With energy prices soaring in the wake of the Russian invasion of Ukraine, National Fuel Gas Co. predicts heating bills this winter will be the highest in 14 years.
And it won’t just be a little more expensive. National Fuel estimates that the average residential heating customer will pay 50% more to heat their homes than last year.
If temperatures are normal this winter, the average bill should reach $ 1,023, compared to an average of $ 684 a year ago.
Unusually cold temperatures could drive bills further by inducing consumers to use more gas and potentially pushing prices even higher as demand increases. Likewise, warmer-than-normal temperatures could give consumers some relief by reducing consumption and demand.
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Karen Merkel, a spokesperson for National Fuel, said the forecast equates to a “steep increase” for National Fuel customers in western New York, where more than 90 percent of homes are heated with natural gas.
The reason: a rise in the prices of natural gas raw materials since the invasion of Ukraine that began in February. The price of natural gas raw materials is 51% higher than a year ago, with almost all of the increase coming since the invasion. The costs of natural gas raw materials have more than doubled in the past two years.
“Unfortunately, natural gas bills are following the trend of almost all other consumer products,” Merkel said. “The costs will be significantly higher this winter heating season.”
Forecasts for this winter also indicate that the period of fairly modest heating costs spanning more than a decade is coming to an end, bringing heating costs back to the higher levels that were common in the mid-2000s.
Consumers have enjoyed significantly lower winter heating costs for most of the past decade, thanks to the boom in low-cost production by shale gas producers, including many in western Pennsylvania.
Until last year’s price jump, it had been eight years since the average winter heating bill in Western New York even exceeded $ 600. During the unusually warm winter of 2015-16, the average winter bill dropped to as high as $ 600. below $ 400.
This winter is a very different picture, one that is likely to strain the budgets of many consumers already struggling with rising prices on many items, from food to gasoline.
This will put renewed focus on both conservation efforts and government programs to help low-income residents pay their heating bills, Merkel said.
As heating costs rise, savings from conservation and energy efficiency improvements will also increase. Lowering the thermostat from 10 to 15 degrees for eight consecutive hours, such as during the night, can reduce your heating bills by 5% to 15% per year.
National Fuel bases its predictions on the assumption that temperatures will return to more normal levels this winter. This would mean a modest increase in the amount of gas used by the typical customer, compared to last year, when temperatures were 10% warmer than normal.
The main reason for the rise in heating bills is the growing demand for natural gas globally and the shock to world energy markets caused by the invasion of Ukraine.
Natural gas producers reduced drilling during the pandemic, which reduced the amount of natural gas they produced. It wasn’t until this month that natural gas producers used more rigs than before the pandemic, according to energy utility Baker Hughes.
This should lead to increased natural gas production, the U.S. Energy Information Administration predicts, after drillers have been slow to make investments to increase drilling as prices have started to rise as the pandemic eases. According to the forecasts of the energy agency, the consumption of natural gas this year in the United States is expected to reach a record high.
Demand for liquefied natural gas produced in the United States has also increased, especially in Europe, which is facing its own crisis as gas supplies from Russia have been cut.
As a result, supplies are scarce towards the winter heating season which runs from November to March. The amount of natural gas stored underground for future use is 11 percent lower than normal at this time of year, the federal energy agency said.
Utilities such as National Fuel Gas use sophisticated hedging strategies to smooth out some of the volatility in gas prices. This helps alleviate some of the volatility in commodity costs.
Additionally, they accumulate their natural gas reserves by pumping gas into underground caves during the summer for use during the winter. But this year, that gas, which accounts for about half of all gas used by National Fuel during the winter heating season, was bought at prices that, while lower than today’s, were still high, Merkel said. The prices National Fuel paid for the gas it pumped into storage facilities this summer were nearly 50% higher than in the summer of 2021.
Higher heating bills this winter will strain the budgets of low-income consumers, who often use more gas because their homes and apartments tend to be older, more drafty and less insulated than the homes of wealthier consumers. .
According to the State Utilities Commission, New York City’s low-income consumers spend between 20% and 40% of their income on energy costs. Nearly 1 in 6 National Fuel customers are considered low-income.
National Fuel, like all state utilities, makes no profit from the natural gas it sells to its customers. Its profits are derived from the delivery charges paid by consumers which are established through negotiations with the regulators of public services.