local responses are needed to help low-income households pay winter heating bills this year.  A recent report by the Center on Budget and Policy Priorities estimates that the District will need $7.7 million above its FY 2005 funding level to protect current LIHEAP beneficiaries from escalating energy costs and address an increased demand for aid.[5]  Because local funding for LIHEAP in the adopted budget is $1.5 million higher than in FY 2005, the needed local increase to protect current LIHEAP beneficiaries is $6.2 million.

Highlights of 2005 National Energy Assistance Survey Report

  • 94% of LIHEAP households have at least one member who is elderly, disabled, a child under 18, or has a single adult living with one or more children.
  • 19% have a household member that uses medical equipment requiring electricity, and 47% went without medical care due to unaffordable energy bills in the past five years.
  • 73% reduced expenses for household necessities because they did not have enough money to pay their energy bills.
  • 19% kept their homes at an unsafe or unhealthy temperature.  63% would have needed to do so, were it not for LIHEAP assistance.
  • 54% would have had their utilities disconnected were it not for LIHEAP assistance.
  • 54% had higher energy bills this year compared to last year.
  • 24% made a partial payment or missed payment altogether towards rent or mortgage due to high utility bills.

An increase of this size would allow the District to increase average benefits, serve more households, or both.

  • If, for example, the average benefit were raised to $564, the 2001 average, some 24,400 households could be served, or modestly more than the 22,400 served in 2005.[6]
  • If the average benefit were raised to $500, some 27,000 households could be served.
  • If the average benefit is maintained at $404 ‘ the level currently planned for FY 2006’ some 33,400 households would receive benefits.  This equals 57 percent of the eligible population.

A funding increase of this level could make a critical difference for thousands of DC households.  At the same time, such an increase still would leave thousands of eligible families unable to get help for high heating bills.  The crisis created this year by hurricanes Katrina and Rita highlights the need for the District to develop better long-term plans for meeting the energy needs of low-income residents, particularly in light of the federal failure to meet these needs adequately.


End Notes:

[1] The basic benefit quoted here is for gas customers.

[2]The share of eligible households receiving aid in DC ’38 percent ‘ is far higher than the national average of about 15 percent.

[3] Jayanta Bhattacharya, Thomas DeLeire, Steven Haider, and Janet Currie, Heat or Eat? Cold-Weather Shocks and Nutrition in Poor American Families, American Journal of Public Health, v. 93, no. 7, Jul. 2003, p. 1149 — 1154.

[4] Children’s Sentinel Nutrition Assessment Program, The Safety Net In Action, July 2004.

[5] Center on Budget and Policy Priorities, Out in the Cold: How Much LIHEAP Funding Will be Needed to Protect Beneficiaries from Rising Energy Prices?, October 2005 (http://www.cbpp.org/10-6-05bud.htm).  This figure assumes that families will continue to pay the same out-of-pocket amounts they paid in 2005, adjusted for inflation to equal 2006 dollars.  The amount covers the increase in out-of-pocket expenses between 2005 and 2006 after adjusting for inflation

[6] These calculations assume that 80 percent of additional funding will go for winter heating assistance, with the remaining funds used for other LIHEAP purposes and administration, as required under current law.