Challenge

A quarter of U.S. households are energy-burdened¹—paying more than six percent of income towards utility bills—and could benefit from forms of bill assistance, but the amount of assistance that can be funded by increasing rates on other customers is limited and may have negative impacts on moderate-income households just above the eligibility threshold, suggesting the need for additional funding from other sources. Moreover, in some cases, clean energy investments and greenhouse gas emission regulations may impose additional costs on utilities which get passed on to customers.

Policy Solution

One mechanism for providing additional bill assistance from non-ratepayer sources is to provide assistance in the form of an on-bill credit, which can optimally be timed to periods when bills are highest. The source of funding for such a credit may vary, but one option is to directly use such a credit to offset any additional costs incurred through climate policies—such as by allocating funds from a cap-and-invest program.

Model Policy Features

• Annual or bi-annual credits are provided on utility customer bills.
• Credits can take the form of flat credits for all customers, or include tiered credits adjusted for income level for income-qualified households.
• Funding may be explicitly tied to offsetting the costs of specific climate policies, such as allocating the proceeds from carbon allowances sold at auction under a cap-and-invest program.
• The timing of the bill credit may be most effective if aligned with seasons (e.g. summer, winter) when bills are the highest.
• Bill credits tied to climate-related policies may help improve the broader acceptance of such policies.

Potential Policy Drawbacks and Pitfalls

• The provision of bill credits is contingent on identifying a source of funding. See the cap-and-invest policy for a further discussion of using this program as a funding source. 
• Bill credits are typically insufficient alone to mitigate high utility bills and need to be coupled with other policies. 
• Credit programs are typically designed with flat credit levels, meaning that they are not tailored to the level or timing of need of any individual household.

Complementary Policies

Complementary policies include: 

• Cap-and-invest, polluter pays, or other policies to fund bill credits.

Percentage-of-income payment plans, bill assistance, and/or low-income rates to more comprehensively and consistently ensure energy affordability.