Energy burden is the percentage of income a household spends on energy costs. "The legacy of racist housing policies, and job and income discrimination, contributes to more families of color living in inefficient homes and having higher energy costs than white families, which forces these families to make trade offs between utility payments and other necessities and to navigate even more cumbersome and disenfranchising system hurdles. Meanwhile, energy efficiency improvements to alleviate the cost burdens are largely inaccessible to low-income families, and awareness of programs is often low." - Energy Burden in Milwaukee: Study Reveals Major Disparities & Links to Redlined Areas. Racial disparities in energy burden in Milwaukee remain amongst the highest in the nation (Sierra Club, 2024). African Americans in the U.S. are more likely to experience an energy burden due to the housing stock available from racial residential segregation (Hernández et al., 2016), which contributes to health inequities.

Recent analyses have found that energy burden is a central social determinant of health. It was so influential on premature mortality, self-reported health, and life expectancy, that only race and education had stronger influences (Reames et al., 2021). Higher energy burden is associated with asthma and other respiratory issues and increased mental health impacts (Wells et al., 2015, Brown et al., 2020). Inefficient heating or cooling systems can lead to thermal discomfort, hypothermia, or heat stress (Chen et al., 2017). Heat risks are increasing as climate change brings more intense heat waves to the Milwaukee area. An improperly heated home doubles the rate of respiratory issues and puts teens at five times the risk for mental health problems (Drehobl & Ross, 2016). It can also increase heart disease, arthritis, rheumatism, and infection rates (Lidell & Morris, 2010). Electricity shutoffs cause health and safety concerns and can be particularly dangerous for older adults and young children that need powered medical devices or refrigerated medications (Brown et al., 2020). In cases where energy burdens are too high, households often sacrifice health to pay for energy bills, leading to chronic stress and exacerbated healthcare costs down the road (Hernández et al, 2016). More than 25 million US households report reducing or forgoing food or medicines to pay electricity costs (EIA, 2015). This dilemma, often referred to as “heat” or “eat”, creates high risk for childhood malnutrition (Frank et al., 2006). On the other hand, the health benefits of energy efficiency upgrades are well documented and include reduced rates of heavy fever, asthma, headaches, sinusitis, respiratory allergies, and angina (Jacobs et al., 2015). In fact, the latest Weatherization Assistance Program (WAP) evaluation showed that the program’s health benefits exceeded its energy benefits (Tonn et al., 2015).

The current utility system provides monopoly status for essential public utilities like electricity, gas, water, and telecommunications. This means customers do not get to choose which utility company provides their services – instead, it’s based on where they live. Historically, it was cheaper to have one company build the necessary infrastructure to deliver energy to households in a given area, so policy was created to ensure that only the company that had built that infrastructure could sell their services to area customers. The PSC cannot legally authorize a new utility (or cooperative or municipality) to provide service in an area where an existing utility is already providing a similar service. Learn more about the different types of utility providers here. All states have a regulatory agency for utilities – in Wisconsin, this is the Public Service Commission (PSC).

The PSC is the state agency that regulates utility monopolies. Since utility companies are given monopoly status within their geographic service region in Wisconsin, the PSC's job is to regulate these services. The PSC consists of three full-time commissioners appointed by the governor in staggered six-year terms and confirmed by the state senate. The PSC is responsible for many critical decisions that relate to public health, including deciding where fossil fuel plants will be constructed and whether or not utility monopolies can increase their rates. The PSC requires public input to support their decision-making.

Utilities make most of their money through returns on investments, which incentivizes them to build more infrastructure, like power plants. Utility rates are typically calculated based on the amount of money needed to cover operating costs and capital investments (the cost of providing service), plus a percentage return on equity (ROE) that the PSC approves. ROE is the profit rate utilities can collect from customers on eligible expenditures. For example, if the PSC set an ROE of 10% and a utility built a $100 million power plant, the utility company could charge customers the $100 million cost of the plant PLUS another $10 million in profits (Energy and Policy Institute, 2024).

Stranded assets are assets that turn out to be worth less than expected as a result of economic, physical, or regulatory changes associated with the transition to a low-carbon economy (Carbon Tracker Initiative, 2017). According to a 2022 study in the journal Nature, approximately 60% of oil and gas reserves and 90% of known coal reserves should remain unused to limit global warming to the Paris Agreement target of 1.5°C (Welsby et al., 2022). Typically, utilities invest money up front to build new infrastructure and then adjust their rates so that customer payments will eventually cover those costs. However, sometimes the economic reality is different than their predictions and they end up with stranded assets. One example in Wisconsin is We Energies’ Oak Creek coal plant, which We Energies is proposing to shut down sooner than expected. They may continue collecting profit from customers even after the facility is no longer providing services, or they may attempt to raise rates to recover their costs (Wisconsin Academy of Sciences, Arts, and Letters), both of which would worsen energy burden and associated health costs.