The energy burden problem, in numbers
Roughly two-thirds of low-income households carry a "high energy burden," meaning they spend more than 6% of household income on utility bills — several times the burden a median-income household carries (U.S. Department of Energy). That burden compounds: households already stretched thin on utility bills are the least able to front the upfront cost of a heat pump, even a heavily rebated one, and are disproportionately likely to fall behind on payments. Reporting on California's electrification rollout found that over a quarter of low-income ratepayers were in arrears on their utility accounts (Frontiers in Energy Research).
Left unaddressed, that dynamic tends to make electrification programs regressive by default — not by design, but because rebate-plus-financing models still favor whoever can carry the remaining cost. The same Frontiers analysis of California's program found participation skewing toward wealthier, whiter homeowners, while renters and lower-income households — who could benefit the most from lower energy bills — were structurally the least likely to participate.
The federal programs already bake in income tiers
This isn't a new realization — the IRA's HEAR program was designed with income tiers from the start. Households at or below 80% of area median income (AMI) can have up to 100% of an eligible project's cost covered; households between 80% and 150% AMI get roughly 50% coverage; above 150% AMI, HEAR generally doesn't apply at all (TECH Clean California). DOE guidance also pushes states to direct a substantial share of Home Energy Rebate funds toward low- and moderate-income households specifically, consistent with the federal Justice40 initiative's goal that disadvantaged communities receive a meaningful share of climate and clean-energy investment benefits.
Why states and utilities are adding their own LMI-specific dollars on top
Even with federal income tiers built in, states and utilities have been layering additional, dedicated LMI programs on top — for a mix of reasons that go beyond fairness.
Federal timelines are uncertain; states are building backstops
Maryland's 2026 Utility RELIEF Act is the clearest recent example. It created a $72.5 million Residential Energy Equity (REE) Heat Pump Rebate Program aimed squarely at LMI households, explicitly framed as a state-funded backstop given uncertainty around federal rebate program timelines (Building Decarbonization Coalition; Maryland Energy Administration). Rather than waiting on a federal program that might launch late, get delayed, or change scope, Maryland put state dollars behind a dedicated LMI heat pump program it fully controls.
Avoiding bad debt and arrears is cheaper than it sounds
Utilities have a direct financial stake in keeping low-income customers current on their bills. A household electrifying with a well-sized, efficient heat pump — especially one replacing expensive delivered fuels like oil or propane — typically sees lower ongoing heating costs, which reduces the odds it falls into arrears. That's part of why Mass Save specifically emphasizes larger rebates ($10,000–$16,000) for households switching off oil, propane, or electric resistance rather than natural gas — the delivered-fuel households tend to carry the highest energy burden and the most to gain (ACEEE).
Coordinated, not just bigger, funding
ACEEE's research on LMI retrofits stresses that the dollar amount of a rebate matters less than whether it's coordinated with other funding sources — weatherization assistance, utility bill-payment assistance, state tax credits — so a low-income household isn't left navigating five separate applications to cover one project. CPS Energy's Casa Verde program in Texas, which targets households spending more than 9.9% of income on energy, is built around this kind of single coordinated entry point rather than a standalone rebate (ACEEE).
Full-cost coverage, not partial rebates, for the lowest-income tier
The Center for American Progress's recommendations for state rebate design go further than the federal 100%-below-80%-AMI tier, arguing states should aim for full project-cost coverage for low-income households more broadly, plus centralized, low-friction program access, to avoid a design where only households that can front the gap actually participate (Center for American Progress).
A local example: Minneapolis's Green Cost Share
This isn't only a state-and-federal story — it shows up at the city level too. Minneapolis's Green Cost Share program, covered in the Minneapolis cold-climate case study, offers a meaningfully larger rebate to homeowners in the city's designated Green Zones — historically underinvested neighborhoods — than it does citywide, which is a small-scale version of the same logic driving Maryland's state program: targeting limited dollars where energy burden and need are highest, rather than spreading them evenly regardless of who benefits most.