Utility Cost Pressures and Energy Insecurity Differ by Household Income

KEY TAKEAWAYS

Recent trends show increasing utility cost pressures, particularly for low- and moderate-income households.
The share of pretax income that low-earning households spend on utilities is five times higher than the share that high-earning households do.
Why it matters: Having less money for childcare, transportation and other essentials can create barriers to securing jobs and training that could improve economic mobility.

This is the first blog post in a two-part series on utility cost pressures and energy insecurity.

Utility affordability can be examined through two complementary measures: cost burden and energy insecurity. Cost burden reflects utility spending as a share of income, while energy insecurity captures the broader hardships households face in meeting their energy needs.

Cost burden is determined by the percentage of household pretax income spent on utilities — electricity, natural gas, fuel oils, water and telephone services — calculated using the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey (CES).CES data are released annually; 2024 is the most recent vintage.

Energy insecurity, as defined by the U.S. Energy Information Administration’s Residential Energy Consumption Survey (RECS),RECS data are released approximately every five years; 2015, 2020 and 2024 are the most recent vintages. occurs when households experience at least one of the following hardships:

Reduce/forgo necessities to pay utility bills
Keep the home at unsafe or uncomfortable temperatures
Receive a disconnection notice
Lose utility service due to a shutoff
Lack working heating or cooling equipment

In this blog post, I analyze three years of data — 2015, 2020 and 2024 — to capture different economic conditions: 2015 and 2024 represent expansionary periods, while 2020 reflects the onset of COVID-19 and related relief measures.

Recent trends show increasing utility cost pressures, particularly for low- and moderate-income (LMI) households. The share of income that LMI households spend on utilities is five times greater than the share that high-income households do, leaving less for items like childcare, transportation and other essentials, which may in turn create barriers to training and employment opportunities that could improve economic mobility.

Utility Cost Burden

Households spending 6% or more of pretax income on utilities are considered cost burdened,Originated from research and consulting firm Fisher, Sheehan and Colton’s (FSC) Home Energy Affordability Gap methodology, based on the U.S. Department of Housing and Urban Development’s housing affordability threshold of 30% of income, with FSC assuming energy represents 20% of housing costs. while those spending 10% or more are considered severely burdened.Commonly attributed to nonprofit research institute APPRISE. Between 2015 and 2020, cost burden decreased for LMI households, likely due to pandemic-era support such as stimulus payments and shutoff moratoria.All changes shown are statistically significant (p < 0.05). Income groups: low income (< $40,000), moderate income ($40,000-$74,999), middle income ($75,000-$149,999 for 2020/2024; $80,000-$139,999 for 2015) and high income ($150,000+ for 2020/2024; $140,000+ for 2015).

By 2024, however, this pattern had reversed: Cost burden rose relative to 2020 for LMI households. In addition, utility affordability challenges appear to have spread to households previously considered more financially stable:

Moderate-income households considered severely burdened increased 6.3 percentage points between 2015 and 2024.
Middle-income households considered severely burdened increased 2.7 percentage points between 2015 and 2024; those considered cost burdened increased 6.0 percentage points.

The difference in cost burden between income groups is also notable: In 2024, low-income households spent 13.3% of their pretax income on utilitiesRepresents the median share of pretax income that households earning less than $40,000 spend on utilities. Calculated from the 2024 CES. — more than five times the 2.5% spent by high-income households. (See the figure below.)

Electricity is the main source of cost burden, representing about 40% of total utility costs for low-income households in 2024, a 19% relative increase from its share in 2020. In 2024, low-income households spent 5.4% of their pretax income on electricity, compared with 0.8% for high-income households — a nearly sevenfold difference. This gap means electricity rate increases disproportionately burden low-income households.

Energy Insecurity

Analysis utilizing RECS data shows households are increasingly struggling with energy costs. While energy insecurity fell between 2015 and 2020, likely due to pandemic-era shutoff protections, it climbed back up by 2024, surpassing pre-pandemic levels. Over the full period, 2015 to 2024, energy insecurity increased:

8.3 percentage points for low-income households
8.0 percentage points for moderate-income households
7.9 percentage points for middle-income households

As shown in the figure below, energy insecurity disproportionately affected lower-income households in 2024.

Manifestations of Energy Insecurity

When households struggle to afford utilities, they face difficult trade-offs. In 2024, 1 in 4 U.S. households (33 million) reduced or went without basic necessities, while 1 in 8 households (17.5 million) kept their homes at unsafe temperatures. Both these measures increased between 2015 and 2024 across low-, moderate- and middle-income households.

For low-income households, hardship was particularly widespread in 2024, as the next figure shows:

42% reduced or went without necessities.
23% kept their homes at unsafe temperatures.
22% received disconnect notices.

These numbers represent millions of U.S. households making difficult choices, such as rationing medication, skipping meals, or enduring dangerous heat or cold.

Eighth Federal Reserve District States

States in the St. Louis Fed’s Eighth District — Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee — mirrored and in some cases exceeded national trends. Because state-level RECS data were unavailable for 2015, this section compares 2020 and 2024 data.

Overall energy insecurity in these states increased from 28.4% to 34.0% over the period, driven by:

Households keeping their homes at unsafe temperatures (up 3.4 percentage points)
Households reducing or going without necessities (up 3.8 percentage points)

Tennessee experienced the sharpest increase, with energy insecurity rising from 27.5% in 2020 to 36.7% in 2024 — the only statistically significant change among the seven states. In both years, Mississippi had the highest rates of households reducing or going without necessities (35.3% in 2024) and keeping their homes at unsafe temperatures (21.2% in 2024).

Across Eighth District states in 2024, more than 1 in 4 households reduced or went without necessities, while 13.1% received disconnect notices and 12.5% maintained unsafe home temperatures.

Conclusion

Rising utility cost burden shows the financial pressure building on household budgets, while energy insecurity reveals how that pressure manifests in difficult trade-offs. The diverging trends between income groups are particularly pronounced: While higher-income households saw improvements in energy security, LMI households experienced significant deterioration.

Having established the scope and severity of these affordability challenges, the next blog post in this series will describe approaches — from assistance programs to energy efficiency initiatives — intended to ease these burdens.

Notes

CES data are released annually; 2024 is the most recent vintage.
RECS data are released approximately every five years; 2015, 2020 and 2024 are the most recent vintages.
Originated from research and consulting firm Fisher, Sheehan and Colton’s (FSC) Home Energy Affordability Gap methodology, based on the U.S. Department of Housing and Urban Development’s housing affordability threshold of 30% of income, with FSC assuming energy represents 20% of housing costs.
Commonly attributed to nonprofit research institute APPRISE.
All changes shown are statistically significant (p < 0.05). Income groups: low income (< $40,000), moderate income ($40,000-$74,999), middle income ($75,000-$149,999 for 2020/2024; $80,000-$139,999 for 2015) and high income ($150,000+ for 2020/2024; $140,000+ for 2015).
Represents the median share of pretax income that households earning less than $40,000 spend on utilities. Calculated from the 2024 CES.