In today’s economy, rising costs affect us all—but electricity prices are outpacing overall inflation at an alarming rate. Since 2021, electricity prices have increased nearly 30% – outpacing inflation, which has increased at a rate of 20%. This surge hits low-income households particularly hard, as they already allocate a disproportionate percentage of their income to energy costs. Low-income households in the United States spent a median of 8.3% of their annual income on energy bills in 2024—exceeding the threshold of 6% that traditionally indicates a high energy burden. Despite increased funding for assistance programs in some states, these efforts still fall short of meeting the widespread need. 

Demand-side management programs—like energy efficiency (EE), time-varying rates (TVR), and demand response (DR)—are helping utilities lower customer costs and improve grid reliability. However, demand response programs in particular, focus on higher-income households which own distributed energy resources like smart thermostats, batteries, or EVs to maximize load shift potential. Leveraging demand response programs to alleviate the energy burden for low-income households requires a different approach. 

Understanding the Outsized Impact of Demand-Side Management programs (DSM) for Low-Income Customers 

I published an ACEEE summer study paper in 2024, outlining the outsized impact that demand response programs can have on low- income households and highlighting the untapped market potential. 

The study combined energy burden analysis, peak load modeling, and data analysis from the Energy Information Administration’s Residential Energy Consumption Survey (RECS). It compared annual electricity bills and demand response incentives across income segments to calculate energy burden reductions, and modeled air conditioning performance scenarios between these segments to assess differences in peak load potential. 

Low-income households may produce lower per-household peak reductions (calculated at 0.72kW versus 0.96kW for typical homes) in demand-side management programs, they experience proportionally greater benefits from program incentives. For example, when comparing the same $100 incentive in a typical household versus a low income household, the impact on overall energy burden is magnified. The same incentive of $100 for participation can reduce energy burden by approximately 0.5% for a low-income household’s utility bill, compared to just 0.1% for typical households. This is a difference that should be considered when determining the purview of demand response programs.

Policy and Program Recommendations for Utilities

Based on these learnings, I developed strategic recommendations for utilities to consider to specifically target low-income households:

• Request regulatory approval for standalone low-income demand response programs: Utilities should work with regulators to establish separate cost-effectiveness criteria for low-income load flexibility programs, ensuring these initiatives aren’t required to meet the same benefit/cost ratio as standard programs. This recognizes their unique social value beyond traditional cost-effectiveness metrics. Regulators should establish specific peak demand reduction targets for this segment—both in terms of megawatts (MW) of capacity and program spending allocations—that reflect the dual benefits of grid support and energy burden relief. 
• Design low-income specific load flexibility programs with appropriate baselines: Although low-income households may deliver smaller individual peak reductions than typical households, they still provide meaningful grid benefits when properly measured against comparable baselines. Since traditional load flexibility programs often use baselines that don’t account for the unique characteristics of low-income households, utilities should compare performance to similar low-income homes rather than average or high-income households to better quantify the true impact of these programs. 
• Establish cost-test “adders” for comprehensive evaluation: If low-income programs must be included in broader demand response portfolios, utilities should implement adders that proportionally reduce the calculated program implementation cost. These adders would recognize the additional societal benefits provided by participation incentives, creating a more equitable comparison with standard demand response programs. 
• Integrate load flexibility enrollment with heat pump installation: Heat pump installation is on the rise—Americans bought 32% more heat pumps than gas furnaces (the next most popular heating appliance) in 2024, exceeding 2023’s lead of 21%. By offering incentives to low-income customers to participate in load management programs when new equipment is installed, multiple challenges can be addressed simultaneously: reducing energy burden, managing new electric loads, and enhancing grid reliability.

As energy costs continue to rise and electrification accelerates, it is crucial for utilities to leverage every tool available to reduce the energy burden for the most vulnerable customer segments. Load flexibility programs represent an underutilized opportunity to provide immediate financial relief to low-income households while generating broader community and grid benefits. 

By reaching out to and intentionally including low-income customers in demand-side management programs like energy efficiency (EE), time varying rates (TVR), and demand response (DR), utilities can help manage new electric loads, enhance grid reliability, and directly address energy affordability challenges—creating a more equitable energy transition for all. Many utilities, like Southern California Edison, are already taking steps to improve participation for low income segments in their energy efficiency program, driving not only bill savings but also increased grid flexibility. 

To get more detailed insights on the potential benefits and considerations for low-income focused load flexibility programs, read the full ACCEE paper.