Household Heating Costs

Forecast of energy prices for heating fuels during 2019/20 Winter Heating Season

Table of Contents

Introduction

Historically, space heating is the largest component of a Massachusetts household’s energy expenditures.   As the leading state in energy efficiency, DOER administers a variety of programs to reduce home heating energy use, lower heating bills, reduce greenhouse gas emissions and provide consumers with information on their home heating choices. DOER 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 2019-2020.

For ways to save on your heating costs, please see the Comparing heating technologies to save on your heating bills.

Forecast of winter conditions and heating fuels costs

While fuel costs are the primary factor in establishing winter heating prices, winter weather is the other driver having 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. The  National Oceanic and Atmospheric Administration’s (NOAA) Winter Outlook is forecasting slightly warmer winter temperatures compared to last year, with the Northeast at about 2% warmer than last year.  The U.S. Energy Information Administration (EIA) released its Winter Fuels Outlook in October.  With winter temperatures forecast to be slightly warmer nationally, EIA is predicting a 1% decrease in natural gas and electricity costs, a 4% decrease in heating oil costs and a 15% decrease in propane costs.

As shown in Figure 1, costs of heating fuels vary from year to year due to many factors including market conditions, weather, and changes in demand.

Figure 1: Trends in Heating Fuel Costs

 

Trends in Heating Costs

Comparison of heating fuel cost effectiveness

Table 1 shows the relative cost of heating an average house in New England by different fuel types assuming the same heating load/energy is required. For example, to heat a home with electric resistance heat would cost more than 4 times as much as natural gas based on similar consumption. Since data is not available for Massachusetts by itself, this comparison is based on an average house in New England which is assumed to be 2186 square feet (sq.ft) with a heated area of 1861 sq ft based on U.S EIA’s Residential Energy Consumption Survey (RECS) data.   

Table 1: Cost of Heating the Average Massachusetts Household by Fuel Type

Space Heating Fuel

Estimated Cost

Natural Gas

$1,082

Modern Wood Heating

$1,240

Air Source Heat Pump

$1,439

Heating Oil

$1,743

Propane

$2,307

Electric Resistance Heat

$4,606

Air Source Heat Pump systems can significantly reduce the amount of energy needed for electric heat.  For more information about Air Source Heat Pumps, see our Clean Heating and Cooling section.

Projected household heating costs for 2019/2020 by average consumption for each fuel

Based on the U.S. EIA’s Outlook and utility company (electric and natural gas) filings at the Mass. Department of Public Utilities, Table 2 shows DOER estimates of heating costs for this winter for a residential customer using the average amount of fuel for each particular fuel type:

Table 2: 2019/20 Estimated Heating Costs Based on Average Consumption for each Fuel

Heating Fuel

Average Consumption

Estimated Expenditures

Change from Last Year

Approximate Heated Square Footage per Household

Heating Oil

707 gallons

$2,191

-5%

1,903

Propane

589 gallons

$1,669

-10%

2,109

Natural Gas

746 therms

$1,082

-5%

1,814

Electric Resistance Heat

3490 kWh

$836

-1%

1,272

Air-Source Heat Pumps

1091 kWh

$262

N/A

1,272

Note: Electric Resistance Heat and Air-Source Heat Pump bills reflect heating costs only.  There are additional costs for lighting and appliances included in an electric bill

As seen in Table 2, the average space in Massachusetts for each fuel type is different. For example, electric resistance heat, or electric baseboard heat, is more often seen in apartments in multifamily housing which tend to be smaller than single family homes. The size of the space that needs to be heated affects how much fuel is needed (consumption) and therefore the expected cost.  Even though the relative cost of electric resistance heating is significantly higher, as indicted in Table 1, average bills may be lower because this type of heating tends to be used in smaller spaces, such as apartments.

The five year trend in heating costs based on the average consumption for each fuel type is shown below in Figure 2.  

Figure 2: Five-Year Trends in Estimated Household Heating Costs

Five-Year Trends in Estimated Household Heating Costs

Note: To see the full break out of the calculations used in this graphic-see Table 3: Detailed Calculations of Changes in Heating Costs in factors impacting heating prices section. 

Comparing heating technologies to save on your heating bills

Clean heating and cooling technologies have advanced in the Commonwealth with Air Source Pumps and Modern Wood Heating leading the way.  As shown in Table 1, Air-Source heat pumps are a more efficient and cost effective way to heat your home using electricity.  Cold climate heat pump systems heat and cool your home at a fraction of the cost of oil or propane.   These hyper-efficient and quiet heat pumps work down to sub-zero temperatures to comfortably and efficiently heat your living and working spaces.  During summer months, these units reverse and efficiently keep your home cool. 

Ductless, mini-split system heat pumps (mini splits) make good retro-fit add-ons to homes with non-ducted heating systems, such as hot water heat, radiant panels and space heaters (wood, kerosene, propane).  Mini-splits are also a good choice for room additions where extending or installing distribution ductwork is not feasible and very efficient new homes that require only a small space conditioning system.  For more information on these systems and available rebates and incentives, visit Mass Save®’ Electric Heating and Cooling Equipment section. 

