Academic journal article Contemporary Economic Policy

The Impact of Low-Income Home Energy Assistance Program Participation on Household Energy Insecurity

Academic journal article Contemporary Economic Policy

The Impact of Low-Income Home Energy Assistance Program Participation on Household Energy Insecurity

Article excerpt

The impact of the low-income home energy assistance program (LIHEAP), the sinqle largest energy assistance program available to poor households in the United States has received little rigorous attention. If LIHEAP participation significantly improves low-income household energy security, funding cuts or eliminating the program could negatively impact the poor. This article empirically estiniates the impact of LIHEAP on household energy security. The results indicate participation in LIHEAP significantly increases energy security in low-income households. Simulations suggest that elimination tithe current household energy-assistance safety net will decrease the number of low-income energy secure households by over 17%(JEL 138, Q48)

1. INTRODUCTION

An extensive literature in economics has evaluated the efficacy of U.S. public assistance programs. Most of the large assistance programs like temporary aid to needy families (TANF), the supplemental nutritional assistance program (SNAP), women infant and children (WIC). and the national school lunch program (NSLP) have been evaluated many times over the last 40 years with advanced- econometric methods to account for the self-selection inherent in the voluntary choice of program and labor market participation (e.g., Higgins and Lutzenhiser 1995: Jensen 2002: Moffitt 1992).

One large federal program. however, has received little rigorous attention in terms of impact. The low-income home energy assistance program (LIHEAP) is the single largest energy assistance program available to low-income households within the United States. LIHEAP provides several types of assistance to low-income households. First, eligible households can receive aid to help pay their utility bills during the critically cold or hot months of the year. Second, LIHEAP provides "crisis" funds to return service to eligible households that have had (or will imminently have) their utility services cut off. Third. LIHEAP provides eligible households with funds to improve the energy efficiency of their home through weather-stripping, upgrading home insulation, or replacing inefficient heating systems. (1) The largest component of LIHEAP has traditionally been the heating and cooling payment assistance program, accounting for .almost 80% of households that receive benefits.

The LIHEAP program has recently come under significant scrutiny from both the U.S. Congress and the White House. Both branches of the federal government have proposed slashing or even eliminating funding to LIHEAP (House Budget Committee 2013: Office of Management and Budget 2013). The major rationale for these cuts has been that "lower" energy prices observed during the most recent recession have substantially reduced the energy expenditure needs of low-income households. Recent spikes in energy prices, however. cast doubt that energy prices will remain low in the long run. Governors from 13 states across the country have written letters to Congress expressing their grave concerns about lower LIHEAP assistance levels and their impact on low-income households (Patrick et al. 2012). A more compelling reason to cut LIHEAP funding would be because the program does not work, though no one has explicitly put forth this argument. LIHEAP has a stated target to assist: "vulnerable households" and "high-burden households." Vulnerable households are low-income households that have young children, elderly, or disabled individuals. High-burden households have a high ratio of energy costs to income. commonly termed a household's energy burden. On average, low-income households show an energy burden (13.6%) that is almost -double the national average (7%). Additionally almost four million low-income households spend over 25% of their income on energy costs (Division of Energy Assistance 2009). Little empirical evidence has been generated to determine whether LIHEAP differentially or effectively helps these vulnerable and high-burden households, or even if these household types are the most likely to be energy insecure. …

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