The United States may also face a brewing crisis as European governments struggle to contain the impact of soaring energy costs for their citizens, with an estimated 20 million households struggling to pay their utility bills.
Representing one in six households, the eye-popping figure comes from a study by the National Association of Energy Assistance Directors (Neada) highlighted in a Bloomberg report earlier this week. Delinquencies totaled $16 billion in June, slightly below the year-to-date high of $16.5 billion in March.
RELATED: UK will see new 80% surge in energy bills “So before the pandemic it was around 80% $100 million … then that number doubled,” Mark Wolf, the study’s author and executive director of Neada, told MarketWatch on Thursday. Wolf, who has tracked the data for about 10 years, said those 20 million households — mostly low-income — could be 30 to 90 days behind on their utility bills. Jean Su, a senior attorney at the Center for Biological Diversity, which tracks utility outages across the U.S., told Bloomberg that she expects a “tsunami of shutdowns.”
Source: Association of State Energy Assistance Directors Soaring energy prices fuel utility debt
Energy, Wolf says Rising prices are a major factor behind the increase in utility debt. Consumer electricity prices have risen 15.2% over the past 12 months, while natural gas prices have surged 30.5%, according to the U.S. Bureau of Labor Statistics. For households in the bottom 20% of annual income, the annual cost of home energy increased from $2,511 in 2019 to $3,044 last year, according to U.S. data. “If current trends continue, this year’s cost could reach around $3,385,” he said in additional comments by email. “On top of that, households are grappling with high inflation for other necessities like gasoline, food and rent.” Gas prices NG00, +0.39% 127% higher than a year ago, partly due to the Russian invasion of Ukraine leading to global commodities Prices soared. Gasoline price RBU22, -0.07% Although crude CL.1 is below the June high, it is still 28% higher than a year, -0.10% from $122 per barrel to the current $93.76 per barrel. READ: Grassroots organisations urge UK public to stop paying energy bills. Its campaign attracted 100,000 supporters. Compared to a year earlier, the cost of living rose 8.5% in July to the highest level in 40 years. Grocery prices continued to soar – up 13.1% compared to the same time last year. Many Americans report that they have tapped into savings to pay bills and purchased smaller pack sizes and cheaper alternatives to keep costs down. Radha Seshagiri previously told MarketWatch that low-income Americans are already struggling to pay off credit card loans and buy big-ticket items like cars because of rising costs. Seshagiri is Director of Public Policy and Systems Change at SaverLife, a nonprofit that helps low- and middle-income families save money. Dave Peters, a professor at Iowa State University, studies the effects of small-town inflation. “The biggest inflationary impact on rural households is the increase in transportation costs, which is critical in rural areas where residents have to drive greater distances to get to work, school or shopping to meet daily needs.” Peter wrote in the report. Compared to two years ago, rural residents pay $2,470 more per year for gasoline and diesel, while urban residents pay $2,057 more, the report shows.
Families falling behind as federal aid expires
During the pandemic, as households struggle with work stoppages and lost income, the number of households delinquent on utility bills has surged, even though the moratorium has prevented the shutdown of things like lights, Wolf said. Without the $45 billion in rent assistance and child tax credit assistance that Congress approved in 2021, many more would be left behind, he said. Through the American Rescue Program Act, lawmakers increased the child tax credit to a maximum of $3,600 for children under 6 and up to $3,000 for children between the ages of 6 and 17. Families eligible for Enhanced CTC receive monthly advances of up to $300 per child under 6 and up to $250 per child 6 to 17 The child tax credit was expanded, and they were in much better financial shape last year. The percentage of Americans who said they were able to use cash or the equivalent to pay $400 in emergency expenses hit a nine-year high, according to the Federal Reserve’s annual National Survey of Household Economics and Decision Making (SHED) conducted last fall. But now those benefits are gone, Wolfe said, families face other problems without any help. Rising U.S. interest rates will likely only exacerbate problems with costs ranging from rent to food, with low-income households often feeling the pain first. “Utilities delinquency can be seen as an economic indicator, they are very sensitive to changes in the economy, and when the economy is trending down, people in the bottom 40% of the population fall behind on these bills,” Wolf said. Of the total 123.6 million U.S. households, 20 million do not appear to be getting enough attention, but 32 million are eligible for energy assistance, Wolfe said. For households that don’t pay those bills, that means potentially losing their leases — “the first step to eviction,” he said, adding that he suspects some small businesses may also be behind their utilities. “Energy is one of the basic commodities that pays rent,” Wolf said. “Eventually I’m going to threaten to close you unless you pay and work most of the time. But we’re in a new paradigm, a new world, and now you’re a low-income family and you’re behind on your bills in the winter, it’s not enough Surprising.” “But now I’ll give you a repayment plan that is planned to be paid off by October next year, but now the cost of cooling is much higher. So your ability to repay this amount is more than the other Things are more challenging,” he said. READ: ‘We’re drowning in debt’: Black and brown mothers grapple with more hurdles balancing parenting and bills as they return to work READ: 1 in 3 Americans earning $250,000 or more a year say they live on a paycheck—really?
