By David Fox
October 12, 2005

Even before Hurricanes Katrina and Rita devastated the Gulf Coast, American families faced huge increases in home energy costs. Now, with our energy production and distribution system struggling to recover, energy prices are expected to climb still higher. And in the months ahead, the impact of those storms will be felt by far more than the hundreds of thousands who originally suffered losses. Tens of millions more will become the second wave of hurricane victims.

In its October 12 forecast, the Energy Information Administration said Americans nationwide should be prepared to pay 48 percent more this winter than last for natural gas and 32 percent more for heating oil.  It said propane is likely to cost 30 percent more, while electric costs may be 5 percent higher.

Energy price volatility will affect almost every American family this winter. But higher energy costs will have a more chilling effect on our nation’s poor, and the federal program created to serve as their lifeline has become increasingly inadequate — not ineffective, but inadequate.
Congress created the Low Income Home Energy Assistance Program (LIHEAP) nearly 25 years ago to help our most vulnerable neighbors — senior citizens, the disabled and poor families with young children — pay their utility bills during periods of temperature extremes and unusually high energy prices.

In Fiscal Year 1982, when the program began, lawmakers appropriated $1.875 billion for LIHEAP state block grant programs. In FY 2005, they provided $1.885 billion — roughly the same amount as when the program began.  Advocates regularly urge lawmakers to increase the level of funding.

LIHEAP proponents argue that no American family should have to choose between paying for food or medicine and paying to heat or cool their home.  The argument is real, because millions of U.S. households must make such difficult and unhealthy choices every month.
But an equally strong case for increased funding can be made from a financial perspective.  Simply put, federal assistance dollars don’t go far enough, and the ability of LIHEAP to serve those in need has changed dramatically.  For the worse.

First, the buying power of LIHEAP dollars is significantly lower than when the program began.  According to the government’s Consumer Price Index inflation calculator, what cost $100 in 1982 cost $203.52 in 2005. Viewed another way, the $100 a family spent on home heating in 1982 would have bought only $49 worth of energy earlier this year — before energy costs began to skyrocket — and home heating bills are certain to be even higher in the months ahead.

While every household is struggling to cope with today’s energy costs, low-income households are hit harder because they spend a disproportionate share of their annual income to heat and cool their homes.

According to the U.S. Department of Health and Human Services, residential energy costs for all households averaged $1,377 in FY 2002, or 5.9 percent of household income. This included electricity, hot water, space heating and cooling — energy usage that all households need to be functional.  For households receiving LIHEAP assistance, the energy bill was $1,309 or 17 percent of household income. HHS said 6.1 million low-income households spent more than 15 percent of their income on residential energy costs in FY 2002, and 3.5 million had energy costs exceeding 25 percent of their income.

Inadequate funding — and the current level is clearly inadequate — also limits the ability of LIHEAP to serve those in need.  Federal data shows LIHEAP assisted 5.99 million households in FY 1982, or 27.2 percent of the 22 million eligible for assistance.  The program served 4.83 million households in 2004, only 13.9 percent of the estimated 34.7 million eligible for help.
In February, long before energy prices began their dramatic rise, the National Association of Regulatory Utility Commissioners passed a resolution urging Congress to increase LIHEAP funding substantially.  The resolution said insufficient LIHEAP funding would “undermine and threaten the continuation of a number of state initiatives that have relied on the ... program to be the foundation for providing a modest amount of energy security for low-income Americans.”  Recognizing unmet needs, the United States Conference of Mayors passed a similar resolution in June.

Congress acknowledged the importance of the program when it passed the Energy Policy Act of 2005, which increased the authorized funding level for LIHEAP from $2 billion to $5.1 billion.
While the higher authorization makes a significant statement, it will mean little if the the actual amount appropriated for the program is not increased. In June, the House voted to fund LIHEAP at $2.006 billion in FY 2006; the Senate appropriations bill would provide $1.883 billion for the regular block grant program plus $300 million in contingency funds that can be released at the president’s discretion.  Neither figure is adequate.

It is time for lawmakers to recognize real human needs and respond accordingly.
They should start by providing $1.3 billion in additional funds for LIHEAP as part of an emergency appropriations for hurricane relief.  That amount would allow states to provide roughly the same level of assistance to the same number of households as they did last year, taking into account anticipated higher energy prices this winter.

Then, lawmakers should find a way to provide full funding for LIHEAP — $5.1 billion —so that no one who qualifies for assistance is turned away because the money isn’t there.

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David Fox is executive director of the Campaign for Home Energy Assistance, a coalition of organizations, utilities and energy-related trade associations that support the Low Income Home Energy Assistance Program.