Heating bills shouldn't be a budget-buster this winter.
Heating costs are expected to rise by almost 5 percent this winter – and if the forecast pans out – it would be the most expensive heating season in four years, according to a new forecast from National Fuel Gas Co.
But there's a silver lining: Even with the expected increase, heating costs still are expected to remain relatively affordable, averaging around $585 from November to March. That's about half as much as the average resident paid 10 years ago, before the natural gas boom across Appalachia caused prices to plummet and ushered in what turned out to be a decade of sharply lower heating bills.
"Natural gas bills continue to remain historically low," said Karen L. Merkel, a National Fuel spokeswoman.
The forecast, however, is based on temperatures being fairly normal. An unusually cold winter could lead to higher bills by pushing up prices and causing consumers to use more natural gas. A warm winter would lead to lower bills, as consumers use less gas and the reduced demand likely would lower natural gas prices.
And even then, forecasting heating costs can be tricky. Last winter, National Fuel expected heating bills to average just under $500. But a cold start to the winter and higher natural gas prices led to an even steeper increase, with the typical customer paying almost $560.
If the forecast pans out, this winter's heating bills will be about $16 higher than the $569 average over the past five years and about 19 percent lower than the $722 average over the last 10 years.
"It's a little higher pricing than this time last year, but it's not a big increase," said Gary A. Marchiori, the president of EnergyMark, an Amherst energy services firm. Marchiori thinks heating costs this year could rise even less than National Fuel anticipates, especially if the winter gets off to a relatively warm start. He predicts that heat bills this year will be, at best, the same as last winter, or at worst, up about 3 percent.
As heating bills have dropped, consumers across the Buffalo Niagara region also have been using slightly more gas, on average.
"You want to be comfortable, and the pricing supports it," Marchiori said.
The more affordable heating costs are largely due to the steep decline in the price of natural gas over the last seven years and the Buffalo Niagara region’s location near one of the most prolific natural gas fields in the nation stretching from Pennsylvania and Ohio into West Virginia.
"It is all about supply and demand," Merkel said.
With so much natural gas being produced in Appalachia, there isn't enough pipeline capacity to move it to markets in the Northeast. That pushes down prices for that gas, which typically sells for less than the widely-quoted natural gas commodity price, she said.
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 much of it comes from nearby Pennsylvania.
Heading into the heating season, natural gas stockpiles nationally are at a 13-year low, which reduces the cushion against price spikes in case a cold spurt drives up consumption, according to the Energy Information Administration.
To protect against price spikes, nearly half of the natural gas that National Fuel’s customers will use this winter was purchased during the summer at prices that were almost 25 percent lower than the current spot price, Merkel said.
If the forecasts hold true, it would be the ninth straight winter of relatively low heating bills in Buffalo Niagara. Heating costs during each of the last five winters have averaged $569 – 47 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 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.
National Fuel's utility business makes its money on the rates, negotiated through the PSC, that it charges its customers to deliver gas to their homes and businesses. Commodity costs account for slightly less than half of a residential customer's average bill, Merkel said.
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.