Home Energy Affordability

After significantly improving earlier in the year, consumers’ feelings about the affordability of home energy essentially held steady in the latest U-M Energy Survey, taken in July 2017.  The national average home energy affordability index for this summer stood at 139 (±11), which is not statistically different from its spring seasonal value of 148 (±10) based on our April 2017 sample. The spring estimate, however, saw the largest increase in this index seen since the U-M Energy Survey began in fall 2013.

As seen in the chart below, the home energy affordability index has generally averaged 127, meaning that monthly energy bills would have to notably more than double (i.e.,. increase by a factor of roughly 2.3) before they were considered unaffordable for the average American consumer. The index had trended below average late last year and through this past January; over the three quarterly samples for summer, fall and winter 2016-17, it averaged 118 (±5). So the spring 2017 sample saw a 30-point jump from the prior three seasons’ average.

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 the overall affordability 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.