This winter's heating bills will be the highest ever for most customers -- but they won't be quite as high as originally thought.
Due to the continued drop in natural gas commodity prices, National Fuel Gas Co. now expects the typical residential customer's heating bills to jump by 16 percent, or $166, to an estimated $1,188. That's $50 less than the company forecast from a month ago that predicted a 21 percent rise in heating costs.
But those heating bills, which assume that temperatures will run close to normal this winter, still will top the previous record of $1,085, set in the winter of 2005-06, by an estimated $103.
"We're still in a high-cost environment," said Christopher B. McGill, the managing director for policy analysis at the American Gas Association, an natural gas utility industry trade group.
While natural gas commodity prices have plunged by 51 percent since July, the prices that utilities, like National Fuel, charge their customers are dropping at a much slower pace because they line up their supplies for the upcoming winter beginning in mid-spring and continuing throughout the summer.
That means that utilities were buying natural gas, either directly to put in underground storage facilities or by working out deals to acquire the gas during the heating season that runs from November through March, at a time when commodity prices were near record highs.
Utility officials said those advance purchases are unavoidable because of the need to fill storage facilities in advance of the cold weather to avoid potential shortages.
"We were negotiating these prices when prices were high in the summer months," said Julie Coppola Cox, a National Fuel spokeswoman.
Because natural gas prices can be very volatile, Cox said it is not prudent to rely on spot market prices, which could potentially subject consumers to wide price increases and price drops.
National Fuel uses a purchasing strategy that relies on stockpiling natural gas in underground caverns, as well as on gas purchases through a combination of fixed-price and market-priced contracts. By having less than a third of its winter gas supplies linked to spot market pricing, Cox said National Fuel is trying to protect consumers from wide swings in commodity prices.
As a result, "what's happening today has an impact, but it's a marginal impact," Cox said.
Natural gas costs account for about 80 percent of a typical National Fuel customer's total bill, while delivery charges, which include the company's profits, make up the remaining 20 percent. National Fuel does not make money on the gas portion of a customer's bill.
To help customers lower their heating costs, National Fuel continues to offer rebates to residential natural gas customers who buy high-efficiency furnaces and water heaters, along with programmable thermostats.
The rebates range from $400 on the purchase of a high-efficiency natural gas furnace and up to $150 on qualifying hot water tanks, to $25 for qualified programmable thermostats. The company has paid out $2.1 million in rebates since the program began last December, Cox said.
The company also is offering a savings card that offers discounts from local energy contractors on items such as furnace filters, home weatherization products, service and repair on natural gas appliances and high efficiency furnaces and water heaters. The card is available through the rebate program's Web site atnationalfuelforthought.com.