In the clean energy transition, ‘affordability’ has become a rallying cry—yet few have defined what it truly means or how to achieve it.
Over the past year, I have spoken on numerous panels, participated in workshops, and webinars on how to make the transition affordable. While these events have included diverse stakeholders and perspectives, we (myself included) have often missed the mark in defining what ‘affordability’ actually means. Many of these discussions have conflated low-to-moderate income customers with affordability. While LMI customers are a significant consideration, in 2020, almost 1 in 3 households had trouble paying energy bills. As volatile weather patterns, load growth, and imbalanced market structures increase bills, the focus not only must be on low to moderate income customers, but also on ensuring energy access.
First, policy makers must define the term affordability. An effective energy justice policy is one that is rooted in a specific, measurable, and accountable result. What policies are you advocating for to support affordability? Is the outcome to reduce energy burden overall? Limit energy spend to a percent of income? Reduce disconnections and arrearages? All of these are lofty goals, but require different policy levers and stakeholder engagement to drive towards these outcomes. A recommended approach is to first identify the outcomes to be achieved and then build the policies and implementation approach to support those outcomes. For example, if the goal is to reduce energy burden, customers must be given an energy burden score. This score can then serve as a baseline to evaluate program impact and effectiveness.
Affordability is determined by the dollar amount on the bill. Customers do not need to understand a kWh to know if they can pay their utility bill. The key aspect that determines the bill is the rate structure. Yet, very little policy or analysis is currently analyzing the impact of rate structures on both the energy transition and affordability. Those in the energy transition space have to start reviewing and look to innovate rate structures. For example, decoupling and multi-year rate plans are two ideas that impact rates that can have greater uptake. One question that is worth exploring is “What if rate structures themselves could reduce energy burden?”
Next, affordability means being able to pay your utility bills without choosing between electricity, food, or healthcare. As more Americans are living with income insecurity, often relying on gig work or part-time roles, this means income is more unreliable and may not be available when utility bills are due. As seen in other industries, budgeting becomes more manageable when customers can make payments aligned with their income. Utilities could allow partial payments through sites such as CashApp. This approach, when combined with the insights of behavioral programs such as Opower, can have a powerful effect on reducing arrearages. Additionally, the industry must reduce penalties for income insecure customers including allowing for more flexible payment dates, waiving late fees, and opening payment centers on weekends.
If we are serious about energy justice, affordability must be redefined—not as a vague aspiration, but by improving life outcomes with energy.
amendmentnine.com 