Energy affordability for all: How states are reducing energy cost burdens through rate-setting

By Madeline Thompson, EDF Legal and Regulatory Intern Energy affordability has become a major concern for customers as utility rates rise across the country. Since 2001, the average cost of electricity per kilowatt has nearly doubled for residential customers, according to the U.S. Energy Information Administration. Low-income households are facing the brunt of this burden. […] The post Energy affordability for all: How states are reducing energy cost burdens through rate-setting appeared first on Energy Exchange. By EDF Blogs By Madeline Thompson, EDF Legal and Regulatory Intern Energy affordability has become a major concern for customers as utility rates rise across the country. Since 2001, the average cost of electricity per kilowatt has nearly doubled for residential customers, according to the U.S. Energy Information Administration. Low-income households are facing the brunt of this burden. According to 2024 research, low-income households in the U.S. spend about 17% of their income on utilities, about three times the national average. To combat the effects of rising energy costs and the major toll they take on low-income households, some states have implemented a “low-income discount rate.” The idea is to lower electric bills for those who make less than a certain income threshold, such as below the state median income or the federal poverty line. However, implementation varies from state to state, ranging from mandatory low-income rates- by statute, to state public utility commissions authorized to approve rates promulgated by utility companies. Following is an overview of how numerous states are implementing these rates in an effort to make sure energy is affordable to all. Energy affordability for all: How states are reducing energy cost burdens through rate-setting Share on X Low income discount rates are authorized by statute Six states have enacted statutes that require a separate rate calculation for low income utility customers. In these statutes, the state Public Utility Commission determines the type of discount program and subsequently directs each utility company to implement it. This model is mostly concentrated in the Northeast and West. In the Northeast, Massachusetts, New Hampshire, New York and Connecticut each have a straight discount rate codified by law or Commission order. Connecticut’s unique structure was borne out of the state’s quasi-judicial Public Utility Regulatory Agency  in 2024. While PURA is not an executive state agency, it is charged with “interpreting and applying all laws and regulations governing the state’s utility sector,” which includes setting rates, and regulating retail electric supply. PURA’s ratemaking procedure uses data from Connecticut’s Department of Social Services to automatically enroll and provide energy bill discounts to customers who qualify.  The discounts are covered by all Connecticut ratepayers through a “public benefits charge” on their bills. In the West, California and Oregon have promulgated a law or commission rule that offers tiered discount rates on energy bills for low income customers[i]. The law authorizing California’s discount rate program also established an oversight board, which advises the state’s Public Utility Commission.[ii] Low income discount rates are approved by regulators Five states, including Indiana, Maryland, Washington, Colorado and most recently New Mexico have created some sort of framework [iii] that allows a low income discount rate to exist, but the states decline to implement one by law, instead opting for less regulatory power for the states’ utility commissions. Maryland, Washington and Colorado Public Utility Commissions are authorized to approve energy affordability measures by investor-owned utility companies. Maryland and Washington have state laws mandating utility providers submit proposals for low income affordability plans to the commission for approval. In Colorado, regulations promulgated by the Public Utility Commission require investor-owned utilities to create their own low-income rate structures, subject to commission approval. New Mexico and Indiana authorize, but do not require, their state commissions to approve additional rate structures. These additional rate structures allow utility companies to respond to market conditions, and also provide sufficient flexibility for utilities to create new affordable rate configurations. This structure charges state regulators with holding utilities accountable for rate structures that are reasonable and fair. Regulators review programs and recommend but do not require action Rhode Island and Illinois have  uniquely open-ended  statutory provisions addressing low income rates. Rhode Island requires its Public Utility Commission to conduct an annual comprehensive