Maximum Burden

Deck: 

The electricity price increases from the proposed EPA Utility MACT will act as a regressive tax on the elderly.

Fortnightly Magazine - December 2012

EPA is proposing Maximum Achievable Control Technology (MACT) regulations, and revisions to the New Source Performance Standards, for coal- and oil fired electric utility steam generating units under the Clean Air Act. These Utility MACT regulations are highly controversial and could result in significant impacts on coal power plants, electric reliability, electricity rates, and the national and state economies. We conducted a study of the potential impacts on elderly persons in Florida of these regulations and found the implications to be troubling.

Over the past several years, a number of studies have been conducted of the potential impacts of EPA’s proposals on the U.S. electricity system and economy. These studies indicate serious potential impacts, and they identify the Utility MACT regulations as among the most troublesome. Many of these studies recommend delay or reconsideration of the EPA regulations.

In Florida, we estimate that the EPA Utility MACT regulations would by 2015 result in an average electricity rate increase of nearly 25 percent, a gross state product (GSP) loss of nearly $18 billion, annual job losses of nearly 160,000, and lost annual state and local government revenues of $2.1 billion.

Increases in electricity prices will affect all Florida residents, but high electricity prices are particularly burdensome for those with limited budgets and fixed incomes. The electricity price increases from the proposed EPA Utility MACT will act as a regressive tax on the elderly, decrease their discretionary income and economic well-being, increase their energy burden, and impair their health.

Elder Burdens

There is a determinant demographic trend in the U.S. and Florida over the next half-century: the increasing portion of the population that will be elderly. In Florida, senior citizens comprise a larger portion of the total population than in any other state. By 2030 the percentage of the population 65 and older in Florida will be higher than in any other state and will be more than 40 percent higher than the national average.

Figure 1 - Florida Residents 65 years or Older

Approximately 3.1 million persons aged 65 or older currently reside in Florida. Of these, about 325,000 are classified as living in poverty; in Florida, poverty level annual income is defined, for a single person, as $10,900, and for a family of two as $14,700.

The mean Social Security income of seniors in Florida is about $16,500 and the mean retirement income of these persons from all sources is about $21,900. Thus, millions of Florida seniors are living on fixed incomes relatively close to the poverty line, and their numbers are forecast to increase significantly over the next two decades. The electricity cost increases resulting from Utility MACT would have a major negative impact on these seniors—especially those at or close to the poverty line.

Utility MACT will increase the residential electricity costs of seniors in Florida by between about $300 and $500 per year. The exact amount will depend on location within the state, type of residence, size of household, and other factors. Cost increases of this magnitude are of relatively little consequence to affluent households. However, most seniors in Florida aren’t affluent, and for them increased electric bills will have significant impacts. Further, by 2030, more than 27 percent of Florida’s population will be 65 or older (see Figure 1).

A major impact of Utility MACT will be to increase the already-high energy burden of elderly persons residing in Florida. “Energy burden” is defined as the percentage of annual household income used to pay annual residential energy bills. Utility MACT will increase the energy burden of the average Florida senior by about 2 percentage points—from about 20 percent to about 22 percent. For those seniors at or below the poverty line, Utility MACT will increase the energy burden by about 4 percentage points—from about 45 percent to nearly 50 percent (see Figure 2). Thus, the average Florida senior will have to spend between one-fifth and one-quarter of his or her income on energy. The poorest Florida seniors will have to spend about half of their meager incomes on energy.

MACT and Health

Figure 2 - Utility MACT and Florida Elders

What actions will elderly Florida residents—most of whom are living on modest fixed incomes—have to take in response to rising energy costs? From numerous studies and surveys conducted over the past decade, we have good idea of the actions that will be necessary. Energy costs are already a major problem for most of these people, and Utility MACT will make matters worse. For example, over a one-year period, as energy costs increase due to Utility MACT and discretionary income is limited, more than 40 percent of Florida seniors might, at times, have to go without a basic necessity. At some point, more than 40 percent might go without food. Nearly 20 percent might forego taking required medicine.

For elderly Floridians living at or below the poverty level (of which there are currently at least 325,000) the situation is even more grim: At times, nearly two-thirds of impoverished Florida seniors might go without a basic necessity; 70 percent might go without food; and nearly one-third might forego taking required medicine.

High and increasing energy costs can be especially dangerous to the health of the elderly, and this will be true in Florida as Utility MACT increases electricity costs. Over a one-year period, as energy costs increase and discretionary income is limited, 20 percent of Florida seniors might, at times, have to go without required medical or dental care. More than 25 percent might be unable to afford to fill a required prescription. More than 15 percent might be unable to pay their medical bills.

For elderly Floridians living at or below the poverty level, the threat to their health is even more troubling: Nearly one-fourth might, at times, be unable to afford medical or dental care. About one-third might be unable to afford to fill a required prescription. And nearly one-fourth be unable to pay their medical bills.

These and related severe health implications of increasing energy costs must be weighed against the alleged health benefits of regulations such as Utility MACT. In fact, given the comprehensively documented medical and health implications of increased energy costs, it’s likely that the net health impacts of a regulation such as Utility MACT will be negative.

High and increasing energy costs have serious implications for the housing status and characteristics of the elderly, and this will be true in Florida as Utility MACT increases electricity costs. Over a one-year period, as energy costs increase due to Utility MACT and discretionary income is limited, nearly 30 percent of Florida seniors might, at times, have to close off part of their home for at least part of the day. Nearly 20 percent might maintain the temperature in their home at an unsafe level for at least part of the day. Nearly 10 percent might have to leave their home for part of the day. More than 15 percent might be unable to make a mortgage or rent payment. And nearly 10 percent might be unable to make a utility bill payment.

For elderly Floridians living at or below the poverty level the threat to their housing security is even more serious: Nearly 40 percent might, at times, have to close off part of their home for at least part of the day. More than 30 percent might have to maintain the temperature in their home at an unsafe level for at least part of the day. Nearly 20 percent might have to leave their home for part of the day. As many as one-fourth might be unable to make a mortgage or rent payment. And nearly 20 percent might be unable to make a utility bill payment.

The implications are thus clear: Senior citizens are particularly vulnerable to energy price increases due to their relatively low incomes, and older consumers with the lowest incomes will experience the greatest cost burdens from Utility MACT. These regulations will significantly harm the elderly in Florida, and they need to be reconsidered.

 

Endnote:

1. The research was conducted for the Environmental Committee of the Florida Electric Power Coordinating Group, the umbrella organization in the Florida that represents investor-owned electric utilities, rural electric cooperatives, and municipal electric utilities on environmental issues affecting the electric utility industry. It currently has 28 members and includes the major electric utilities in the state.