Step Up the Heat: A Regression Discontinuity Analysis of the Effect of Home Heating Subsidy on Energy Expenditure

(ProQuest: . denotes formulae omitted.)I. INTRODUCTION1.1 OverviewAccording to the latest Residential Energy Consumption Survey conducted in 2009 by the U.S. Energy InformationAdministration, the total U.S. energy expenses amount to USD230 billion; average energy consumption per household is USD2,000. Households with an annual income in the USD20,000 to USD3 9,999 bracket have the highest energy expenditure of USD48 billion. Those in the USD40,000 to USD59,000 bracket come second at USD42 billion, and households in the lowest income group of the USD20,000 or less come third at USD37 billion. These 3 income groups make up about 72% of the total 113.6 million housing units in the U.S. in 2009. As for the type of energy consumed by the U.S. as a whole in 2009, natural gas and electricity have the highest consumption, followed by marginal consumption of fuel oil, propane/LPG, and kerosene. Space or home heating accounted for 63% of natural gas consumed in U.S. homes; the remaining 37% was for water heating, cooking, and miscellaneous uses. A total of USD65 billion is spent on home heating expenses. This expenditure on home heating alone represents approximately 28% - the highest - from the total energy expenditure of USD230 billion. Based on the U.S. Energy InformationAdministration (EIA), in 2011, energy consumption by New York home end-users constitutes 29.6%, second only to the commercial sector that consumes 32.7% of total energy. In 2009, home heating in New York households makes up the largest portion of energy consumption, at 56%. Other energy consumption includes those for appliances and electronic usage at 26%, water heating (17%), and air-conditioning (1%). In the U. S. , home energy consumption is mainly subsidized by a federal program known as the Home Energy Assistance Program, or the HEAP subsidy for short. The U.S. National Energy Assistance Directors' Association (NEADA) reports that the funding for HEAP has declined between 2010 and 2013 from USD5.1 billion to USD3.3 billion. NEADA also estimated that during that period, due to the budget cut for HEAP funding, the number of households served by the HEAP subsidy declined from 8.1 to 6.7 million households nationwide. The budget cut in the HEAP funding for New York during that period sees a decrease from USD537 million in 2010 to USD350 million in 2013. Earlier in 2014, a further reduction of the federal budget in the appropriation for HEAP subsidy has been proposed by the Obama administration for the 2014 fiscal year, despite the fact that the country is still recovering from the recent cold spells especially in the northern part of the country where New York is. Little is known empirically on the causal effect of the HEAP subsidy on energy expenditure. With such high fiscal cost of providing energy subsidy, it is important to know if such subsidy is in fact lowering targeted households' energy expenditure. If so, then the aim of the subsidy is achieved. This is the study's main purpose.InNewYork, the HEAP subsidy is administered by the State Office of Temporary and Disability Assistance. The subsidy aims to assist low-income households in meeting their home heating and energy expenditure. Eligibility to apply for the subsidy is based on household income, household size, primary heating source, and the presence of a household member who is less than age 6, more than age 60, or permanently disabled. The HEAP subsidy is given out as one of the following types: (i) a regular benefit to lessen the burden of the home main heating source expenses, (ii) an emergency benefit to assist with heat-related emergencies such as disconnected heating services, and (iii) a repair and replacement of heating equipment benefit. An eligible household may receive one regular HEAP benefit per program year. The subsidy is a one-off annual benefit paid directly to authorized utility companies or the fuel vendors supplying the household's primary source of heat. …