Summary
Each year, DOER analyzes available winter weather forecasts, projected prices, and expected consumption for major heating fuel sources (natural gas, heating oil, propane, electric heating) to provide heating season cost estimates for Massachusetts homes. The 2022-23 winter report is being provided to help households prepare for higher energy prices and to assist state partners in providing adequate resources for households in the Commonwealth. Estimated future prices and expenditures in this report are subject to change and should not be used by households to determine a specific budget for heating costs for the upcoming winter.
The following key points of the report are discussed in more detail below:
- The region is expected to experience high costs for energy this winter, driven by significantly higher than average commodity prices – the price fuel and electricity suppliers have to pay.
- The upcoming winter is projected to be slightly colder (4.7%) than last year, increasing the expected consumption of heating fuel sources.
- Household heating costs this winter are projected to be higher than last winter for all heating fuel sources due to higher expected consumption and prices. The cost of heating for residential customers is expected to be 28% higher for homes heating with natural gas, 63% higher for heating oil, 10% for propane, and 57% for electric heating.
- Massachusetts offers a wide variety of incentives to increase energy savings and help with heating bills, visit the ‘Help with your heating bill’ section.
Introduction
Space heating is the largest part of household energy costs. In Massachusetts, most households heat their homes using natural gas, followed by fuel oil, electricity, and propane. To see a further breakdown of how Massachusetts households heat their homes, visit how Mass. Households heat their homes.
Massachusetts Department of Energy Resources (DOER) helps run programs to reduce home heating energy use, lower heating bills, reduce greenhouse gas emissions, and provide residents with information on their home heating choices. Every year, DOER analyzes available winter weather forecasts, projected prices, and expected consumption for major heating fuel sources (natural gas, heating oil, propane, electric heating) to provide heating season cost projections for Massachusetts homes.
How to use this report
DOER publishes this annual heating report to help residents understand market conditions for home heating. Due to increased volatility in global markets impacting consumers, DOER produced a pre-season report this year to provide early information to consumers, which was posted on this website in September. This report represents an update to estimated price, consumption, and expenditure for the remainder of the winter season based on the latest available data. As a consequence of the Russian invasion of Ukraine earlier this year, energy markets have been marked by high energy prices and heightened uncertainty. This report is being provided to help households prepare for higher prices more generally, and to assist state partners in providing adequate resources for households in the Commonwealth. However, due to high uncertainty, estimates in this report are subject to change and should not be used by households to determine a specific budget for heating costs for the upcoming winter. Throughout this report, both winter and heating season mean the period between October and March (e.g. 2022/2023 heating season is October 2022 to March 2023).
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. A colder winter causes an average home to use more fuel and spend more, while a milder winter may mean households use and spend less.
According to the National Weather Service’s Climate Prediction Center, the upcoming winter is projected to be 3.3% warmer than normal winter temperatures (1981-2010) while 4.7% colder than last year. As a result, Massachusetts households may need to use more energy for space heating compared to last winter.
Heating fuels price estimate for this winter
According to the United States Energy Information Administration’s (EIA) August Short-Term Energy Outlook (STEO), energy prices and supply levels are experiencing heightened uncertainty resulting from Russia’s invasion of Ukraine, the production decisions of OPEC+ countries, U.S. oil and natural gas production, and inflation. The EIA’s 2022 Winter Fuels Outlook forecasts higher wholesale energy prices - the price fuel and electricity suppliers have to pay - for the upcoming winter as compared to the 2021/2022 winter heating season. These increases in wholesale fuel costs will result in higher retail electricity and retail natural gas prices - the price residents will pay through their utility bills.
DOER provides estimates for heating fuel prices based on currently available wholesale and retail energy pricing. Changes in crude oil and wholesale heating oil prices pass through to the retail heating oil price much more quickly; as a result, the heating oil price estimate is subject to heightened uncertainty. While propane and heating oil prices go up and down throughout the winter, DOER provides an average heating season price in this report. Additionally, though many heating oil and propane customers buy supplies ahead of winter and refuel as needed, our estimate does not account for heating oil purchased prior to winter. Retail natural gas and electric rates may remain constant or vary depending on each resident’s energy supply contract terms.
