To Address High Energy Costs, States Should Increase Energy Assistance, Not Cut Climate Programs

Everyone deserves affordable, safe energy to meet their everyday needs. But average electricity bills have risen close to 6 percent in the past 12 months. Some states made the sound choice of bolstering energy assistance programs that help people struggling the most to pay their bills. Unfortunately, other states chose to cut or delay revenue-generating policies that pay for energy assistance, energy efficiency, and other supports — or redirect the revenue from these policies — for negligible energy bill reductions spread across all utility customers, including those who don't need help.

Three key factors are behind rising electricity bills: increased construction costs (due in part to tariffs) are driving up the cost of upgrades utilities need to make; increased electricity demand (including significant new demand from data centers in some states); and high prices for natural gas, which powers over 40 percent of U.S. electricity. 

While energy bills are rising for most households in the U.S., low-income households spend the highest percentage of their income on them: 20 percent on average for those below the federal poverty level ($33,000 for a family of four), with Black and Latine households also facing disproportionate energy burdens. Households with low incomes are also struggling the most with rising food, health care, and housing costs. Rising costs have put pressure on states to ease energy affordability. States should be taking steps to help households struggling today with high costs while also looking to make smart investments that will lower costs for residential consumers in the future. 

In the immediate term, states wishing to support residents with energy bills should expand energy assistance targeted to those who need it most. Multiple states did so this year, including:

• Illinois, which codified and expanded the state’s ratepayer-funded low-income discount rate. Now, utility companies serving over 100,000 customers (the large investor-owned utilities that cover most of the state) are required to offer the discount rate. It is available to households up to 300 percent of the poverty line and covers most of the energy bill — including delivery and supply charges.
• Maine, which implemented new rules so that eligible residents are automatically enrolled in energy assistance beginning in October. In anticipation, utility regulators nearly doubled the program’s funding by greatly increasing the public benefits surcharge and legislators appropriated additional general fund dollars. 
• Washington, which enacted a new low-income energy assistance program intended to be funded with cap-and-invest revenues, delivering on-bill discounts targeted to the highest energy-burdened households

States can pay for energy assistance through public benefits charges or cap-and-invest programs to raise revenue from households that can afford it. 

Unfortunately, policymakers in at least six states this year cut or delayed revenue-generating policies that pay for energy assistance, energy efficiency, clean energy, and other social supports — or redirected the revenue from these policies — for negligible or speculative near-term reductions in energy bills spread across all utility customers (ratepayers), including those who can afford their bills. The actions across all six states will raise energy bills over time and create health harms by reducing opportunities to cut fossil fuel pollution. 

• Maryland cut the state's energy efficiency program, EmPOWER Maryland, reducing the funding ratepayers contribute to it and likely saving ratepayers only a few dollars a month. Over 20 states use surcharges on residents' and businesses' energy bills to generate revenue for clean energy, energy efficiency, and energy assistance programs. The majority of benefits in many states go to low-income households. These charges are typically a small share of bills, but because they appear as line items and state lawmakers control them, any changes can be visible to customers as soon as the following month. The surcharge for EmPOWER made up only about 5 to 7 percent of a typical energy bill in 2025. The new law amounts to a small savings to all ratepayers while reducing the state’s energy efficiency targets by 30 percent. This significantly weakens a program that returns $2.21 in benefits for every dollar over the life of the investment and from which low-income households have the most to gain. 
• California and New York took aim at a different tool — cap-and-invest, the permit auctions that raise revenue from climate polluters — but the impulse was the same: wrongly blaming climate policy for high energy bills. California gave more free emissions allowances to refineries and other polluters, arguing it would ease gasoline prices. New York delayed rulemaking for its new cap-and-invest program — originally due in 2024 — by another three years, citing a debunked report that the program would sharply raise households' energy costs. In both cases, these programs have relatively small impacts on consumer prices, while the revenue they generate can be returned to those who need it to afford their bills and invested in programs that lower energy costs permanently. Some estimates show California and New York could forgo $2 billion and $3 billion respectively in annual revenue from these actions, threatening funding for energy assistance, clean energy, affordable housing, and environmental justice.
• Three states diverted cap-and-invest revenue away from programs that address climate change and towards small bill credits for all ratepayers. Energy bill credits can be a sound use of cap-and-invest funds, but they should be targeted to households with the greatest need so the help is enough to meaningfully reduce their costs and improve their financial well-being.
  • New Jersey is providing a $25 one-time credit to all ratepayers, using cap-and-invest revenues previously reserved for low- or moderate-income ratepayers. New Jersey also provides larger, income-targeted credits of $150 to low- and moderate-income households, a sound practice. But if the $90 million that the state is spending on one-time $25 credits for all ratepayers had been directed to the approximately 278,000 households eligible for the income-targeted credit, the impact on affordability for those struggling could have been significantly larger. 
  • Virginia, which restarted their cap-and-invest program this year, is redirecting a portion of proceeds to universal credits estimated to equal just $3-per-month for the next two years, diverting funds from flood resilience.
  • Rhode Island is providing a one-time payment of, on average, $61 to all ratepayers; its previous credits went only to low- and moderate-income households.

High energy bills are not going away. To address both immediate-term affordability issues and somewhat longer-term needs, states should consider the following policies, which both make a meaningful difference for low-income households and are worth their fiscal opportunity costs:

• Requiring data centers and other large energy users to pay the full cost of their energy needs;
• Expanding targeted energy assistance for lower income households;
• Removing policy barriers and easing up-front costs so residents, building owners, and utility companies can install and use the sources of energy with the lowest cost to run; and
• Requiring utility regulators to consider affordability as a goal in setting rates.