Home Energy Affordability

Consumers remain generally content with what they have been paying for home energy. Our latest analysis, using the fall data sample from the U-M Energy Survey as taken in October 2017, yields a home energy affordability index of 151 (±12). That value is statistically unchanged from what it was this past summer and spring, showing that Americans are feeling much better than they did a year ago about what they pay to heat and cool their residences and to run the appliances, lights, electronics and other energy-using items in their homes.

Indeed, since the launch of the U-M Energy Survey in fall 2013, consumers had felt that energy was reasonably affordable. As can be seen in the chart below, the home energy index averaged 125 through this past winter. The interpretation of this value is that monthly home energy bills would have to rise by 125% — that is, more than double — before average consumers would feel that they would have to make some changes in their day-to-day life because of energy costs. The most recent level therefore represents a 26 point jump in energy cost contentment over that prior 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 do vary with household income. As described in another recent post on the topic, 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.