EIA Projects Lower Bills for Home Heating Oil and Propane Customers

Posted by Ed Burke on Oct 8, 2014 2:45:47 PM

Person adjusting their residential thermostat

The EIA is projecting lower heating bills for consumers this winter - especially if you use propane or oilheat versus Natural Gas. 

Demand is projected to be down across the board because the latest NOAA projections are looking like this winter will (thankfully) be nothing like the extreme arctic fiasco we had this past winter. 

Heres how the numbers break out:

Natural Gas

  • Demand is expected to be down 10%
  • Consumer price is expected to be up 6%
  • Net change - about $30 dollars off your bill per month

Heating Oil 

  • Demand is expected to be down 10%
  • Prices are projected to be down 15% (or around 25 cents per gallon) due to Crude oil prices dropping
  • The caveat here is that its unknown whether new Sulfur regulations will impact price due to supply/demand/logistics issues (you can read about the sulfur changes here: http://www.burkeoil.com/state-sulfur-content-changes )

Propane

  • Demand is expected to be down 13%
  • Prices are projected to be down 24%
  • In the Northeast the propane figures are a little different: 5% lower prices, 9% lower consumption.
  • Last year we saw an extreme propane shortage and logistical nightmares in the propane market. This year inventories are higher than last year in the Midwest and Gulf, but the agricultural yield can impact propane supply levels quickly and harshly, so stay tuned on propane projections after the harvest (corn) season 

So what about here in New England?

As we saw last year, New England Nat Gas prices vary wildly from the Henry Hub spot pricing for Nat Gas. Supply here is a HUGE issue, and we are fighting over any and all pipeline projects that could address that issue in the near term. 

Also, the EIA is projecting that the cost of electricity will be trending down for consumers roughly 2% - but we know that is not the case here in Mass, where we just saw 37% rate hikes approved, on the back of our limited nat gas infrastructure. 

Keep in mind that the majority of cost savings are due to a presumed weather-related demand drop.

The bottom line - if you project that this winter will be 10% colder than average (last year was 11%) Propane and Heating Oil customers still come out ahead and spend less than last year due to the drop in pricing. Natural Gas customers don't fare so well - if their usage mirrors their usage last winter, they can expect a 6% increase in their bill - at least - due to price increases.  Add that to your newly increased electric bill, and heating oil is looking pretty good right now!

 

(PS - if you want the nitty gritty on the Market impacts of todays EIA reports and projections, you can read about that on our Market Update blog here: Retail & Market Prices Drop on Crude Supply & Pricing )

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Topics: natural gas, EIA, national grid, propane, heating oil

Breaking: Rate Hikes Approved. Hold On to Your Wallets - or Hold Your Nose for Pipeline Approvals

Posted by Ed Burke on Sep 26, 2014 4:58:33 PM

Oil pipline in the snow

 National Grid announced Thursday that it is proposing to raise electricity rates by 37% starting November 1, with other utility companies to follow suit. The rate increases are not a profit but a response to the increased cost to the utility companies on the wholesale market. National Grid cites that the price increases are a result of New England moving to deriving more and more electricity from Natural Gas, without the region investing in any supply expansions. Today, the proposed rate hike was approved.

 So what does the rate hike mean for you? The average residential customer in MA is looking at a bill around 40 dollars higher monthly (assuming similar usage year-on-year)

 So whats going on, why is electricity spiking like this?

It’s all about Natural Gas supply.

 The supply crunch we saw with Nat Gas in the region last winter forced many power generation stations to run alternatively on oil or liquid gas for generation, which costs more. Given the polar vortex dominated winter we had this past season, and the lack of any forward progress on infrastructure improvements, it makes sense that rates are skyrocketing in anticipation of another cold season.

 Then why isn’t my natural gas heating bill going up? Basically, long term contracts versus spot pricing – natural gas often gets locked in over longer periods, so it doesn’t necessarily hit you in the wallet right away when prices bounce.

 There are supply solutions potentially on the horizon, but even if approved it would be a couple years before they were fully operational. Two vying pipeline options are being proposed to relieve the Nat Gas supply pinch in New England. The first is Kinder Morgan's Proposal, the Tennessee Gas Pipeline Northeast Energy Direct Project. T he Tennessee pipeline would be through Pennsylvania and Upstate NY, then run through Massachusetts from Richmond on the NY border to Dracut on the NH side. It would run 177 miles, with a 3 foot diameter.

On the other side, Spectra Energy & Northeast Utilities are planning to expand pipeline access to New England on the existing Algonquin pipeline, which will terminate in Everett (right outside of Boston). The project would replace the existing 26 inch pipeline with a new 42 inch one, essentially along the same route it already takes, but the expanded diameter and system upgrades would result in higher yields.

Senators Markey and Warren are both appearing to oppose the pipelines, and many activist groups are also protesting any pipeline expansion ala "not in my back yard"……. but the question becomes - if we dont upgrade the infrastructure to allow more nat gas to flow, aren't we condemning ourselves to continually increasing rates and supply problems? Probably.

One irony of the pipeline protests is that as a region, we’e moved to Nat Gas over environmental concerns (ie replacing coal fired plants). And although there may be some environmental concerns with pipelines, the lack of supply during cold snaps means that power plants etc have to burn other fuels for electricity generation which both drives up cost, and has its own environmental impact. Essentially, the spike in reliance on natural gas for power generation (versus heating) is a result of closing power plants in the region based on their environmental impact - notably the Somerset Station (coal burning)  a few years ago, the Salem Harbor Station (coal burning) closed this year, and the planned shut down of Vermont Yankee (nuclear).

The bottom line is the power has to come from somewhere, and with New England counting on  over 60% of our electricity generation coming from Nat Gas sources, we’ve really painted ourselves into a corner.

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Topics: natural gas, Utility Rates, algonquin pipeline, tennessee pipeline, national grid, electricity rates

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