Winter Weather Forecast
Fifty-nine percent (59%) of a Massachusetts household’s energy expenditures are spent on space heating. This is primarily due to Massachusetts colder climate. This winter the National Weather Service (NWS) is predicting Massachusetts will be about 2% warmer than normal (30 year average), that is about 7.5 % warmer than last winter.
Source: National Weather Service
Winter Heating Season Estimated Energy Expenditures
In addition to weather, other factors impact energy costs. These factors include supply constraints that cause the price of fuels to rise. As a result of natural gas constraints, winter electricity prices are expected to increase across all utilities through basic service rates this season. Conversely the drop in crude oil prices is projected to lower heating oil prices this winter. Propane supply issues that arose last year due to late season crop drying in the Mid-West, as well as the prolonged cold weather throughout the US during the winter are not expected to reoccur leading to lower price estimates for propane customers this winter.
Based on the NWS prediction of slightly above normal weather coupled with utility filings and U.S. EIA price estimates for this year, DOER has estimated the cost of heating and electricity bills for the upcoming winter. Below are the estimated costs for the past five years for the top four heating fuels currently tracked by DOER, as well the estimated projections for the upcoming 2014/15 heating season. Depending on the fuel used to heat their homes, Mass households will spend a wide range on energy expenditures this heating season.
(Note: electric and natural gas estimates are based on filings of the non Municipal electric distribution companies and natural gas utilities with Mass DPU. For these electric customers, National Grid and Unitil have filed their winter rates; the estimate is based on those filings plus an estimated range of NSTAR/WMECO proposed filings (actual filings are in November). DOER will update when those rates are filed. Municipal electric and gas customers should check with their Municipal utility for their rates).
Source: Mass Department of Energy Resources
Over the past five years, heating oil and propane customers have paid the most for household heat, with natural gas and electric customers paying the least. Electric heat is also impacted by natural gas prices as it is the primary fuel used in electric generation. While it may appear that electric heat is a lower cost alternative to other fuels, it is generally used in smaller spaces (apartments and condos), making it more expensive on a per square foot basis. The U.S. Department of Energy explains “Electric resistance heating converts nearly 100% of the energy in the electricity to heat. However, most electricity is produced from coal, gas, or oil generators that convert only about 30% of the fuel's energy into electricity. Because of electricity generation and transmission losses, electric heat is often more expensive than heat produced in the home or business using combustion appliances, such as natural gas, propane, and oil furnaces.”
Another way to compare the energy intensity of each fuel is to measure the cost per MMBtu, [(equals 1,000,000 British thermal units (Btu) (One Btu is the heat required to raise the temperature of one pound of water by one degree Fahrenheit.)-U.S. EIA].
Source: Mass Department of Energy Resources
As previously noted, heating oil customers have paid the most for heating over the past five years. Heating oil prices are directly impacted by crude oil prices. The U.S.EIA tracks these prices and the factors impacting them in its This Week in Petroleum (TWIP) section on its website. Additionally, TWIP tracks supplies of heating oil (distillate fuel-500ppm sulfur) in New England (PADD 1) as well. Low stocks can lead to higher prices as supplies become constrained. TWIP also tracks propane prices and stocks.
To assist in tracking factors impacting all heating fuels, U.S. EIA also publishes an annual Winter Fuels Outlook (see slide show here) as part of its monthly Short-Term Energy Outlook. This winter the prediction is for the Northeast to have a warmer winter than last year with prices for heating oil and propane decreasing by about 6% and 5% respectively. Natural gas and electricity prices are all expected to rise. With electricity prices seeing the largest increase for heating at about 28%, this will increase the overall winter heating expenditures for electric customers by approximately 24%.
Based on the current winter forecast, utility filings, and US EIA winter fuels estimates, DOER is projecting that heating costs for electric and natural gas customers will rise this winter. Heating oil and propane customers will see a decrease in their heating costs based on current estimates but some of those savings will be offset by the increase in electricity bills.
This information is provided by the Department of Energy Resources.