Your heating bill is going way up this winter
Natural gas prices rise 53% over last year

By Tim Huber
Pioneer Press (St. Paul, MN)
October 5, 2002

If you’re tempted to turn up the thermostat this weekend, you might want to pull on a thick Minnesota Twins sweat-shirt instead.

The price of natural gas is up 53 percent, meaning most Minnesotans will pay more to heat their homes this winter than they did last year. But how much is uncertain and depends on how cold it gets, whether there's war in Iraq or the economy improves.

Even so, the bills won’t be as bad as they were two years ago, when natural gas prices were at record highs. Gas prices are up 53 percent from last October, but they are still 33 percent lower than October 2000, according to Minnesota Commerce Department figures.

“Last year, customer bills were very, very reasonable,” said Joe Klenken, a regulatory specialist with CenterPoint Energy Minnegasco, the state’s largest natural-gas utility. “The good news is that it’s not nearly as bad as it was two years ago."

Two Octobers ago, the aver-age price of 1,000 cubic feet of natural gas was $6.48 in Min-nesota, according to state Com-merce Department figures. Last year, the price fell to $2.89 for the same quantity of gas. This October, it hit $4.42.

The average Minnesota homeowner paid $440.25 for heat between Nov. 1 and March 1 last winter, compared with $762.94 the year before. For the same period in winter 1999-2000, the average heat bill for normal usage was $431.66.

The big question is what hap-pens from now until next spring. Gas prices and heating bills fluctuate based on those old economic standbys of supply and demand.

The supply picture looks good, said Vince Chavez, manager of the Commerce Department's natural gas unit. Imports from Canada remain strong, and overall production is expected to remain above 2001 levels. Almost 64 percent of Minnesota homes heat with gas, so other energy sources aren’t as critical.

“That’s really important, for Minnesota, because the bottom line is there will be enough gas to heat our homes," Chavez said. "There's been times in the past where we've wondered."

Demand, on the other hand, is the big unknown.

Typically, demand increases when the weather gets colder and Minnesotans dash to their thermostats for relief.

"If we just have a normal winter in Minnesota, that would put upward pressure on the prices," Chavez said. "Another factor would be whether or not the economy kicks over."

When the economy is strong, demand for gas increases because factories and other industrial users use more energy. When it weakens, demand slackens as well, which is what has happened since 2000.

This year, there’s a third factor weighing on energy markets, including natural gas. That is the prospect of a war in the Middle East. If the United States goes to war with Iraq, the supply of oil would likely be disrupted. That prospect already has sent oil prices higher, although heating oil is not a major fuel in Minnesota. Less than 10 percent of Minnesota households use oil heat.
However, if oil prices spike or supply slackens, gas prices could rise because many large industrial users can switch fuels easily, Chavez said. That could heighten demand for gas, thus pushing prices higher.

“The weather, the economy, both would kind of indicate we would anticipate somewhat higher prices,” Minnegasco’s Klenken said. “The real key is how fast and how hard will winter set in.”