America already funds an energy affordability program, and it overpays for bad coverage

Household utility debt in the United States, counting electric and gas together, rose from USD 17.5 billion at the end of 2023 to USD 23 billion by mid-2025, and NEADA now puts the balance at approximately USD 25 billion, the highest level since 2021, with one in six households behind on their bills. Policy debate tends to treat proposals like a national percentage-of-income payment plan (PIPP) as new spending that has to be justified from zero. I would argue the framing is backwards: ratepayers and taxpayers already fund a de facto affordability program through uncollectible-expense riders, financing costs on unpaid balances, collections operations, and federal assistance. Nobody designed that program, no filing reports its total cost, and it delivers worse coverage per dollar than the structured alternative it is being compared against.

RMI modeled a universal PIPP that would cap electric bills at 4 percent of household income for households at 0 to 60 percent of state median income, at a gross cost of USD 19.3 billion, minus roughly USD 10 billion in avoided arrearages, for a net cost of USD 9.3 billion a year. I made the measurement argument recently in Impact Entrepreneur: income supports get judged on gross program cost while the savings land in other budgets. For a utility or a regulator, though, the argument only becomes usable once the status quo has a number attached, so we put one together.

Unpaid bills do not stay unpaid from the utility's perspective, since regulated utilities recover the money through four channels that rarely get added up. These are worth listing separately:

1. Uncollectible expense, which is the written-off debt recovered from all customers through base rates or riders. E Source survey data puts the historic bad-debt ratio for electric utilities near 0.20 percent of revenue, with many utilities now reporting two to three times that level.

2. Carrying cost, which is the financing expense a utility bears on roughly USD 25 billion of electric and gas receivables it has billed but not collected.

3. Federal assistance, which is LIHEAP, funded at about USD 4.045 billion in FY2026, down from USD 6.1 billion in 2023.

4. Collections operations, which is the credit staff, notices, field visits, disconnections, and reconnections, and which no agency tracks as a national line item.

Putting numbers on the first three is straightforward arithmetic on public data, and we treat the result as our estimate, not a published statistic. EIA reports residential electricity revenue of about USD 244 billion in 2024, so a bad-debt ratio moving from 0.20 percent to a 0.40 to 0.60 percent range adds roughly USD 0.5 to 1.0 billion a year in incremental write-offs socialized to other customers. Carrying USD 25 billion of arrears at a 5 to 7 percent short-term financing cost runs another USD 1.3 to 1.8 billion a year. The USD 25 billion covers electric and gas together, and an electric-only balance of roughly USD 18 to 19 billion would put the carrying cost nearer USD 0.9 to 1.3 billion a year, a case the debt slider in the exhibit below already covers.

Adding LIHEAP brings the countable total to roughly USD 5.8 to 6.8 billion a year, before collections operating costs, before municipal emergency assistance, and before any health costs from households rationing heat or medicine. As a result of this, the honest comparison for the universal PIPP is a marginal cost of roughly USD 2.5 to 4 billion a year over what the system already spends, depending on whether the arrears base is counted as electric-only or electric plus gas. That margin still excludes the categories hardest to count. The exhibit below lets you test the estimate under your own assumptions, incl. what happens to the stack if federal assistance falls out of it.

Coverage is where the two designs separate most sharply. The current arrangement reached about 5.4 million of 34 million LIHEAP-eligible households in 2023, and NEADA counts roughly 6 million households relying on the program today, which works out to roughly USD 675 of federal LIHEAP funding per assisted household at the current appropriation, while the average delinquent household carries about USD 1,160 in arrears (USD 25 billion across 21.5 million households, our arithmetic). The remaining exposure gets spread across the full residential customer base, incl. 143 million electric accounts, as debt someone will eventually finance, forgive, or write off. Our energy regulatory advisory practice works on exactly this kind of cost-allocation and rate-design question.

For utility finance and regulatory teams, the practical move is to compute the implicit affordability spend for their own service territory: uncollectible expense against its pre-2020 baseline, carrying cost on the arrears balance, collections O&M incl. disconnection and reconnection field costs, and the LIHEAP and state dollars flowing into the territory. That figure belongs in the record of the next rate case, because it converts the affordability conversation from a values dispute into a cost comparison the commission can rule on. A commissioner weighing a PIPP proposal against a status quo priced at zero will reject it more often than one weighing it against a status quo priced at, e.g., USD 40 to 50 per customer per year in scattered recovery mechanisms.

The direction of the underlying numbers is one-way at the moment. NEADA estimates that up to 4 million households faced utility disconnections in 2025, nearly 500,000 more than in 2024, LIHEAP disbursement was delayed during the late-2025 federal shutdown, and the President's FY2027 budget proposes eliminating LIHEAP entirely while NEADA urges Congress to restore funding to USD 6.1 billion. The House Appropriations Committee approved its FY2027 Labor-HHS bill, the vehicle that funds LIHEAP, in June 2026, the Senate is expected to move its version over the summer, and the final number gets settled before the fiscal year starts on October 1, 2026.

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Arif Gasilov is partner for Natural Resources & Built Environment at Gasilov Group, where he works on energy regulatory analysis, water governance, utility rate cases, and the resource footprint of large development. Meet Our Partners →