How States Can Lead in Addressing Soaring Energy Costs

The cost to power our homes is going up with no signs of stopping, making "keeping the lights on" a harder task for American households. Electric bills have been rising at a pace even faster than groceries (and the rate of inflation). Add to that the rising frequency of extreme weather events caused by climate change, which strains our electric grid and causes prices to go up when people are most vulnerable, and the affordability challenge grows even more urgent.

And while electricity costs have been on the rise for years, recent developments have raised the stakes on how much our bills will go up.

The unprecedented growth of data centers, for example, is driving up energy demand at a rate that has caught utilities off guard. If we power these data centers with dirty fossil fuels and fail to properly protect ratepayers, we can expect that consumers will be forced to pay the price.

At the same time, clean energy tax cuts by President Trump, including the July budget bill, have paused or canceled many renewable projects in development. During a time when expanding grid capacity to meet demand is crucial, undermining incentives for readily deployable clean energy technologies like wind and solar in favor of doubling down on dirty fossil fuels (which are also generally more expensive) will lead to higher energy bills for American families.

Many analyses on the impacts of the federal budget predict that the legislation will increase household energy spending. EnergyInnovation, a non-partisan energy and climate policy think tank, estimated that household bills would go up by an average of $130 per year in 2030 and more than $170 per year in 2035, with wide variation across states. On top of that, costs to replace aging infrastructure, record high temperatures, and volatile fuel costs will likely increase the price of electricity.

The toll of energy insecurity

As prices go up, it is crucial that states make efforts to ensure that energy is still affordable. With many factors causing energy costs to go up at a rate that households are not prepared for, there is increased risk that families are pushed into energy insecurity, the inability of a household to meet basic energy needs.

Energy insecurity is about more than just keeping the lights on. Struggles to afford electricity bills often overlap with food insecurity, housing instability, negative health consequences, and mental health challenges.

The effects of high energy prices occur even before the power goes out, as people will often reduce their energy consumption in potentially unsafe ways before they are unable to pay their bills. Before the power is shut off, families may cut back on spending on food and other necessities or choose not to run the air conditioning even when the home gets dangerously hot. In Boston, where I have been living this summer, there have been three heat waves where city officials have urged people to stay hydrated and inside. When it is this hot, cooling is a lifesaver that everyone deserves to have.

According to the US Energy Information Association (EIA), roughly 1 in 4 households in 2020 reported that they had difficulty paying energy bills or kept their home at an unsafe temperature due to cost concerns. A staggering 1.4 million households reported that someone in their household needed medical attention because their home was at an unsafe temperature. Nonpayment of bills can contribute to other negative economic effects such as disconnections, low credit scores, utility debt, and even eviction.

The inequity of unaffordability

Energy burdens, the percentage of a household's income spent on energy costs, aren't felt equally across different communities. An energy burden of 6% or more is generally considered by researchers to be unaffordable. Analysis by the American Council for an Energy-Efficient Economy (ACEEE) found that low-income, Black, Hispanic, renter, and older adult households have disproportionately higher energy burdens than the average household. In particular, low-income households have a median energy burden that is 3.5 times higher than non-low-income households.

Data Source: American Council for an Energy-Efficient Economy (ACEEE)

Another way to understand the disproportionate energy burden faced by low-income households is to examine the data spatially. The maps below show energy burden across one state (South Carolina) by census tract. The map on the left illustrates the average energy burden for all households, regardless of income, while the map on the right focuses specifically on low-income households (those earning 80% or less of the area median income).

Compared to the all-income map which highlights just a handful of tracts as experiencing a high energy burden, the low-income map shows that low-income households in almost every tract have unaffordable energy costs. In many of them, energy burdens are not just high, but severe. High energy burdens (above 6% of household income) already indicate that families are sacrificing other essentials to keep the lights on. But severe energy burdens (above 10%) are especially concerning because they mark a tipping point where the tradeoffs become dangerous and long-term. Any unexpected cost can push these households into experiencing a utility disconnection, debt, or eviction.

All-income vs. Low-Income Energy Burden Across South Carolina

Data Source: Author analysis of data from Low-Income Energy Affordability Data (LEAD) tool

More than a simple after-effect of high energy prices, energy insecurity is also a driver of a system which traps low-income households in a cycle of poverty. Households that are energy insecure tend to have lower and fixed incomes that make it difficult to adjust to rapidly rising prices. These households often live in housing units that are older, less energy efficient, or inadequate (which could mean poorly insulated, leaking, or moldy, to name a few) leading to higher energy bills. These factors trap people in a cycle of poverty as a greater percentage of income is needed to support their power-hungry homes, which in turn makes it more difficult for households to afford the upgrades needed to make homes safer and more efficient.

Federal policies are making the problem worse

As energy insecurity becomes a greater concern for residents of the United States, actions by the Trump administration are causing energy prices to rise while simultaneously eliminating crucial federal consumer protection programs that help families afford their energy. On April 1, 2025, the Trump administration fired the entire staff administering the Low-Income Home Energy Assistance Program (LIHEAP) as part of an executive order that was designed to "serve multiple goals without impacting critical services."

