One in ten U.S. households pays an energy bill indirectly as part of rent or condo fees
Many U.S. households do not pay energy utilities or other suppliers directly for using electricity, natural gas, fuel oil, or propane but pay indirectly through rent, fees, or to a third party such as a housing authority. Data from the most recent Residential Energy Consumption Survey (RECS) show that, in 2015, 12.4 million of the nation’s 118 million households (11%) paid some or all of their energy costs indirectly. Indirect payment of energy bills was more likely for households in multifamily buildings, where 34% made indirect energy payments, compared with single-family homes, where only 2% made indirect energy payments.
Households in the Northeast were most likely to pay for energy use through rent, fees, or some other arrangement (22%). The Northeast region has the highest share of apartment homes and homes built before 1970. Indirect payment arrangements were least common in the South region (6%), the area with the lowest share of apartment homes and households in older homes. Indirect payments of energy bills are also more common in lower-income households: 23% of households making less than $20,000 paid some or all of their energy bills indirectly, compared with 5% of households making $80,000 or more.
Indirect payment of energy bills is considered a market barrier for increasing energy efficiency. If a household’s energy expenditures are not directly linked with its energy consumption, these households may have less financial incentive to install energy-efficient appliances or lights, or to lower thermostat temperature settings when away from home.
The share of households paying for energy indirectly varied by the fuels used in the home. Electricity is used in virtually every home, and 7% of households using electricity paid for it indirectly. Of the 69 million natural gas-consuming households, 11% paid for their natural gas indirectly; the share was more than 40% for natural gas-consuming households in multifamily apartment buildings. For fuel oil, which was used in 7 million homes, 15% of households paid indirectly. Of households using propane—more commonly rural, single-family homes—5% paid for their propane indirectly.
Nearly 75% of households used more than one fuel, so a number of payment arrangements were possible across the nation’s households. About 40% of those households with indirect billing arrangements paid both electricity and another fuel indirectly. Another 34% paid electricity directly but the other fuel indirectly.
The share of households who don’t pay for energy directly has declined over the past few decades. In 1984, 18% of all households paid energy costs indirectly. Although the share of households indirectly paying their electricity bills changed very little from 1984 to 2015, the share of households indirectly paying their natural gas bills fell from 22% to 11% over that period.
This decrease is attributable to natural gas utilities installing direct-metering devices or apartment building owners installing submeters behind the utility meter. Without a direct meter or submeter, apartment owners and landlords might have allocated a total building’s fuel use to each unit based on square footage, total number of bedrooms, or similar criteria.
Principal contributor: Chip Berry