According to a jobs report released last month by the U.S. Conference of Mayors, the average American wage fell by 23 percent since the Great Recession began, especially impacting lower and middle income families. One way to ensure lower-income Americans to not fall victim to further economic duress is to make electricity bills more affordable. The best way to do so is to make sure that we all continue to have a variety of competitive energy options to choose from.
Lower-income and minority communities should not be forced to fork over even more money for their energy bills. We should do everything we can to ensure that we maintain a diverse fuel mix.
- Justin Vélez-Hagan
Currently, American electricity is produced by more sources than ever before. Across the country, our energy choices include coal, oil, natural gas, nuclear, hydroelectric and any number of renewable options. Such a diverse fuel mix allows us to guard against volatile price spikes that often occur in markets where fewer options exist. To date, we should be proud of the number of options we’ve maintained, which have kept electricity prices relatively stable and cheaper than almost any other country that doesn’t solely rely on domestic resources. But, if we don’t have the right policies in place, reliability and affordability could be impacted.
IHS Energy, a well-respected research firm, recently analyzed the possibility of reducing the number of fuel sources in our nation’s energy portfolio. The results were astonishing: the “reduced diversity” scenario envisioned by IHS would lead to an increase of $93 billion more per year to generate electricity, also increasing the potential for variability in monthly power bills by 50 percent. Perhaps most troubling, especially given the already dramatic recent wage and income losses, is that the typical household’s annual disposable income would also be expected to fall by $2,100.
That is not a paltry sum – how can we take even more from those who can least afford it? This year, families with annual household incomes of under $30,000 will have to spend 26 percent of their earnings on energy costs. That burden is greater in minority communities, given that average incomes of Hispanic and Black households were 25 percent and 33 percent lower, respectively, than the average income of U.S. households. So for minority and low-income families, a smaller energy portfolio could mean choosing between feeding their children or cooling and heating their homes.
Of course, this is not a choice anyone should have to make, especially in this country, and I doubt that policymakers want this for their constituents either. We do not want to put ourselves in the same scenario that Germany is currently facing, where electricity prices are three times what they are here and consumers can hardly afford to pay their electricity bills. But due to a confluence of factors, the scenario that IHS has mapped out could well occur if we aren’t careful with our energy strategy.
Lower-income and minority communities should not be forced to fork over even more money for their energy bills. We should do everything we can to ensure that we maintain a diverse fuel mix. I hope that policymakers and all stakeholders involved take note of the very real impact that a lack of energy options would have on everyone. Although energy concerns are just one piece of the puzzle to close the income inequality gap, it is an important one.
Justin Vélez-Hagan is the founder of The National Puerto Rican Chamber of Commerce and an economic policy researcher at the University of Maryland. He is also the author of The Common Sense behind Basic Economics. He can be reached at JustinV@NPRChamber.org or @JVelezHagan.