This is tremendously consequential, as LIHEAP is the largest program at the federal level that helps low-income households with energy affordability. If a household is having difficulties paying bills in a particular month, LIHEAP is there as a safety measure to protect the well-being of families. In 2023, LIHEAP supported 6.2 million households, weatherized 60,000 homes, prevented 2.75 million disconnections, and helped lift 34,000 children and 68,000 seniors out of poverty.

While some states are moving to pass policies that incentivize clean, healthy renewable energy, residents of other states risk having higher energy bills with fewer safety measures for what to do when costs are too high. While there are many things that states can do to be clean energy leaders, we must also push to reinstate federal incentives for clean energy to avoid further risks to households in states without affordability protections.

Combatting unaffordability

With LIHEAP gone, it is now up to states and local governments to address affordability challenges. Several states have already taken steps to address affordability challenges by developing their own low-income energy assistance and weatherization programs funded through various channels: some implement mandatory contributions from utilities while others generate funding through voluntary contributions.

Low-income energy efficiency and weatherization programs are great policies for building climate resilience. When utilized together, these programs help address housing issues, enhance home comfort, and decrease household energy consumption so low-income families can lower their bills and live in a safe environment.

Typical energy efficient improvements often have high up-front costs associated with buying new appliances and ensuring that building envelopes are up to standard which keeps many low- and middle-income households from being able to access the benefits. Considering that energy insecurity is an issue that disproportionately affects low-income households, states must find a way to channel weatherization funding to the households that need it the most. In her blog on data centers, my colleague Maria Fernandes Chavez mentions a new Minnesota bill that introduces a fee on data centers that would direct funding towards weatherization programs for low-income residents.

A way forward for utilities

Inclusive utility investments present a promising approach for utilities to make energy upgrades accessible to everyone and are especially powerful for their ability to bring upgrades to communities that have been underserved. In these programs, utilities provide the up-front capital needed to pay for energy efficient upgrades and recover the money from households through an extra charge on their monthly utility bills that is less than their energy bill savings from the new equipment. This allows customers to get needed home repairs and save money on day one without needing to get a loan to pay for high initial fees.

These programs are made accessible to all customers because they eliminate the need for personal debt, have no minimum credit score requirement, and do not require a person to own their home to receive benefits. This addresses many of the cost barriers that prevent low- and middle-income households from accessing energy efficiency upgrades. It also helps renters who often struggle to get energy efficiency improvements due to the split incentives between renters who want to save money and landlords who do not have to worry about whether utility costs are high. With inclusive utility investments, the renter can benefit from lower energy costs and improved comfort while the landlord does not have to pay additional costs to have an improved property.

Keep the clean energy fight going

Maintaining strong incentives for clean energy is another way states can help keep energy affordable. Renewables make energy more affordable than fossil fuels.They have no fuel costs, lower maintenance costs, and are often cheaper than fossil fuels to build. While the Trump administration is working to undermine clean energy, now is a crucial moment to keep the push for renewables strong. States can offer their own tax credits for clean energy technologies, adopt Renewable Portfolio Standards (RPS), or offer programs for shared clean energy.

Household clean energy adoption can play a significant role in reducing energy prices for families, though programs and incentives are needed to help make sure the benefits of rooftop solar can be fully shared by low-income households, renters, and Black and Hispanic households. Research has shown that there is a racial and ethnic disparity in the adoption of rooftop solar with census tracts that are over 50 percent Black or Hispanic having "significantly less" rooftop solar installations than census tracts with no majority or that are majority white. To ensure that everyone can benefit equally, utility solar programs can address equity concerns by setting up carve-outs for low-income households, offering on-bill financing options, and targeting outreach to communities of color and high energy-burden communities.

Community solar programs allow multiple customers to benefit from a solar energy system that does not require them to install panels on their own property. A typical 5 kilowatt rooftop solar system for one single-family home can help households save $100-150 monthly on their electric bills for households. However, this system also comes with an initial price upwards of $10,000, making it unaffordable for many low-income households, and can be unobtainable for renters or those with small or shaded roofs.

People already struggling with energy insecurity may not have access to traditional rooftop solar programs which help make energy more affordable. As household renewable energy adoption increases, it is important that the existing energy inequity gap doesn't widen as those who can afford solar have the tools to make their energy cheaper while others have a harder time with higher bills without solar to reduce costs. Community programs expand the economic benefits of solar to renters, homeowners with unsuitable roofs, businesses, and those without the funds to buy their own solar panels.

No family should need to pick between paying for electricity and paying for groceries. With federal protections in limbo, states and local governments need to act now to keep energy affordable. Here are three things that state and local decision-makers should do:

1. Strengthen state energy assistance and push for a reinstatement of federal assistance programs to prepare for rising costs and protect families in times of need
   
2. Grow energy-efficiency programs that target low and moderate-income households (such as inclusive utility investment programs) to improve access to energy efficiency benefits
   
3. Expand access to clean energy by increasing access to alternative financing solutions such as those offered in community solar programs

Many challenges such as rising bills, extreme weather, and political rollbacks are converging to put families at risk. But the solutions are here. If states seize them, we can build an energy system that keeps homes safe, protects the most vulnerable, and ensures that no one is left in the dark.