Dollars & Sense

As temperatures drop, heating bills are on the rise

Updated: 2013-12-28T04:15:45Z

By STEVE EVERLY

The Kansas City Star

The recent spate of frigid weather — expected to return Sunday — has furnaces humming and heating bills climbing, especially when compared with a year ago.

This heating season has started off with mostly cooler than normal weather. Compared with last year, both November and December have been much colder.

So more natural gas, the main fuel for heating in the Midwest, is being used. And that’s forcing up heating bills.

Jim Bartling, a spokesman for Atmos Energy, which has natural-gas customers in Johnson County and other areas in Kansas, discovered that first-hand. His heating bill from early November to early December was $73 higher, or about 30 percent more, than what he paid a year ago.

A small part of the increase was due to higher gas prices, but it mostly came from using more gas to stay warm.

“It has been colder, and usage is up,” he said.

The higher bills come as experts believe that natural gas is at a turning point. Natural gas supplies recovered from underground rock formations have surged in the last few years, keeping prices down. But production in the last year has slowed, and supply and demand are becoming more closely matched.

The production slowdown and the spike in consumption this winter have recently driven futures prices on the New York Mercantile Exchange to a 2½-year high. However, they’re still far below the price spikes seen a few years ago.

Utilities get to pass their gas costs through to their customers, and some have raised gas prices a bit. But consumers should be shielded from the worst of the price increases this winter because some gas is bought ahead and stored, and utilities have hedging programs and other measures to cushion against volatile prices.

A more immediate concern is the higher bills from more gas being used. Agencies helping those struggling to pay their utility bills say requests for help are up.

“We’re also seeing an increase in new people,” said Sharon Kinder, executive director of the Grandview Assistance Program.

The effect of cold temperatures, of course, varies among households, depending on insulation, how families use their furnaces, and other factors. Setting your thermostat back 10 to 15 degrees for eight hours while you’re asleep or away from home can cut your gas use up to 15 percent, according to the U.S. Department of Energy.

Still, in cold weather you’re going to use more gas. Heating degree days, a widely used measure to determine the effect of weather on home heating use, show that in general about a third more natural gas was needed this December through Christmas to heat a home in the Kansas City area.

November’s weather was also much colder than last November, so utility bills dropping in mailboxes now are already reflecting the increased consumption. One example: a Missouri Gas Energy customer with a 3,200-square-foot home, which is larger than an average home, used an additional 17,000 cubic feet of gas from mid-November through mid-December. That raised the bill by $85.

Estimates vary on the average impact. Kansas Gas Service said December’s temperatures, which in the last few days have warmed up some, could cost an average residential customer about $25 for the extra gas usage.

Meanwhile, there are signs that higher gas prices are beginning to trickle through to consumers.

For Atmos Energy customers in December, the cost of gas, which is the wholesale price of the fuel plus a storage and transportation fee, was $4.85 per 1,000 cubic feet. That was up from $4.45 for the same month in 2012. The price in January will be $5.33 compared with $4.57 a year ago.

Natural-gas prices on the New York Mercantile Exchange have been climbing since early November, when they fell to $3.52. A couple of days before Christmas, they reached $4.46 after reports of the largest withdrawal of natural gas from storage since 2008.

Still, the increases are far less than the spikes to $10 or more per 1,000 cubic feet seen a few years ago

Increases in natural gas production have slowed dramatically, according to the Energy Information Administration, as domestic producers focus on recovering more profitable crude oil instead of natural gas.

James Williams, an analyst for WTRG Economics, said supplies are getting tight enough that something like a spike in consumption or a large withdrawal of natural gas from storage will have an effect. Though he doesn’t expect the sharp price spikes once seen, the cycle of the last few years when a surplus of natural gas kept prices down appears to be ending.

“We’re getting close,” he said.

To reach Steve Everly, call 816-234-4455 or send email to severly@kcstar.com.

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