Policy Options to Mitigate Energy Cost Burden on Low and Middle Income Households - Spring

Advisor: Eileen McGinnis

Team Members: Eric Smith, Ishaan Ghose, Vanessa Lincoln, Ziqi Liu, Rafae Ghani, Manasi Gupta, Jinming He, Zheqi Li, Songze Qu, Brett Wieland

New Jersey’s transition toward electrification and renewable energy presents equity challenges, particularly for low- and middle-income (LMI) households that already experience disproportionate energy burdens. Approximately 14% of households spend at least 4% of their income on energy, and electrification could worsen this disparity as higher-income households electrify faster, leaving remaining natural gas infrastructure costs concentrated among those least able to afford them. Structural inequities in rate design and insufficient participation in assistance programs further compound affordability challenges, increasing risks of utility arrears and service disconnections.

Quantitative modeling and policy analysis identified progressive rate design reforms as the most effective mechanisms to improve affordability while maintaining utility revenue stability. Income-based fixed charges and inverted block rates both reduce financial burden on lower-income households by shifting cost structures toward more equitable distribution. The greatest impact occurs when these approaches are implemented in combination, creating progressive pricing structures that protect vulnerable households without undermining decarbonization goals. Strengthening existing energy assistance programs and reducing barriers to enrollment further improves equity outcomes. These findings demonstrate that equitable rate design is essential to ensure that clean energy transitions do not exacerbate economic inequality, and that integrating affordability considerations into utility regulation can enable decarbonization while protecting vulnerable populations.

Learn more about the MPA-ESP Capstone projects.