The Department of Energy Resources (DOER) tracks energy prices and consumption, including those associated with the cost of heating homes during the winter. DOER has analyzed weather forecasts and the projected prices and consumption for this winter for the major heating fuel sources (natural gas, heating oil, propane, electric heating) to provide the following heating season cost projections for 2015-2016. Wood pellet prices are available here. Electricity cost information will depend on your electricity provider; more information can be found here.
Average Household Heating Expenditures Expected to Decrease by 14 - 37 Percent
Due to falling energy prices and expected warmer winter weather (see National Weather Service December 17, 2015), DOER estimates heating expenses for this winter for an average residential customer will be: $879 for natural gas; $2,248 for oil; $2,569 for propane, and $697 for electric heating. Projected expenditures are based on the average price of fuel; consumers’ historical fuel usage; and anticipated weather conditions as noted. Historically, space heating is the largest component, fifty-nine percent (59%), of a Massachusetts household’s energy expenditures.
DOER’s comparison of this year’s versus last year’s expenditures shows a decrease in all fuels:
- 23% for natural gas; - 37% for heating oil; -13% for propane, and – 15% for electric heat (see Table 1).
Table 1: 2015-16 Estimated Average Residential Winter Heating Bills
Figure 1 provides a summary by fuel type of this winter’s projected average residential heating bills and the past five heating seasons. See Table 2 below for the corresponding numbers.
Figure 1: Estimated Average Residential Winter Heating Bills by Fuel
Data source: U.S. DOE/EIA; Mass. Utility Filings, DOER SHOPP surveys
Figure 1 is calculated based on costs associated with the average household usage by fuel type and is a useful comparison year to year for any one fuel type. It should not be used to compare one fuel type to another because it is not normalized for factors that affect fuel usage such things as size of household or square footage. For example, it may appear that electric heat is a lower cost alternative to other fuels, however; it is generally used in smaller spaces such as apartments and condos and is actually more expensive both on a square foot basis and based on a comparison of energy delivered. Energy delivered or “energy intensity” is a better comparison among fuels because it measures energy delivered (energy intensity) using a common unit of measurement. In Figure 2, energy intensity is expressed as the cost of energy versus the amount of energy produced in millions of British thermal units (MMBtu), (One Btu is the heat required to raise the temperature of one pound of water by one degree Fahrenheit.)-U.S. EIA). Based on energy intensity, Figure 2 depicts electricity as the highest cost fuel.
Figure 2: Measuring Energy Intensity of Heating Fuels by Prices per Millions of British Thermal Units (MMBTU)
Data source: U.S. DOE/EIA; utility filings; and DOER analysis
Factors Affecting Projected Heating Costs
Anticipated Falling Fuel Prices Lead to Lower Residential Bills
Natural Gas: Based on the utilities’ natural gas filings at the Department of Public Utilities (DPU). DOER estimates that the projected natural gas price this winter will average $11.90/MMBtu compared with $14.80/MMBtu last winter. However, ongoing natural gas pipeline constraints for delivering natural gas to New England customers could contribute to price volatility during periods of very cold temperatures.
Heating Oil: Lower heating oil prices reflect lower crude oil prices. The U.S. DOE estimates that the cost of Brent crude oil spot prices will average $52 per barrel this winter, a drop of about $13 per barrel (32 cents/gallon) lower than last winter.
Propane: Propane is also benefiting from lower crude oil and natural gas prices, as these are the fuels used to make propane. Additionally, supply issues that have occurred in past years such as the prolonged cold weather throughout the U.S. during the winter, or late season crop drying in the Midwest resulting in high usage of propane stores are not expected to reoccur, thus leading to lower price estimates for propane customers this winter.
Electricity: Based on filings by the Electric Distribution Companies with the DPU, basic service electricity prices for Massachusetts utilities will decrease for this winter. This is largely due to lower natural gas prices as natural gas is the primary fuel used for electric generation. The utilities expect the supply cost to drop by 28% for Eversource customers and 20% for NGRID Customers. Unitil is expecting a 13.6% drop. Municipal electric heat customers should check with their individual utility for prices.
Renewable thermal technologies, including cold climate heat pumps, solar water heating, and biomass pellet heating, are attractive new technologies now entering the market that can offer homeowners significant energy costs savings. DOER is supporting these emerging technologies, as outlined on DOER’s website under Renewable Energy.
For consumers interested in following energy markets and prices throughout the heating season, the U.S. DOE’s Energy Information Administration (EIA) tracks energy prices and the factors influencing them. This information is published in, “This Week in Petroleum” (TWIP) on DOE’s website, www.eia.doe.gov. To assist in tracking factors impacting all heating fuels, EIA also publishes the “Annual Winter Fuels Outlook” (see slide show here) as part of its monthly Short-Term Energy Outlook.
2015-16 Winter Weather Expected to be About 10 Percent Warmer Than Last Winter
While fuel costs are the primary factor in establishing winter heating prices, winter weather has a significant impact on heating bills, as energy expenditures are a function of fuel usage. Colder weather leads to higher usage and warmer weather leads to lower usage. DOER expects that heating fuel usage, calculated based on projected Heating Degree Days (HDD-see definition below) will be lower than last winter, further lowering consumers’ heating expenditures. The National Weather Service (NWS) forecasters expect winter temperatures to be 10% warmer overall this winter than last winter and 3% warmer than a “normal” winter, as measured by the 30-year average of Heating Degree Days.
Based on these predictions and lower fuel costs, DOER is projecting lower fuel bills for all residential heating customers this winter.
Further Background Data on Heating Prices
Comprehensive Household Heating Data for Average Residential Customers
Table 2 provides the comprehensive average residential pricing and consumption data for the past five years and estimates for this heating season.
Heating Degree Days Defined: Heating degree day (HDD) is a measurement designed to reflect the demand for energy needed to heat a building. It is derived from measurements of outside air temperature of 65 degrees. The heating requirements for a given structure at a specific location are considered to be directly proportional to the number of HDD at that location. The difference between the average daily temperature and the base temperature of 65 degrees is the heating degrees for that day.
This information is provided by the Department of Energy Resources.