A growing number of Californians are struggling to pay their gas and electric bills as the economy slows and utility rates are poised for a major increase. Economic stress is resulting in emergency energy assistance funds being outstripped. A rising number of people are without heat and light. \u201cShutoffs are at the highest levels they have ever been,\u201d said economist Roger Colton, a partner in the Massachusetts-based consulting firm Fisher, Sheehan, and Colton, which tracks energy affordability. \u201cThe system can\u2019t continue to absorb the non-payment.\u201d The shutoffs and non-payments are mounting just as utilities are raising rates to modernize long neglected infrastructure and meet new and urgent environmental goals. A recent analysis by Energy and Environmental Economics projects electricity rates will rise in real terms by as much as 13 percent on average in California. Tackling greenhouse gas reductions mandated under the state\u2019s climate protection law, AB 32, could boost rates by another 13 percent. To repair long neglected infrastructure that has been causing blackouts, the Los Angeles Department of Water & Power last month boosted its base rates by 9 percent. The increase will take effect in three steps. Southern California Edison is seeking a 16.2 percent base-rate hike, which would raise the average utility bill for its customers by 6.2 percent. The money is needed to help carry out $19 billion in infrastructure improvements to repair its aging network and to supply service to new customers in fast-growing inland areas around Los Angeles, according to the utility. News of the rate hikes comes at the same time a report released by the National Energy Assistance Directors\u2019 Association late last month showed that the number of California households late on their residential energy bills rose last year from 1.6 million to 1.7 million, or by more than 6 percent. Back payments owed to California utilities grew by 5.2 percent, from $284 million to $299 million. In 2007, the state Community Services and Development Department reports that 228,013 received assistance paying their bills from the Low Income Home Energy Assistance Program. Through April of this year, 43,698 Californian had turned to the fund for help. At the same time, assistance payments under the Low Income Household Energy Assistance Program grew by just 1.2 percent. The program provides last resort cash assistance for poor households facing imminent shutoff of energy services for non-payment. \u201cThese families have very little discretionary income and it is increasingly going to pay high energy bills, both to heat their home and drive their cars,\u201d said Mark Wolfe, National Energy Assistance Directors\u2019 Association executive director. Combined with higher food prices, \u201cmany low income families are at risk of falling even further into poverty.\u201d What is particularly worrisome is that the increase in arrearages is occurring in a state known for its comparatively generous energy assistance discounts for low income customers, as well as a cadre of utilities that have done a good job marketing enrollment in assistance programs, observed Meg Power, Economic Opportunity Studies economist in the nation\u2019s capitol. She follows the impact of energy prices on low income consumers. Another troubling trend is that the energy affordability gap--the difference between what utility customers can afford to pay and what they have to pay for energy--has been widening and creeping up beyond the poverty line into the lower middle class in California, said Colton. Five years ago, he said, only those below the federal poverty line faced an affordability gap. Last year, however, families in the lower middle class had problems, with the average gap at $765 a year for people with income up to 185 percent of the poverty line, he said. The cumulative affordability gap in the state stood at $2.7 billion in 2007, up $772 million from the previous year, Colton said. To close the gap, many customers have turned to credit cards, said Power. But as food and gasoline prices rise and credit tightens many of these customers now have exhausted their credit and may not be able to continue to charge their household energy. Others are awaiting their federal tax rebate checks to help pay utility bills. \u201cThe current credit crunch has forced many consumers to reprioritize their spending habits,\u201d said Ty Taylor, Experian Interactive(SM) group president. A survey by the company last month showed that 6 percent of those receiving rebate checks plan to use them to pay off utility bills. Power adds that some solidly middle class families can\u2019t pay their utility bills, due to wage stagnation, health care expenses, and need to help support elderly parents, higher prices at the pump and grocery store. With AB 32 soon to take effect--and utilities already planning for how to meet emission reduction requirements--the big question is the likely impact of a planned carbon trading market on utility rates, according to Snuller Price, Energy & Environmental Economics partner. Purchasing credits will increase costs for power producers and utilities, he observed. That could be a tall order, under some of the scenarios the company analyzed real electricity rates by 2020 could increase by as much as 48 percent for LADWP customers, 43 percent for Southern California Edison customers, 39 percent for Pacific Gas & Electric customers, 37 percent for San Diego Gas & Electric customers, and 36 percent for Sacramento Municipal Utility District customers. The analysis assumes natural gas will be priced through the period at an average of less than $8\/MMBtu, according to Price. However, gas prices, which are passed through to utility customers directly as fuel costs for making power, averaged $10.26\/MMBtu last month, according Oilnergy.