During the winter, DOER publishes weekly pricing for heating oil and propane in Massachusetts as part of our participation in the State Heating Oil and Propane Program (SHOPP). Consumers should visit the DOER weekly heating survey webpage for the most up-to-date information on current heating oil and propane prices. Electricity and natural gas rates are determined by each resident’s energy supply contract terms in addition to delivery charges as approved by Massachusetts Department of Public Utilities (DPU). Current Massachusetts’ electric and gas utility rates are available at the DPU’s Utility Filings and Tariffs website.
Figure 1 shows average residential heating fuel cost by heating fuel for the past seven winters, along with an estimate for this upcoming winter. Many factors influence the costs year to year including market conditions, weather, and changes in demand.
Figure 1: Winter Season Average Residential Heating Fuel Prices
Source: DOER Analysis
The prices for propane and heating oil in Figure 1 are the average prices from many fuel suppliers across the state and will vary from company to company across the Commonwealth. The average is not a guarantee of price for residents, some residents will pay more and some less for propane and heating oil. The prices for electricity and natural gas are estimated load-weighted averages across the distribution companies, such as National Grid, Eversource, and Unitil. Since distribution companies charge different rates across the Commonwealth, a load-weighted average will reflect the share of customers receiving electricity or natural gas from the various companies.
Household heating costs for 2022-2023 winter by average consumption for each fuel
All residential customers should expect an increase in winter heating costs over last winter
Homes in Massachusetts use different types of fuel for heating, and the average type of home for each fuel type is different. For example, electric resistance heat, or electric baseboard heat, is more often used in apartments in multifamily housing. Apartments tend to be smaller than single-family homes, which are more likely to use oil or gas heat. Larger spaces use more fuel (consumption) to stay warm and therefore can have higher costs. Spaces that are well-insulated and have been weatherized will require less fuel to maintain the same temperature. In this report, average heating expenditures reflect the average size of housing units and therefore are not an “apples to apples” comparison.
To compare the cost of producing heat from different fuel sources, Figure 2 presents the cost to heat this winter using different technologies using the 2022/2023 winter price estimates in this report. Costs are shown in dollars per unit of heat, which is measured in British thermal units (Btu). This cost analysis does not reflect the full benefits that can be achieved through energy efficiency measures, decarbonization, and air conditioning costs. Please see the Comparing Heating Technologies section for more information on the benefits of air source heat pumps.
While Figure 2 shows the costs of heating based on the averages used in this report, household fuel and electricity costs will vary based on the residents’ supply rates. This is most evident in electricity costs which may be impacted by a residents’ participation in a municipal aggregation/Community Choice program or service through Basic Service, competitive supply, or a Municipal Light Plant (MLP). Households should not assume this data guarantees cost savings by fuel switching, please see your own supply rate to estimate your household costs.
Figure 2: Cost to Produce Heat this Winter (2022/23) for Different Technologies
Source: DOER Analysis
Note: This graph shows cost based on the estimates used in this report (shown under each technology). Since households pay different prices for fuels and electricity, error bars show the range of costs Massachusetts households are expected to pay this winter.
DOER compiles data each year to estimate an average Massachusetts household’s consumption and expenditures dedicated to space heating. DOER uses housing data, EIA’s Energy Outlooks, and utility company filings at the Massachusetts Department of Public Utilities (DPU). In this report, DOER compiled readily available data to provide consumption and expenditure estimates. Figure 3 shows estimated household winter expenditures for space heating by fuel source for recent past years and the estimate for the 2022/23 winter season.
Figure 3: Winter Season Average Residential Household Space Heating Expenditures
Source: DOER Analysis
Note: As described below, the data graphed above does not indicate that a household can ensure savings by switching heating systems. The expenditures estimated here are based on the average home size and year of construction for homes with that heating source; for instance, homes that heat with electricity tend to be smaller. The estimated expenditures are based on current estimates of fuel price and consumption.
Heating oil remained the most expensive fuel to heat an average household this past winter, costing $2,155 through the winter. Propane was less expensive at $1,582 while natural gas heating totaled $773 in the 2021/22 heating season. Electric heating, primarily electric baseboard heating, was cheapest at an estimated $728 for space heating, although this also reflects the smaller average home size for units that heat with electric resistance heat. The above data does not account for differences in housing unit type, year of construction, home size, and other factors that can influence heating fuel consumption for space heating. Households should not assume this data guarantees cost savings by fuel switching to electricity. For better estimates of switching household heating systems, Mass Save® offers a Heating Comparison Calculator to calculate potential savings.
