It's Going to Cost More to Heat Your Home This Winter
The Only Question Seems to Be, How Much More?

By Frank Reeves
Pittsburgh Post-Gazette (Pittsburgh, PA)
October 13, 2002

Timothy Merrill, Jr., president of a Green Tree-based energy consulting firm, knows the hazards of trying to predict natural gas prices -- a key indicator of what many will pay in heating bills this winter.

A few years ago, Merrill and his staff put money into an office pool, with the jackpot going to the staff member who came closest to correctly predicting the price of natural gas during the coming winter months.

"The winner was our chief financial officer, who had the least knowledge of the energy business," Merrill recalled with a chuckle.

Looking ahead to natural gas prices this winter, "It's anybody's guess," said Merrill, who runs Competitive Energy Strategies Co. He cautioned that natural gas prices are extremely volatile and any number of factors, including the weather, could change the situation. Last week, the federal Energy Information Administration ventured where Merrill and some analysts feared to tread. The U.S. Department of Energy's statistical and research arm predicted that residential heating bills would rise an estimated $100 to $300 this winter from a year ago.

Natural gas users will get hit the least, with an expected 19 percent increase in their bills during the October-through-March season, the agency said. Those who use heating oil should see their bills rise 45 percent, it said, while users of propane should see their bills rise 22 percent.
Roughly half the households in the country use natural gas to heat their homes, while about a third use electricity and almost 10 percent use heating oil. The remainder use wood, alternative fuels or have no heat at all.

Higher energy use -- not higher energy prices -- will be the main force driving heating bills higher, the agency said. The Energy Information Administration's analysts expect normal winter weather to prevail over much of the country this coming winter, in contrast to a year ago when winter was 10 to 20 percent warmer than normal. Under these circumstances, households would be expected to use more heating fuel and consequently have higher bills even if the price of natural gas, oil or propane remained the same.

The agency said it expects heating fuel prices to rise somewhat, mainly due to increased demand because of the expected colder weather. But prices aren't expected to reach the record levels of two winters ago, when some households, particularly those that use natural gas, saw their heating bills double from 1999-2000 winter levels.

The government also said it expected that there should be sufficient fuel supplies for this winter, mainly because natural gas and propane stockpiles are at record levels. Heating oil supplies are slightly below recent averages, however, which is why those prices are expected to rise the most.

There are some caveats to the government's forecast for modestly higher bills.

If the economy shakes its doldrums and suddenly spurts ahead early next year, which few economists predict, then natural gas prices could spike as industries and electric generating plants start consuming more. Companies increasingly are favoring natural gas over coal, oil and nuclear power to generate electricity.

The government also cautioned that rising world oil prices could pull natural prices upward, "since both fuels are substitutes for each other in such areas of the economy as electrical and industrial production."

Overshadowing the world's oil markets is the prospect of a U.S. invasion of Iraq, and the effect that this could have on oil production in the Middle East.

Pennsylvania residents who use electric heat aren't likely to see any major price increases since electricity rates here are capped by the state Public Utility Commission.

Moreover, the rise in wholesale natural gas prices is already reflected in the rates gas utilities charge. Last month, the Public Utility Commission approved requests by Columbia Gas of Pennsylvania, Dominion Peoples and Equitable Gas to increase what they charge customers to cover the cost of natural gas.

Columbia Gas, for example, raised the price it charged customers for natural gas to $4.60 per thousand cubic feet (mcf) for the October-December quarter, vs. $3.35 per mcf a year ago. Similarly, Dominion Peoples' rates rose to $4.22 per mcf for the same period from $4 a year ago.

But consumers don't have to buy natural gas from their local gas utility, even though the utility owns and operates the gas lines that deliver the gas to their home. Under Pennsylvania's deregulation plan, they can chose a supplier other than their local gas utility from a list of licensed suppliers approved by the state PUC.

State Consumer Advocate Sonny Popowsky said that the choice programs have two distinct advantages: consumers can compare prices and they can consider entering into long-term contracts as a hedge against future increases in natural gas prices.

But before someone chooses an alternative gas supplier, he or she should be prepared to ask detailed questions beyond the price of natural gas, such as the length of the contract, whether the price is fixed or variable, and about fees for switching to or from a particular supplier.

When comparing the price a supplier charges with what the local gas utility is charging, it is important to remember that that utilities typically change their gas prices on a quarterly basis.

Information on the state's natural gas choice program can be found on the Office of Consumer Advocate's Web site: www.oca.state.pa.us or by calling the office's toll-free number: 1-800-684-6560 (in Pennsylvania only).

The state PUC also provides information on its Web site: www.utilitychoice.org or by calling a toll-free number: 1-888-782-3228.

During any economic slowdown, inevitably some families struggle to pay heating bills. For anyone confronting this circumstance, help is available.

One source of help is the Low Income Energy Assistance Program (LIHEAP), which is funded with federal dollars and administered by the state Department of Public Welfare.

But Congress, whose attention has been focused on a possible invasion of Iraq, has yet to approve money for the program. Last year, it appropriated $1.7 billion for LIHEAP, of which Pennsylvania's share was $114 million. State officials are hoping that the state will receive at least that much this year.

To be eligible , a family must earn less than 135 percent of the federal poverty level, or an annual income of under $23,828 for a family of four. A family does not have to be on public assistance to be eligible for LIHEAP.

LIHEAP provides crisis assistance for people whose heat, electricity or water has been cut off. It also helps people who are having a hard time paying their bills and face the prospect of having utilities shut off.

LIHEAP won't be up and running until mid-November. Once it is, people desiring information about it should contact their local county assistance office or call the Department of Public Welfare. Toll-free numbers will be in operation once the program is under way.

Another source of help is the Dollar Energy fund, whose money comes from individual donations that are matched dollar-for-dollar by many of the region's utilities.

The fund helps people whose gas, light or water have already been turned off. It is a last resort for people who have already tried to get assistance from government programs such as LIHEAP or tried to work out payment arrangements with their utilities. Information on the Dollar Fund is available through the local utilities.

To be eligible to receive assistance from the Dollar Energy Fund, a family's income may not exceed 200 percent of the federal poverty level or an annual income of $35,304 for a family of four.

Tips to trim heating bills
* Vacuum ducts, check air filters and replace dirty ones in your heating units.
* Make sure the flame on your furnace is burning an efficient blue (let a qualified heating specialist handle any modifications).
* Install an automatic timer thermostat to lower the temperature when you are asleep and away at work.
* Shut registers in and close doors to rooms that aren't being used. Move furniture and draperies away from registers or radiators.
* Wrap your hot water heater with fiberglass insulation.
* Weather-strip doors and windows and, for windows that are drafty and closed during the winter, install window insulation using kits available at hardware stores.
* Remove air conditioners for the season or, if they can't be removed, wrap them with heavy duty plastic sheeting.

Source: Post-Gazette research, U.S. Department of Energy's Energy Savers tips (www.eren.doe.gov/ energy_savers)