Creating an Equitable Grid: Should We Be Worried?

The future of reliable energy is in jeopardy – for the poor. New proposals to upgrade the American grid fail to account for the needs of low-income consumers. Historically, equitable grids, which fairly distribute power to all consumers,  were the best choice economically.  Until the twentieth century, electric utilities benefited from increasing demand because it justified building larger, more efficient power plants that ultimately decreased the cost of electricity for everyone. In fact, as long as there was excess capacity, it was often cost-effective to maintain services to consumers as long as they received a partial payment. Without explicit policy intervention, this system generally reduced rather than exacerbated social inequalities.

Today, despite the existence of more efficient technology, energy poverty persists in America. In 2012, 15% of households in the U.S. were below the poverty line and paid a disproportionate amount of their income to adequately heat or cool their home. In some cases, families are making decisions about whether to heat their home or buy food. In many cases, these families are in poverty because of health problems, which may be exacerbated by both heat waves and below-freezing temperatures. In addition to health risks, families are more likely to use unsafe heating sources such as lanterns, which can lead to fire hazards.

Despite this need, most proposals for revolutionizing the electric grid focus on improving reliability and increasing renewable generation. For example, Utility 2.0  is a pilot program to be implemented in Maryland in response to concerns about grid reliability and consumer engagement.  Although the political motivation is unclear, this pilot program has ambitious plans to align utility compensation with consumer priorities. It focuses on increasing consumer access to information in order to install smart technology and participate in real time pricing programs – neither of which is likely to reduce energy poverty. Another project, America’s Power Plan, includes policy recommendations that focus on performance-based compensation, reducing investor uncertainty, and increasing renewables. While this type of change is certainly needed, little mention is made of how these policies will impact disadvantaged communities. These proposals would benefit from guiding principles to ensure that the needs of low-income consumers will be met.

Research indicates that implementing many market-based programs today could disadvantage the poor. For example, analysis of a ComEd data set suggests that real time pricing programs would increase the electricity bills of lower income households because they have a reduced ability to shift their electricity usage and tend to use less energy overall. Other work indicates that an unexpected consequence of solar panel subsidies is the redistribution of wealth from the poor to the rich. In Arizona, all ratepayers pay for subsidies on solar systems yet only the wealthy can afford to install them. Since lower income individuals tend to rent rather than own their homes, they have fewer opportunities to reap the benefits of these types of renewable energy subsidies. As a result, the poor ultimately have less access to reliable power.

We must envision an electricity system that responds to the current environmental crisis and reduces carbon emissions. However, we cannot do so in a way that increases social inequality. If new market-based programs are to improve the quality of life for all of society, we must include safeguards to reduce energy poverty.  A next-generation utility should move us forward, not backwards.