LMI Households Need Energy Equity During Times of High Inflation

by | Oct 31, 2023 | Customer Engagement, Education, Energy, Financial Shock, Intergenerational Communities, Service Line Responsibilities

Since 2020, Canadian inflation rates have soared higher than any point in the last four decades, reaching as high as 8.1 percent in June of 2022. This growth has slowed in this year; however, September’s rates were still at 3.8 percent over September 2022.

Prior to the COVID-19 pandemic, the annual rate of inflation was 1.95 percent.

The causes of the past few years’ high inflation rates can largely be traced back to the COVID epidemic. The global issue of supply chain bottlenecks during the pandemic are slowly beginning to ease, and the labour market is also slowly correcting itself. The high wages employers offered in an effort to entice employees back to work are evening out, and the labour demand and labour supply are incrementally coming back into balance. In an effort to help calm storm, the Bank of Canada was forced to bump up the lending rate eight times in 2022, helping to slow the inflation rate.

Gasoline is the largest contributor to the current inflation rates. The food, shelter, and energy indexes are the next highest contributors to high inflation. Residents of all income levels are forced to adjust their spending in these critical areas, but those families considered low- to middle-income, or LMI, are being hit hardest.

While residents across all income groups reported shopping at different stores with lower prices, eating at restaurants or ordering in less often, and delaying major purchases, the LMI group indicated they are also purchasing less fresh fruit and meat, lowering their utility usage, asking friends and family for help, and accepting benefits from charities.

But what happens when a LMI household is hit by an economic shock, or large, unexpected expense?

Even before this crushing inflation growth, 6.4 percent of Canadians lived in poverty. In 2023, 7.4 percent, or 4.9 million Canadians, are considered to be at poverty level. Almost one million live in severe poverty with an income of $11,700 or less for a family of four.

Utilities, including energy and water, represent more than 20 percent of a low-income household’s monthly expenditures, a significantly higher portion than that of middle class wage earners. Although energy efficiency measures would pare down their electric bill, many are living paycheque-to-paycheque and don’t have the extra cash on hand for an HVAC tune-up or to upgrade to ENERGY STAR® certified appliances.

Many utilities are now funding programs to help low- and moderate-income consumers conserve energy. Energy efficiency investments for lower income homes are particularly important for quality of life and safety, ensuring that homes have enough heat, hot water and lighting and eliminating the use of unsafe space heaters, hot pots and other hazardous equipment. Low-income efficiency programs also help avoid utility shut offs, a benefit for both residents and the utility.

Adding to the issue for LMI households is inflation inequality, the gap in inflation rates between rich and poor individuals. While all groups cut down on luxury goods, LMI families spend most of their household income on necessities such as food and heat. When the prices of those critical items rise, these residents are more affected as they spend more to maintain the same lifestyle.

According to HomeServe’s Canada State of the Home Survey, one quarter of homeowners have $500 or less in emergency savings if faced by an economic shock like a damaged service line. When the choice is paying for groceries and other necessities, setting aside the money in case of an unexpected household emergency takes a backseat.

This is where the HomeServe can help utilities shield their residents from the financial shock of an unexpected home repair. that impacts their daily quality of life. The program prepares residents by educating them about their service line responsibilities in tandem with partner utilities, at no cost to the energy provider. In addition, the program offers a completely optional warranty program at an affordable price.

Plan holders have access to a repair hotline 24/7/365 and a nationwide network of pre-vetted, licensed and insured contractors. When a plan holder has an issue, they make one call, and the Program dispatches a qualified contractor to their home. There is no call out fees or deductibles, and the Program pays network contractors directly, so there is no need for the resident to pay out of pocket and wait for reimbursement.

To learn how utilities and the Program can work together to shield residents from yet another unexpected expense, contact us.