National Fuel customers expected to share 50% more to heat their homes this winter

It’s going to be a costly winter to heat your home.

With energy prices soaring in the wake of the Russian invasion of Ukraine, National Fuel Gas Co. is predicting that 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 share 50% more to heat their homes than they did last year.

If temperatures are normal this winter, the average bill is expected to reach $1,023 – up from an average of $684 a year ago.

Unusually cold temperatures could drive bills up even higher by causing consumers to use more gas and potentially pushing prices even higher as demand rises. Likewise, warmer-than-normal temperatures could give consumers some relief by reducing consumption and demand.

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Karen Merkel, a National Fuel spokeswoman, said the forecast amounts to a “steep increase” for National Fuel’s customers in Western New York, where more than 90% of homes are heated with natural gas.

The reason: a surge in natural gas commodity prices since the invasion of Ukraine began in February. The commodity price of natural gas is 51% higher than it was a year ago, with nearly all of the increase coming since the invasion. Natural gas commodity costs have more than doubled over the past two years.

“Unfortunately, natural gas bills are following the trend of virtually every other consumer product,” Merkel said. “Expenses will be significantly higher this winter heating season.”

The forecast for this winter also indicates that the period of fairly modest heating costs that has lasted for 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 had enjoyed sharply lower winter heating costs for most of the past decade, thanks to a boom in low-cost production from 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 topped $600. During the unusually warm winter of 2015-16, the average winter bill dropped below $400.

This winter, it’s a much different picture, which likely will strain the budgets of many consumers already grappling with rising prices on many items, from food to gasoline.

That will put a renewed focus on both conservation efforts and government programs to help low-income residents pay their heating bills, Merkel said.

With heating rising costs, the savings from conservation and energy-efficiency improvements will increase, as well. Turning the thermostat down by 10 to 15 degrees for eight straight hours, such as overnight, can reduce heating bills by 5% to 15% annually.

National Fuel bases its forecast on the assumption that temperatures this winter will return to more normal levels. That would mean a modest increase in the amount of gas the typical customer uses, compared with last year, when temperatures were 10% warmer than normal.

The main reason for the higher heating bills is the rising demand globally for natural gas and the shock to the world’s energy markets caused by the invasion of Ukraine.

Natural gas producers cut back on drilling during the pandemic, which reduced the amount of natural gas they produced. It wasn’t until this month that natural gas producers were running more drilling rigs than before the pandemic, according to energy services firm Baker Hughes.

That is expected to lead to an increase in natural gas production, the US Energy Information Administration predicts, after drillers were slow to make investments to increase drilling as prices began rising as the pandemic eased. Natural gas consumption this year across the US is expected to reach a record high, the energy agency forecast.

The demand for liquefied natural gas produced in the US also has jumped, especially in Europe, which is dealing with its own crunch as gas supplies from Russia have been slashed.

As a result, supplies are tight heading into the winter heating season that runs from November through March. The amount of natural gas stored underground for future use is 11% lower than it normally is at this time of year, the federal energy agency said.

Utilities like National Fuel Gas uses sophisticated hedging strategies to smooth out some of the volatility in gas prices. That helps ease some of the volatility in commodity costs.

They also build up their natural gas supplies by pumping gas into underground caverns during the summer for use during the winter. But this year, that gas, which accounts for about half of all gas National Fuel uses during the winter heating season, was purchased at prices that, while lower than today, still were elevated, Merkel said. The prices National Fuel paid for the gas it pumped into storage facilities this summer was nearly 50% higher than it was in the summer of 2021.

The 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, draftier and less insulated than residences of wealthier consumers.

Low-income consumers in New York spend between 20% and 40% 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 profits come through the delivery charges paid by consumers that are set through negotiations with state utility regulators.

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