Home Energy Affordability

American consumers’ views about how much they have to pay for home energy became significantly more positive this spring, with the latest U-M Energy Survey data showing the largest increase in the home energy affordability index seen since the survey began nearly three years ago. Based on the April 2017 sample, the national average home energy affordability index reached 148 (±10). That’s a nearly 30-point jump from its January value of 119 (±8), which had been itself essentially the same as the 117 (±8) level of the October 2016 sample and the 118 (±8) level recorded in the July sample last summer.

We calculate the affordability index by comparing the energy costs that consumers say they would find to be unaffordable to the costs — in this case, their monthly home energy bill — they experience when each quarterly survey sample is taken. As explained in our Overview of how the indices are calculated, an affordability index of 100 means that consumers believe energy prices would have to double (i.e., see a 100% increase) before they were considered unaffordable. In this context, “unaffordable” means that the energy cost has become so high that consumers feel they would need to change their day-to-day activities in some way. When consumers report that the price they find unaffordable is the same as what they currently pay, then the affordability index is zero.

Consumer views about the affordability of energy of course vary with household income. As described in this quarter’s main findings post, the largest jump in the home energy affordability index was seen for consumers in the highest tercile of self-reported household income. Nevertheless, views on affordability improved across the board.