Winter Heating Costs and Older and Low-Income Households

Winter Heating Costs for Older and Low-Income Households (December 2010)

Since the mid-1990s, home heating costs have increased in conjunction with an overall rise in energy costs. During this same period, Low Income Home Energy Assistance Program assistance (LIHEAP[1]) to low-income consumers has remained relatively flat.  Consequently, affording home heating costs has become difficult for many older consumers. This trend continues during winter 2010-11.

Source: Residential Energy Consumption Survey, 2005. Prepared by the AARP Public Policy Institute. December 2010.

Because more than half (54 percent) of older households in the United States use natural gas as their primary heating fuel, changes in the price of natural gas tend to have the biggest influence on the heating costs of older consumers.

Sources: Residential Energy Consumption Survey, 2005; Short term Energy Outlook, December 2010 (Table WF01); LIHEAP Survey 2009, National Energy Assistance Directors' Association.                                                                      Prepared by the AARP Public Policy Institute, December 2010.

Projections of winter 2010-2011 heating costs indicate that heating expenses will be much higher this year for households using heating oil, while those using natural gas and electricity for heating can expect their heating costs to be generally similar to last year.

Sources: Residential Energy Consumption Survey, 2005; Short term Energy Outlook, December 2010 (Table WF01); Prepared by the AARP Public Policy Institute, December 2010.

Heating costs differ substantially based on geographic location due to differences in climate and primary heating fuel used. Projections indicate that heating costs will be highest in the New England census division where heating oil is the primary heating fuel used, followed by the Middle Atlantic census division.

Source: Energy Information Administration. This image is available at http://www.eia.doe.gov/emeu/reps/maps/us_census.html

*The gross yearly income of a family of four with a household income of 200 percent of poverty is $44,100. Forty-five states and the District of Columbia set LIHEAP eligibility at or below this income level.

Sources: Residential Energy Consumption Survey, 2005; Short term Energy Outlook, December 2010 (Table WF01); Prepared by the AARP Public Policy Institute, December 2010.

Forty-one percent of older households have total household incomes of less than $20,000, and they typically experience the greatest energy burden[2]. This trend is projected to continue throughout winter 2010-2011.  The burden is highest for those using fuel oil for heating.  For example, comparing heating costs for age 65+ low-income and all-income households heating with fuel oil, low-income households will spend almost 25 percent of household income on heating costs, while all-incomes households will spend around 5 percent of total household income on heating costs.

Although consumption data show that low-income older consumers tend to use less heating fuel than higher-income groups, high winter heating costs are likely to be a greater burden on this group than on higher-income older consumers who have greater financial resources available to meet these costs. 

Sources: Residential Energy Consumption Survey, 2005; Short term Energy Outlook, December 2010 (Table WF01); LIHEAP Survey 2009, National Energy Assistance Directors' Association. Prepared by the AARP Public Policy Institute, December 2010.

As average heating expenditures have continued to increase throughout the decade, the average LIHEAP grant amount has remained relatively flat.  Consequently, the gap between heating expenditures and LIHEAP assistance received by eligible participants has widened.

Energy Cost Analysis Methodology

The Residential Energy Consumption Survey (RECS) is a national statistical survey that collects energy-related data for occupied primary housing units; the most recent survey was conducted in 2005. RECS provides information on the use of energy in residential housing units in the United States, including demographic characteristics of the household, energy consumption and expenditures for natural gas, electricity, fuel oil, and other fuel types, as well as other information that relates to energy use.

The Energy Information Administration (EIA) is the statistical agency of the U.S. Department of Energy and produces energy data, analysis and forecasting. EIA issues weekly, monthly and annual reports on energy production and prices, demand, imports, and others, and prepares analyses and special reports on topics of current interest. The Short Term Energy Outlook (STEO) is a monthly publication of the EIOA and contains current and projected prices of fuel, including natural gas, fuel oil, electricity, and petroleum.

This data digest uses variables from both the RECS survey and the most recent Short Term Energy Outlook (STEO) to analyze past heating-related energy consumption and expenditures among consumers age 65 and older, and to project heating-related energy consumption and expenditures for the most recent winter season.

    Ann McLarty Jackson and Neal Walters

   AARP Public Policy Institute

   601 E St., NW

   Washington, DC 20049

   202-434-3910; E-Mail ppi@aarp.org

  December, 2010

[1] For a detailed explanation of the LIHEAP Program see: The Low Income Home Energy Assistance Program: A Critical Resource for Low-Income Households,  http://assets.aarp.org/rgcenter/consume/fs138_liheap.pdf

[2] Burden, or energy burden, represents the portion of household income needed to meet projected winter heating costs. For purposes of the table above burden is estimated by dividing the median income for each income group in Table 1 by the average projected fuel cost for each income group.