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Household Heating Costs

Forecast of energy prices for heating fuels during 2020/21 Winter Heating Season

Table of Contents

Introduction

Space heating is the largest part of what the average Massachusetts household spends on energy.  As the leading state in energy efficiency, DOER helps run programs to reduce home heating energy use, lower heating bills, reduce greenhouse gas emissions, and provide consumers with information on their home heating choices. Every year, DOER analyzes the winter weather forecast and the projected prices and consumption for major heating fuel sources (natural gas, heating oil, propane, electric heating) to provide heating season cost projections for Massachusetts homes.

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 expected energy use

While fuel prices are the biggest factor in what households are expected to spend on heating, winter weather has a significant impact on heating bills, as a colder winter may cause an average home to use more fuel where as a milder winter may mean households spend less. The National Oceanic and Atmospheric Administration’s (NOAA) Winter Outlook for 2020-2021 is forecasting colder winter temperatures compared to last year, with the Northeast at about 5% colder than last year.  Last year’s temperatures were above average, so this year is forecasted to be closer to a normal winter. The U.S. Energy Information Administration (EIA) released its Winter Fuels Outlook in October.  Massachusetts is expected to be about 6% colder than last year but 3% warmer than a normal winter. 

Impact of COVID-19 on Forecasts:

According to U.S. EIA Winter Fuels Outlook, responses to COVID-19 and the actions taken to stop its spread have significantly affected not only the price of fuels but also how much energy residents have consumed. Residential uses of energy (such as powering electric appliances and space cooling/heating) by the average US consumer has increased, while transportation-related uses of energy have decreased. This trend is expected to continue into the winter of 2020–21. EIA forecasts that there will be more residential energy consumption in the United States this winter compared with last winter. More people are working and attending school from home this year, which EIA expects will increase demand for space heating at any given temperature relative to past winters. This is true in Massachusetts as well as many businesses continue to have staff telecommuting and many schools have hybrid or remote learning. 

Heating fuels prices and expected seasonal costs

Many fuel prices were impacted last winter because of lower demand due to the response to COVID-19 and prices may change from the forecasts below if the response to COVID. EIA is predicting for the Northeast, an 8% decrease in natural gas prices and 1% electricity prices and a 7% increase in propane prices. Heating oil is the one fuel showing a large decrease of 19% in heating oil prices. For homes that heat primarily with heating oil, EIA expects that price declines will offset the effects of higher consumption and lead to a decrease in expenditures. 

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 assumes an average house in New England heating the same amount with different fuel types and shows the relative heating bills. For example, to heat a home with electric resistance heat would cost more than four 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

$1,088

Modern Wood Heating

$1,223

Heating Oil

$1,319

Air Source Heat Pump

$1,403

Propane

$2,525

Electric Resistance Heat

$4,491

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 2020/2021 by average consumption for each fuel

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

Table 2: 2020/21 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

761 gallons

$1,774

-15%

1,903

Propane

814 gallons

$2,413

15%

2,109

Natural Gas

661therms

$978

11%

1,814

Electric Resistance Heat

3710 kWh

$860

3%

1,272

Air-Source Heat Pumps

1159 kWh

$269

1%

1,272

Note: Electric Resistance Heat and Air-Source Heat Pump bills reflect ONLY heating costs.  There are additional costs for lighting and appliances included in an electric bill. There may also be additional utility costs for water/cooking if heated by a different fuel than what your space heating fuel is. 

Even though the relative cost of electric resistance heating is significantly higher, as indicated 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

2020-2021 Five Year Trends for Heating Fuels

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.  Visit the MassCEC's Air Source Heat Pump Guide for more information.

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 MassCEC 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 MassCEC 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.

Help with your heating bills

If you are a residential customer struggling to pay your utility bills or behind on your payments, reach out to your utility to discuss available payment plans. For more information please see: Frequently Asked Questions about Electric, Gas, and Water Utilities during COVID-19.

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. 

As part of the Columbia Gas settlement, funds will provide debt relief for gas bills to thousands of low-income gas customers and enable clean energy and energy efficiency efforts in homes and buildings in Lawrence, Andover, and North Andover. Visit the Merrimack Valley Clean Energy & Energy Efficiency Programs page for more information. 

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 increase to an average $14.80/MMBtu ($1.48/therm) compared with $14.20/MMBtu ($1.42/therm) last winter. Consumption of natural gas is expected to increase about 6.3% due to forecasted slightly colder winter temperatures than last year as well as impact of COVID-19.  Prices in the Northeast, particularly New England, have been among the highest in the country in recent years due to pipeline capacity constraints that limited delivery of natural gas into the region. However, increased pipeline connectivity along with relatively low prices globally for LNG, which is an additional source of supply in New England, have helped bring residential natural gas prices in the Northeast closer to the U.S. average. 

Heating Oil:  Prices for heating oil are expected to average 19% less than last year, lowering expenditures by about 10% nationally.  DOER forecasts a 15% decrease in expenditures. The lower forecast for heating oil expenditures primarily reflect lower retail heating oil prices. EIA expects retail heating oil prices to be 54 cents per gallon (gal) less than heating oil prices last winter. EIA forecasts that the Brent crude oil price, which is the most relevant crude oil price in determining U.S. petroleum product prices, will average $43/barrel (b) this winter. This forecast is $14/b lower than last winter.

Propane: According to U.S. EIA, propane prices in the Northeast are expected to rise about 7% this winter. This increase coupled with increased consumption of around 6% will result in an increase of about 15% for propane bills. Wholesale propane spot prices at the Mont Belvieu hub were 12% higher than at the same time in 2019. However, EIA expects the seasonal increase in propane prices to be more muted than usual this winter because the market is well supplied. EIA’s propane price forecasts reflect inventories that are higher than average in most regions of the United States going into the winter season and U.S. propane production levels that are expected to remain sufficient to satisfy domestic and international demand.

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 by 3% for this winter. DOER estimates the total retail residential rates (supply plus distribution rates) will decrease about 2.9% from 23.88 cents/kWh last winter to 23.18 cents/kWh this winter. With winter temperatures expected to be slightly colder than last year and increased usage due to COVID-19, consumption is estimated to increase by 6%.  The increase in consumption offsets the decrease in electricity costs raising bills overall by about 3%.  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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