Winter heating costs are expected to increase across all heating fuels this upcoming winter due to higher wholesale energy costs. Residents should plan for these additional costs and refer to the next section in this report for resources to help with heating costs.
Table 1 shows DOER’s estimates of space heating expenditures for the 2022-2023 winter for a residential customer for each fuel type, including the estimates of Massachusetts’ retail energy prices and average fuel consumption for space heating. The consumption estimates below only account for estimated space heating needs, total household consumption and expenditures will be higher due to other energy uses, such as water heating, appliances, lighting, and other uses. Unexpected changes in weather, commodity prices, or wholesale prices can change the retail price of fuels and consumption; therefore, these estimates may not reflect any individual consumer’s actual expenditures. . Utility compliance filings may be submitted to DPU from time to time and may impact the price of electricity and natural gas to consumers.
Table 1: 2022/23 Estimated Space Heating Expenditures by Fuel
Source: DOER Analysis
Help with your heating bills
Massachusetts offers a wide variety of financial incentives for all consumers to save on their energy bills, including no-cost programs for home upgrades 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.
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 access similar benefits either through the NextZero (formerly HELPS) energy efficiency programs or Energy New England. Contact your municipal utility for more information on available programs in your municipality.
If you are a residential customer struggling to pay your utility bills, contact your utility to discuss available payment plans. For more information please see: Frequently Asked Questions about Electric, Gas, and Water Utilities. Residents can also take advantage of the Home Energy Assistance Programs, including fuel assistance and energy efficiency programs for income eligible households.
For additional information on saving energy, visit the U.S. DOE’s Energy Saver’s website. Get tips on weatherizing your home, maintaining your heating system and more. Consumers can also download the free Energy Savers Guide (available in English and Spanish).
Comparing heating technologies to save on your heating bills
Clean heating and cooling technologies have advanced in the Commonwealth with air source heat pumps leading the way. Air-source heat pumps are a more efficient and cost-effective way to heat your home using electricity at a fraction of the cost of oil or propane. These hyper-efficient and quiet heat pumps operate in below zero temperatures to heat living and working spaces comfortably and efficiently. During the summer months, these units are used to efficiently cool spaces. Visit the Massachusetts Clean Energy Center's Air Source Heat Pump Guide for more information.
Ductless, mini-split system heat pumps (mini splits) are a good option for 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 mini-splits, central heating, and ground source heat pump systems as well as available rebates and incentives, visit Mass Save's Heat Pump Heating and Cooling website. If you are a municipal utility customer, visit their website or contact them for more information on available programs. Some municipal utilities have information on their programs at Home Energy Loss Prevention Services (HELPs).
DOER's Alternative Portfolio Standard (APS) allows consumers to receive compensation for heat generated by renewable heating and cooling technologies such as heat pumps, solar hot water, 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 are required to purchase certificates to meet their APS obligation.
Factors impacting heating prices this season
Even before the heating season begins, fuel prices are elevated and have reached record volatility. Natural gas, heating oil, propane, and electricity rates in Massachusetts spiked during late February due to Russia’s invasion of Ukraine. While prices have gone up and down since, historically high prices are expected at the start of the winter season. The U.S. EIA forecasts stable or falling wholesale energy prices throughout the winter season; however, those forecasts are less certain this season due to increased volatility in energy markets.
Natural Gas: Natural gas retail rates for Massachusetts’ residents are filed and approved by the Massachusetts Department of Public Utilities (DPU) and include recovery for several costs including supply, demand, capital and infrastructure, and other costs. A significant portion of the supply and demand costs are based on the commodity cost for natural gas and can increase significantly over the winter when natural gas prices for New England increase. Similar to heating oil and propane, these natural gas commodity prices are impacted by several factors including production, storage levels, net trade, variations in temperature, economic growth, and availability and prices of other fuels. DOER relies on local distribution companies’ compliance filings to the DPU for updates to current and near future residential gas prices. The gas supply rate, the Cost of Gas Adjustment factor (GAF) and the Local Distribution Adjustment factor, and the tariffs and delivery rates are approved by the DPU. To estimate this winter’s natural gas rate, DOER assumes that the delivery and supply rates will remain constant as is effective at the publishing of this report. The gas supply rates used to estimate the natural gas rate have been filed by the local distribution companies and are subject to DPU approval. . Local distribution companies reserve the right to file adjustments to the gas rate with the DPU to recover various changing costs throughout the winter. As a result, the estimate provided may change throughout the season due to market volatility.
