Electric bills average four to four-and-a-half percent of expenditures of low income households
One of the primary concerns in utility regulation, rightfully so, is the affordability of electricity to low income households. So how are we doing in this critical area?
The answer can be found in the latest semi-annual Consumer Expenditure Survey by the US Bureau of Labor Statistics. This survey has been providing extraordinary insights about what Americans buy, and what they spend, since the 1980's. It samples many thousands of households quarterly and repeatedly.
It's not perfect. The survey leaves out what companies, institutions and government buy on behalf of consumers such as insurance. This is why we also consult the Personal Consumption Expenditures data of the US Bureau of Economic Analysis.
And the survey averages all households. That's a problem for goods and services purchased by some and not by others (tobacco, pet supplies, etc.). It's less a problem for goods and services universally purchased such as electricity. Though homes with and without electric heat are averaged.
The ten percent of households with the lowest income averaged $5,675 in income in 2014. But they spent $22,488. This huge gap between income and expenditures is typical. Students, retirees, etc. receive funds from relatives and government.
There is a gap, much less of one, for the second lowest-income ten percent, the third, and the fourth. While all of the six tenths of households with higher incomes have incomes exceeding expenditures.
Let's focus on the bottom forty percent, the 50.7 million households with the lowest incomes. On average:
The lowest and second-lowest tenths of households spend four-and-a-half percent of their expenditures on electric bills.
The third-lowest and fourth-lowest tenths of households spend around four percent on electric bills.
Households with higher incomes spend less on electric bills in terms of percentage. For example, the highest and second-highest tenths of households use around two percent of their expenditures on electricity. But the wealthier spend roughly twice as much as the poorer in terms of dollars.
In every month's issue, Public Utilities Fortnightly presents insightful measures of the electric and gas utilities industry, like these, on our PUF Mega-Metrics pages.
Steve Mitnick, Editor-in-Chief, Public Utilities Fortnightly
E-mail me: mitnick@fortnightly.com
