Home Energy Affordability

American consumers’ views about how much they have to pay for home energy were statistically unchanged as summer passed through fall and then into winter this year. Based on our January 2017 sample, the U-M Energy Survey’s home energy affordability index stood at 119 (±8), essentially the same as the 117 (±8) level of the October sample and 118 (±8) value recorded in the July sample from this past summer.

Although nominally down from the affordability index of 137 (±11) last winter (January 2016), the decline in home energy affordability as perceived by consumers is not quite significant when comparing confidence intervals at the 95% probability level. As shown in the chart below, American consumers’ views of how well they can afford home energy have not changed very much since we launched the Energy Survey just over three years ago.

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 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. That’s the situation for about 7 percent of U.S. consumers on average. Of course, views about the affordability of energy vary with household income. Based on previous analyses, about 13 percent of consumers in the lower third of the income distribution seem to believe that what they pay for home energy is already unaffordable; that is to say, it’s already crimping their lifestyle in some way. In contrast, only 4 percent of respondents in the upper income tercile replied with answers indicating that they view their monthly home energy bills as already being at a level they consider unaffordable.

As seen in our post on the affordability of gasoline, the latest data show that Americans view home energy and gasoline as equally affordable.