The Disconnection Spiral: How the Trump Administration’s Attack on LIHEAP Risks a Larger Crisis

On April 2, the Trump administration fired every staffer at the Low Income Home Energy Assistance Program (LIHEAP). Since its creation by Congress in 1981, LIHEAP has provided low-income households with assistance to pay their utility bills.

In fiscal year 2025, LIHEAP was in charge of distributing $4.1 billion in allocated funding from Congress to 6.7 million low-income households nationwide to help meet their heating and cooling needs and avoid disconnection from utilities. While much of LIHEAP’s funding for this year has already been sent out to households, $4o0 million has not yet been distributed.

Without staff, LIHEAP cannot allocate any of the remaining funds to households as summer approaches. Households will not be able to rely on the LIHEAP program to avoid utility disconnection—when a utility ceases providing services due to bill nonpayment—during the hottest months of the year. This will exacerbate existing energy insecurity that disproportionately impacts households at or below the federal poverty line, Black and Hispanic households, households with young children, or individuals requiring electronic medical devices, and houses in inefficient or poor conditions.

Without bill assistance programs like LIHEAP, people resort to unsafe and harmful coping strategies to reduce energy usage and avoid disconnection. Disconnection limits a household’s ability to refrigerate perishable food, purchase medicine, and maintain adequate temperatures. It also causes additional harms, including debt accumulation, accidents from “DIY” heating and cooling mechanisms, increased risk of homelessness, and even death as temperatures increase due to climate change.

By firing the staff, the Trump administration has de facto ended the LIHEAP program this year. According to a draft budget request document, the administration intends to not allocate LIHEAP funding next fiscal year, despite the program historically receiving bipartisan support.

The immediate impacts of ending LIHEAP are clear: American households who already struggle to pay utility bills are going to suffer.

Energy insecurity, or the inability of households to meet their energy needs, will continue to exist without LIHEAP, but ending LIHEAP will not just hurt energy-insecure households; it will hurt all households.

Historically, utilities have relied on LIHEAP to avoid accruing bad debt on balance sheets from customers who cannot pay their bills. It also costs utilities time and manpower to process disconnections and reconnections. Despite this, corporate utilities have remained largely silent on the LIHEAP layoffs, according to a new report by the Energy and Policy Institute. Utilities generally set rates by bundling energy production costs and dividing them by a prediction of what total output will be. In general, these costs to the utility are fully recovered through rates, and utility costs are ultimately borne by consumers.

Given this principle, it seems safe to assume that increased disconnections will shift the administrative, infrastructure, and service costs to other consumers who can still pay. For example, a 2021 report by the Energy Institute at Haas on California’s investor-owned utilities (IOUs) found that 66 to 77 percent of what California ratepayers are paying is the fixed costs of operation that do not change based on customer consumption.

A 2022 study on the impact of heatwaves on disconnections in low-income households in Southern California found that electricity expenses increase by 1.6% for each day above 95 degrees in the current billing period, which is mirrored by a 1.2% increase in disconnection risk 2-3 months later. Even marginal rate increases will increase disconnections.

More disconnections, which will increase without programs like LIHEAP, will cause higher rates for everyone. This makes it more difficult for people who are disconnected to reconnect, and higher rates will increase the number of people at risk of disconnection.

This cycle of disconnection and higher rates mirrors the “utility death spiral” argument about rooftop solar adoption’s impact on utilities: as more homeowners install solar panels, they will buy less from utilities, which will raise electricity prices for everyone else to make up for the shortfall. This encourages more people to adopt solar to avoid higher rates. Utilities have used this “cost shift” argument to lobby against solar programs like community solar that have the potential to lower household energy bills.

Ending programs like LIHEAP that help people meet their basic energy needs could create a “disconnection spiral” that will surely be deadly as rising energy bills force more disconnections, which in turn create higher bills for other ratepayers. As rates increase, more households will become energy insecure and at risk of disconnection.

A “disconnection spiral” could force governments to step in and subsidize energy bills for households through reinstating programs like LIHEAP, or force utilities to reconfigure rate design to reduce disconnections by keeping rates lower. Without LIHEAP, American households—regardless of whether they are currently energy insecure or not—are at risk.

This is one possible outcome of ending LIHEAP, but we must monitor the immediate and long-term implications of defunding this critical program in the coming months and years.

Elea Castiglione

Kleinman Center Research Assistant

Elea Castiglione is an undergraduate student studying philosophy, politics, & economics with a concentration in public policy and governance. Castiglione is a 2025 Undergraduate Student Fellow and a research assistant with the Center.