What Role Do Household Incomes Play in the Full Cost of Electricity?

Texas, a microcosm of the United States, shows that many households spend a fair fraction of their income on electricity

2 min read
A torn dollar bill in the shape of the state of Texas
Photo: iStockphoto

Electricity is something many of us take for granted. Flip a switch and lights come on, air-conditioning fires up, and computers hum. But how much will new energy cost relative to the income of the people who will consume it? It’s not something most of us in the United States think about as we flip that switch, but it is something we need to understand as we build next-generation power plants and the grid to move that electricity to demand centers.

As part of The Full Cost of Electricity project of the University of Texas at Austin Energy Institute, we wanted to ensure that public and policy discussions had baseline information. So we asked a few simple questions: “How much are households paying for household energy overall? How much of this cost is for electricity? How does this cost compare to incomes?” To answer these questions, we used the data acquired by the U.S. Energy Information Administration, via its Residential Energy Consumption Survey, for the state of Texas [PDF].

Besides being our home, Texas is a microcosm: We have rural and urban areas, flat and hilly country, desertlike areas and coastline.

Here’s what we found:

  • Twenty-two percent of Texas households are energy burdened, spending more than 8 percent of income on household energy, and 16 percent of households spend more than 10 percent
  • The vast majority of the cost of household energy is for electricity
  • Fifteen percent of Texas households spend more than 8 percent of household income on electricity alone, and 11 percent spend more than 10 percent
  • Higher incomes translate to higher household electricity consumption, but there are important differences between urban and rural households
  • Other than income, there are several demographic variables that explain whether or not a household spends more than 8 percent on energy. For example, a household where someone is at home during the work day is more likely to be energy burdened

For the details, read the full white paper, “Household Energy Costs for Texans” [PDF] on the Energy Institute’s page for The Full Cost of Electricity.

Carey W. King is the assistant director and a research scientist with the University of Texas Energy Institute.

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The 2021 Dixie Fire in northern California is suspected of being caused by Pacific Gas & Electric's equipment. The fire is the second-largest in California history.

Robyn Beck/AFP/Getty Images

The 2020 fire season in the United States was the worst in at least 70 years, with some 4 million hectares burned on the west coast alone. These West Coast fires killed at least 37 people, destroyed hundreds of structures, caused nearly US $20 billion in damage, and filled the air with smoke that threatened the health of millions of people. And this was on top of a 2018 fire season that burned more than 700,000 hectares of land in California, and a 2019-to-2020 wildfire season in Australia that torched nearly 18 million hectares.

While some of these fires started from human carelessness—or arson—far too many were sparked and spread by the electrical power infrastructure and power lines. The California Department of Forestry and Fire Protection (Cal Fire) calculates that nearly 100,000 burned hectares of those 2018 California fires were the fault of the electric power infrastructure, including the devastating Camp Fire, which wiped out most of the town of Paradise. And in July of this year, Pacific Gas & Electric indicated that blown fuses on one of its utility poles may have sparked the Dixie Fire, which burned nearly 400,000 hectares.

Until these recent disasters, most people, even those living in vulnerable areas, didn't give much thought to the fire risk from the electrical infrastructure. Power companies trim trees and inspect lines on a regular—if not particularly frequent—basis.

However, the frequency of these inspections has changed little over the years, even though climate change is causing drier and hotter weather conditions that lead up to more intense wildfires. In addition, many key electrical components are beyond their shelf lives, including insulators, transformers, arrestors, and splices that are more than 40 years old. Many transmission towers, most built for a 40-year lifespan, are entering their final decade.

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