Modern wood heating has also advanced and is both available as a primary and secondary heat source.  The Mass Clean Energy Center has information on Modern Wood Heating for homes and available incentives.  Table 1 also shows how Modern Wood heating compares to traditional heat sources and DOER publishes prices for Modern Wood as part of its Home and Auto Pricing Surveys.  

Additionally, the Massachusetts Clean Energy Center offers rebates for air source heat pumps, ground source heat pumps, modern wood heating and solar hot water through its Clean Heating and Cooling Rebate Programs.

DOER Alternative Portfolio Standard (APS) allows consumers to receive compensation for heat generated by renewable heating and cooling technologies such as heat pumps, solar thermal, woody biomass, liquid biofuels, and biogas. Eligible facilities receive certificates for the heat they produce, which can then be sold to retail electricity suppliers that must purchase a certain amount of certificates each year.

In addition to rebates and incentives, Massachusetts offers a wide variety of financial incentives for all consumers to save on their energy bills, including no-cost programs and enhanced incentives for income eligible customers.  The statewide Mass Save® program offers no-cost home energy assessmentsrebates on efficient heating equipment as well as 0% financing for major energy efficiency measures. 

Customers of municipal light plant companies (MLPs) can also often access similar benefits through the HELPS energy efficiency programs.

For a complete list of available incentives visit The Commonwealth Energy Tool for Savings (energyCENTS) that provides a single entry point to all of the energy saving opportunities, including Mass Save and Low-Income Energy Assistance (LIHEAP) program. DOER also publishes A Guide on Massachusetts Energy Rebates and Incentives.  Customers of the electric distribution companies can also shop for their generation service via the Commonwealth’s EnergySwitch site.

Factors impacting heating prices

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 decrease to an average $14.50/MMBtu ($1.45/therm) compared with $14.80/MMBtu ($1.48/therm) last winter. Consumption of natural gas is expected to decrease about 4% due to forecasted slightly warmer winter temperatures than last year.  EIA forecasts residential prices in the Northeast to be 6% lower than last winter. Prices in the Northeast, particularly New England, have been among the highest in the country in recent years as a result of pipeline capacity constraints that limited delivery of natural gas into the region. Relatively low prices globally for liquefied natural gas (LNG), which New England relies on as a source of supply, have helped bring residential natural gas prices in the Northeast closer to the U.S. average.

Heating Oil: Heating oil prices are expected to fall about 2% this winter.   This decrease is largely due to forecasted prices for crude being lower this year. The U.S. EIA estimates that the cost of Brent crude oil spot prices will average $59/ barrel this winter, a decrease of about $7/barrel from last winter. The lower forecast for crude oil for this winter compared with last winter primarily reflects uncertainty about global economic growth and its effect on global petroleum demand. U.S. EIA notes in its Winter Outlook-“Distillate fuel inventories (which include heating oil) in the Northeast totaled 28.8 million barrels on September 27, 9.9 million barrels (26%) lower than the five-year (2014–18) average for that week and 2.1 million barrels (7%) lower than at the same time last year.” While EIA is not expecting any significant supply distributions, prolonged cold weather or extreme storms could impact supplies and push prices up. 

Propane: According to U.S. EIA, despite higher crude oil prices, propane prices in the Northeast are expected to be similar to last winter partly because of improved logistics in the region and higher-than-normal inventories in Canada, which are expected to provide greater access to propane supplies.  Based on this outlook, propane costs are estimated to remain about the same as last year (1% increase in total costs). Northeast inventories at the end of September were 33% higher than the five-year average due to higher Mid-Atlantic inventories. 

Electricity: Based on filings by the Electric Distribution Companies with the DPU, basic service, also known as energy supply prices, for Massachusetts utilities will increase slightly for this winter. This is largely due to natural gas prices being relatively stable since natural gas is the primary fuel used for electric generation in the region. DOER estimates the total retail residential rates (supply plus distribution rates) will increase about 1.3% from 23.64 cents/kWh last winter to 23.94cents/kWh this winter. With winter temperatures expected to be slightly warmer than  last year, consumption is estimated to decrease by 2%.  The decrease in consumption should offset the slight increase in electricity costs lowering bills overall by about 9-10%.  Municipal electric heat customers should check with their individual utility for prices.

Renewable thermal technologies, including air-source heat pumps, solar water heating, biofuels, and biomass pellet heating, are technologies now in the market and can offer homeowner’s significant energy costs savings. DOER is supporting these emerging technologies, as outlined on DOER’s website under Clean Heating and Cooling.

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 issues 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” as part of its monthly Short-Term Energy Outlook

Table 3: Detailed Calculations of Changes in Heating Costs

Table 3  Detailed Calculations of Changes in Heating Costs

Contact

Phone

Main Phone 617-626-7300

Online

Energy Markets doer.markets@mass.gov

Address

MA. Dept. of Energy Resources
100 Cambridge St.
Suite 1020
Boston, MA 02114
Date published: December 26, 2018
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