Energy Cost Increases by State, 2020-2022

 

 


White Paper: New Study Shows 2020 - 2022 State Homeowner Energy Cost Inflation Ranges from 24% to 62%,


Jerry Jackson, Ph.D.,    August 17, 2022
 

10 best and 10 worst states for energy cost inflation  2020-2022 Summary

Households are struggling to adjust to rising prices primarily by changing consumption habits: eating out less often, postponing vacations, shopping more at discount stores and limiting driving to essential trips. However, dwelling unit energy and commuting costs are two major budget items that are difficult to reduce. Increases in these two essential expenses are having significant impact on the ability of households to pay their bills. The New York Public Service Commission reported that one in 8 utility customers in the state are in arrears on their utility bills for a total of $1.8 billion.

As part of a larger forthcoming study on mortgage default potential, recent increases in dwelling unit energy and commuting gasoline costs were estimated for a stratified sample of owner-occupied households in each of nearly thirty-thousand ZIP code areas throughout the continental US for the years 2020- 2022.

The focus on “cost increase” rather than “price increase” considers both energy use and energy price increases. For example, variations in gasoline cost reflect both commuting distance and the increase in gasoline prices. Similarly, variations in dwelling unit energy costs reflect both use and energy price increases.

The findings of this analysis are striking. Nationally, the 2020 to 2022 increase in dwelling unit and commuting gasoline costs are estimated to be $3,110 for owner-occupied dwelling units. $527 of that is dwelling unit energy use and $2584 is commuter gasoline costs (including average gasoline prices falling to $3.78 / gallon in the 4th quarter). The greatest energy inflation pain is concentrated in eight northeastern states with California and Illinois rounding out the worst ten with annual 2020 – 2022 cost increases ranging from $1,863 to $2,682. Ten states with the lowest dwelling/commuting energy cost increases range from $623 to $1199 and include six southern states and four states from the west.

Ranking of State Average Dwelling Unit and Commuting Energy Costs and 2020 - 2022 Cost Increases

Details for all states, except Hawaii is provided in this table. Numbers in parentheses for total energy reflect the percent increase from 2020 to the end of 2022 while all other parenthetical number reflect state rankings for those individual items. (Hawaii is excluded from this analysis because of its unique energy situation).
State-Level Energy Cost Inflation
About the Data.

These cost data are calculated using a representative sample of owner-occupied dwelling units within each ZIP code area for all ZIP codes in the state with more than 100 owner-occupied dwelling units. ZIP level estimates are weighted by the number of dwelling units and summed to provide state level estimates. Household data from approximately 28,000 ZIP code areas were drawn from the MAISY Utility Customer Residential Energy Use Database.

Energy costs for 2020 and 2022 are calculated for each of the sample dwelling units using data on energy use (electric, natural gas, fuel oil propane) and electric utility prices for utilities that serve that ZIP code and state-level prices for fossil fuels. August 2022 US Energy Department forecasts of price increases (or reductions in the case of gasoline) are used to compute the full-year 2022 energy costs.

Why Such Differences Among States?

Electric generation fueled primarily by natural gas boosts electric prices more than generation that relies on coal, nuclear or hydro. Households using more fossil fuels (natural gas, fuel oil and propane) for space heating, water heating, dryers, and ovens experienced steeper price increases than those using predominately electricity. Gasoline prices and commuting distances vary significantly across ZIP codes within states. The bottom line is that variations in energy and commuting cost increases across states reflect variations in electric generation cost increases, household variations in energy use, fuel sources, fossil fuel price increases and variations in commuting patterns and state gasoline cost increases.

A Look at ZIP-Level Variations in Energy Cost Inflation
ZIP level energy cost inflation for New Hampshire
Comparing energy cost increases across states shows a huge variation. That begs the question: how much variation is there across individual ZIP code areas within individual states. How much more inflation pain do homeowners in some ZIP areas face compared to the average in the state. These study results show significant variations in ZIP-level energy cost increases from 2020 to 2022 within individual states. The following graphics show New Hampshire ZIP detail for total dwelling unit and commuting energy cost, as well as costs for each of these categories separately. A heat map of metro areas is also shown to provide a geographic reference to the ZIP-level maps. A visual evaluation of these New Hampshire maps suggests, as one might expect, a mild clustering of gasoline commuting cost increases. Dwelling unit cost increases reflect both dwelling unit size, demographics, choice of fuels and the electric utility provider price; however, some geographic clustering is also apparent.

The take-away from this example of ZIP-detailed energy cost inflation is that, even within individual states, the impact of energy cost inflation is unevenly distributed.

About the Author

Jerry Jackson is a former Signature Professor at Texas A&M University, Chief of the Applied Research Divisions at Georgia Tech Research Institute and economist at Oak Ridge National Laboratory and the Federal Reserve Bank of Chicago.

He is also President of Jackson Associates (JA) and the author of MAISY ZIP Level Utility Customer Energy Use Databases. JA MAISY Databases were first introduced in 1995. Annual updates have expanded databases to include data from more than 7 million US utility customer records. JA MAISY data have been used by the US Department of Energy in analysis supporting appliance efficiency standards, by state regulatory agencies from Texas to New York, and by dozens of solar, CHP, battery and other energy equipment manufacturers, utilities and retail electricity providers. Dr. Jackson has provided testimony in a variety of state and provincial hearings as an expert witness. His early modeling work at Oak Ridge National Laboratory provided the basis for energy forecasting at the US Department of Energy and state agencies. Most recently JA provided a 2021 agent-based model forecasting application for five Indiana investor-owned utilities submitted to the Indiana Public Service Commission by the Purdue University State Utility Forecasting Group. He published “Energy Budgets at Risk (EBAR): Risk Management Approach to Energy Purchase and Efficiency (Wiley, April 2008),” the first extension of risk management principles to evaluate building energy efficiency investments. He received a patent in 1995 for a drill-down and data visualization technology that has been licensed by Microsoft, Oracle, SAP and other major business intelligence software providers. He holds a Ph.D. in economics from the University of Florida with specialties in econometrics and regional economics. Click Here for a partial list of JA clients.

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