Household Heating Costs

Forecast of energy prices for heating fuels during 2018/19 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 2018-2019.

For ways to save on your heating costs, please see the How to save on your heating bills section.

Forecast of winter conditions and heating fuels 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 Fuel 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 similar winter temperatures to last year, and even warmer in some regions.  U.S. Energy Information Administration (EIA) released its Winter Fuels Outlook in October.  While winter temperatures are forecast to be about the same as last year, and even warmer in some regions,  nationally EIA is predicting a 5% increase in natural gas costs, 20% increase in heating oil costs, 3% increase for electric heat costs, and propane costs to remain roughly the same as last year.

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 equivalent amount of fuel is required. 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

$983

Heating Oil

$1642

Propane

$2118

Electric Resistance Heat

$4511

Air Source Heat Pump

$1,262

Woody Biomass

$1,070

Table 1 compares costs if heating with different fuel types for an average sized home.  For example, to heat a home with the electric resistance heat would cost more than 4 times as much as natural gas based on similar consumption.

Newer technology, such as electric renewable thermal spilt systems, are making strides in reducing the amount of energy needed for electric heat.  DOER tracks this and other new technologies in our Clean Heating and Cooling section

Projected household heating costs for 2018/2019 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, DOER estimates heating costs for this winter for a residential customer using the average amount of fuel for each particular fuel type will be: $983 for natural gas; $2,359 for heating oil; $1,808 for propane, and $803 for electric heating (resistance heating)(Table 2). Projected expenditures are based on the average price of fuel; consumers’ expected average fuel usage; and anticipated weather conditions.

Table 2 shows that the amount of heated space varies by fuel which impacts the consumption of each fuel and hence costs.  For example, electric resistance heat tends to be used in smaller homes as reflected by an average 1,272 square feet of heated space compared to homes heating with oil with an average 1,903 square feet of heated space.  Even if 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

Table 2: 2018/19 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

Natural Gas

647 therms

$983

-5%

1,814

Heating oil

719 gallons

$2,359

+9.1%

1,903

 

 

 

 

 

Propane

589 gallons

$1,808

+2.6%

2,109

Electric Resistance Heat

3374 KWh

$803

+4%

1,272

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. 

Save on your heating bills

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 assessments, rebates on efficient heating equipment as well as 0% financing for major energy efficiency measures. 

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.

Customers of municipal light plant companies (MLPs) can also often access similar benefits through the HELPS or other 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. Consumers 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 $15.20/MMBtu ($1.52/therm) compared with $16.90/MMBtu ($1.69/therm) last winter. Consumption of natural gas is expected to increase about 5% due to forecasted slightly colder winter temperatures than last year and the continued increase in demand for natural gas for electric generation across the U.S. Although periods of extended or extreme cold from unpredictable weather could constrain natural gas supply and increase prices, leading to increased heating costs for consumers during the heating season.

Heating Oil: Higher heating oil prices reflect higher crude oil prices. The U.S. EIA estimates that the cost of Brent crude oil spot prices will average $79/ barrel this winter, an increase of about $15/barrel (36 cents/gallon) from last winter. The increase in crude prices is caused by the gradual tightening of global oil supplies. Another reason for higher heating oil prices is that stocks of distillate fuel in the Northeast heading into the heating season were lower than last year by about 4.6 million at 30.9 million barrels as of the end of September.  Stocks were also 7.4 million barrels (19%) lower than the five-year (2013–17) average.  The lower stocks are a result of continued growth in distillate demand, driven by strong global industrial and economic activity.  U.S. refineries are running at a record level or near record level and U.S. EIA expects this high level of output to continue but notes that severely cold weather could strain supplies. 

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 3% from 23.00 cents/kWh last winter to 23.79 cents/kWh this winter. With winter temperatures expected to be similar to last year (about 1% colder), consumption is estimated to only rise by 1%.  These slight increases in pricing and consumption are estimated to lead to an increase in heating bills of about 4%. Municipal electric heat customers should check with their individual utility for prices.

Renewable thermal technologies, including cold climate heat pumps, solar water heating, biofuels, and biomass pellet heating, are attractive new technologies now entering the market that can offer homeowner’s 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 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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