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Low Heating Prices Don’t Equal Savings

October 18, 2012 By Will Nissen, Fellow

For Minnesotans who know our state’s winters, last year was weird. Temperatures were mostly balmy but sometimes plunged below zero in parts of the state. Overall we had roughly the second-warmest winter on record, and the warmest in anyone’s lifetime.

This weather trend, combined with the lowest delivered natural gas prices to residential consumers in over eight years, likely made Minnesota residents’ heating bills look exceptionally low.

But don’t get your hopes up, this coming winter will be back to what we’re used to in the North Star State. According to forecasts by the U.S. National Oceanic and Atmospheric Administration, this winter in the Midwest will still be slightly warmer than the average over the last 30 years of the 20th century, but it will be 20 to 27% colder than last year’s winter.

So while your heating bills will go up in the coming months as temperatures drop, it’s important to note that this won’t be because fuel prices are increasing.

The majority of residential heating consumers in the Midwest, roughly 65%, use natural gas as their primary heating source. The remaining third is comprised mostly of electricity and propane-based heating. Fortunately for Midwesterners, the delivered residential price for natural gas is expected to rise by only 1% compared to last winter, delivered electricity prices are expected to drop by 2%, and propane prices are expected to drop by 4%, according to forecasts from the U.S. Energy Information Administration (EIA).

If you heat your home with natural gas, the key aspect to look at on your utility bill is the number of therms you used in the billing period. Utilities buy natural gas on the wholesale market based on volume; prices and quantities are generally set using dollars per thousand cubic foot. But this is not an efficient way of determining how much energy a customer actually consumes.

So gas utilities generally bill customers based on therms, which reflects the energy content of the gas. One therm equals 100,000 British thermal units (BTU) and is roughly the energy content of 100 cubic feet of natural gas. While the volume of natural gas can be influenced by temperature and pressure, its energy content is based solely on the composition of the gas. Impurities such as carbon dioxide or nitrogen can decrease the therm factor, or the energy content per cubic foot.

Temperatures will be lower, requiring more energy to heat your house, and fuel prices will be roughly the same compared to last winter. So the only way to keep your heating bills in check while keeping your home comfortable is to control your demand, and there are a variety of ways to do this.

You can ensure that your house is properly sealed, and you can improve that “envelope” that keeps the warm air from escaping and the cold air from getting in through your walls, doors and windows. You can also get your heating furnace tuned up so it is working as efficiently as possible, minimizing the amount of gas you need to heat your home. Finally, a programmable thermostat allows you to more easily customize your heating demand, keeping your house comfortable when you're home and lowering the temperature when you’re asleep or at work.

There are additional steps you can take to improve the efficiency of your home and lower your heating fuel demand. The Center for Energy and Environment, based in Minneapolis but operating throughout Minnesota, has great resources and connections to efficiency rebates and programs.

This year is projected to bring us back to business-as-usual when it comes to Minnesota winters, and fuel prices are expected to stay flat compared to last year. Given those forecasts, our heating bills are going up. But homeowners can take steps to keep their heating demand in check and minimize that increase in heating bills. And remember to keep an eye on those therms.

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