Staying warm shouldn’t bust your budget this winter.
In fact, heating bills this winter are expected to be the second-lowest in the last 22 years, costing the average residential customer just under $500, according to a new forecast from National Fuel Gas Co.
If temperatures return to normal after last winter’s unusually warm weather, the Amherst-based energy company estimates that heating bills for a typical customer will be about 30 percent higher than they were last winter. That would be $116 more than last winter, when heating costs fell to $381 – their lowest level in more than two decades because of a combination of warm temperatures and low natural gas commodity prices.
And because natural gas prices remain unusually low, this winter’s bills still are likely to be about 18 percent lower than the average for the last five years, even if temperatures return to move normal levels.
“It’s hard to compare with last winter, because last winter was so warm,” said Karen L. Merkel, a National Fuel spokeswoman.
The good news on heating costs is largely due to the steady decline in the price of natural gas over the last six years and the Buffalo Niagara region’s location near one of the most prolific natural gas fields in the nation – the Marcellus Shale region in central and western Pennsylvania.
“Western New York has a location advantage, being adjacent to the new shale gas production in Pennsylvania,” said Gary A. Marchiori, the president of EnergyMark, an Amherst energy services firm.
That advantage is especially good for Western New York consumers. Because there is such a glut of natural gas in the Marcellus Shale region, prices of gas produced there have been running well below national spot market prices. While natural gas commodity prices now are running at just above $3 per 1,000 cubic feet, shale gas from Pennsylvania was selling for less than $1.50 per cubic feet during the summer – a time when utilities like National Fuel buy a lot of the gas that their customers will use during the coming winter.
About half of the natural gas that National Fuel’s customers will use this winter was purchased during the summer, Merkel said.
Even so, predicting heating costs can be tricky because how much consumers pay depends, in large part, on how cold the winter is. An unusually warm winter like last year’s – when temperatures were 17 percent warmer than normal – can drive down heating bills even more, as consumers use less gas and the low demand depresses gas prices further. Likewise, a cold winter causes furnaces to run more frequently, pushing up bills and, often, increasing the cost of the natural gas itself as demand rises.
The National Weather Service is predicting above-normal temperatures through December for most of Western New York.
Commodity prices in the Marcellus Shale region are depressed because there is not enough pipeline capacity to ship the vast amounts of gas the area is producing to markets in the Northeast and elsewhere that need it, creating a severe oversupply. And while several major pipeline expansion projects are in the works, including one by National Fuel that will run through Western New York and transport gas from Pennsylvania to markets in Canada, those projects are not coming into service fast enough to make a big dent in the supply glut.
That’s good for consumers in two ways. Not only is the commodity price of nearby natural gas supplies lower, but the cost of transporting that gas to Western New York also is less because it is nearby in Pennsylvania.
Heading into the heating season, natural gas stockpiles nationally are almost 6 percent above their five-year average, creating more of a cushion in case a cold spurt drives up consumption, according to the Energy Information Administration.
If the forecasts hold true, it would be the eighth straight winter of relatively low heating bills in Buffalo Niagara. Heating costs during each of the last five winters have averaged $605 – 43 percent lower than the $1,065 they averaged from 2005 to 2008.
Still, heating costs can be a burden for low-income consumers, who often use more gas because their homes and apartments tend to be older, draftier and less insulated than residences of wealthier consumers.
Low-income consumers in New York State spend between 20 and 40 percent of their income on energy costs, according to the state Public Service Commission. Nearly 1 in 6 National Fuel customers is considered to be low-income.
National Fuel, like all utilities in the state, does not make a profit on the natural gas that it sells its customers. Its gas costs differ from the commodity price because the utility has bought nearly half of its gas this summer, when prices were even lower than they are today, and is storing it underground until it’s needed. The utility also buys some gas through advance-purchase contracts or on the spot market, Merkel said.
National Fuel makes its money on the rates, negotiated through the PSC, that it charges its customers to deliver gas to their homes and businesses. Those delivery rates have not changed since 2007, although the company is seeking a rate increase that would take effect in April 2017.
About 89 percent of the households in Erie County heat with natural gas, the U.S. Census Bureau says; 6 percent heat with electricity, and less than 2 percent apiece use fuel oil or propane.