When families living from check to check without a savings cushion are hit by surprise spikes in their energy bills, it can derail their budgets. The Pew Foundation’s new report, The Precarious State of Family Balance Sheets, highlights the problems of the numerous households who lack the savings needed to weather an emergency — or a spiking utility bill. The Report finds:
- Almost 55 percent of households are savings-limited, meaning they cannot replace even one month of their income through liquid savings (money in cash, checking accounts, and savings accounts).
- Just under half of households are income-constrained, meaning they perceive that their household spending is greater than or equal to their household income.
- And 8 percent are debt-challenged, which means they report debt-payment obligations that are 41 percent or more of their gross monthly income.
Many of these families are already on utility deferred payment plans, so missing a payment may mean service termination. Others incur utility late payment charges at 18% per year, and some borrow at even higher interest rates to make a utility payment necessary to forestall termination. See BORROWING AT HIGH INTEREST TO PAY UNAFFORDABLE UTILITY BILLS, NYUP Update, October 10, 2012, citing a Ford Foundation funded study finding that the number one use of short term high interest loans is to pay a utility bill.
New York law requires that there be an 11 month process for consideration of gas and electric rate increases exceeding 2.5%. The Pew Report underlines the wisdom of New York’s historic policy on protecting consumers from rate spikes, and it calls into question the wisdom of recent practices that have allowed major monthly rate increases to be passed through to customers with no advance notice. See AFTER THE SPIKES, NYUP Update, April 3, 2014, and UTILITY PROJECT URGES PSC REFORMS TO REDUCE HARM TO UTILITY CUSTOMERS FROM PRICE SPIKES, NYUP Update May 14, 2014.