Heating Oil: The EIA forecasts the West Texas Intermediate (WTI) crude oil price will average $86.67/barrel (b), or $2.06/gal this winter, which would be 1cent/gal (0.5%) higher than last winter. Heating oil averaged $3.76/gallon for Massachusetts consumers last winter; DOER is using a projected 46.8% increase to consumers for this upcoming winter, averaging $5.52/gallon. Retail heating oil prices spiked in Massachusetts after Russia’s invasion of Ukraine in February. The price of heating oil in Massachusetts reached a record high of $5.90/gallon in May 2022, falling until the beginning of October when OPEC+ announced oil production cuts. Since then, the average Massachusetts retail heating oil price has reached as high as $5.88/gallon as recently as November 7, 2022. The estimate in the pre-season report was $4.25/gallon based on the historical relationship between crude oil and residential heating oil prices. This relationship has not held through the summer and the start of the heating season; as a result, DOER is estimating a retail price closer to current retail rates in Massachusetts. This estimate is based on market conditions and estimates at the time of this publication; changes in the commodity or wholesale markets pass down relatively quickly to retail markets meaning this estimate can differ greatly from current market retail price. Residents can visit the Massachusetts Home Heating Fuels Prices website to check the current week’s price of heating oil and propane in Massachusetts, collected as a part of the State Heating Oil and Propane Program (SHOPP) at the.
High retail heating oil price this winter is being driven by low inventories, high exports, and limited refining capacity. U.S. inventories of distillate oil started this year below the level of supply in the past five years. A substantial increase in the export of distillate oil has left U.S. inventories below the five-year range of supply at the starting of the heating season. Prior to Russia’s invasion of Ukraine, Russia was the leading supplier of distillate fuel to Europe. To meet demand in Europe, exports of heating oil have increased which have decreased imports of heating oil to the United States. Refinery output has limited ability to increase in the short run, limiting the potential to meet increased demand for U.S. distillate oil.
Propane: DOER bases future residential propane price estimates on the recent relationship between WTI crude oil price and Massachusetts retail propane price. Based on this methodology, DOER is using a projected propane price of $3.79/gallon in the 2022/23 winter season. Off-season propane prices collected through SHOPP showed a decreasing trend in propane prices falling from a high in May 2022 at $4.00/gallon to a most recent price in November at $3.67/gallon. The above three fuel estimates should not be interpreted as prescriptive as each fuel has its own market structure, infrastructure, regulations, and limitations that influence connections between wholesale and retail markets.
Electricity: Electric distribution companies (EDCs) and municipal light plants (MLPs) issue electricity bills to their distribution customers. The final price of electricity shown on a bill reflects the sum of several separate charges. The two main components of electricity rates are the supply charge and the delivery charge: the supply charge represents the cost of generating the electricity, while the delivery charge represents the cost of bringing that electricity to the customer’s home. Electric delivery costs are charged by EDCs in Massachusetts, which include Eversource, National Grid, and Unitil, regardless of the residents’ source of electricity supply, or a municipal light plant (MLP). Delivery charges include transmission, distribution, operations, and service charges, along with public policy charges. Massachusetts electric rates and tariffs approved by the DPU can be found here. For the purposes of the winter heating report, DOER assumes that the delivery portion of the electric retail rate will remain constant as is effective at the publishing of this report.
The supply side includes costs of energy on the wholesale electricity market as well as clean energy policy compliance costs. The delivery charge includes distribution network costs (poles and wires), long-distance transmission, as well as charges for clean energy, energy efficiency, and other reconciling charges. Electricity usage is measured in kilowatt-hours (kWh) and supply and delivery charges on electric bills are calculated on a per kWh basis. For a more detailed explanation of your utility bill, see DPU’s information on how to read your bill.
In Massachusetts, consumers have a choice to supply their energy through the Electric Distribution Company (EDC), known as basic service, a municipal aggregation plan, or a competitive supplier. The MA DPU provides more information regarding electric Basic Service Rates by service territory here. For data on electric and natural gas customer choice, see DOER’s Electric & Gas Customer Choice Data. Many customers in Massachusetts receive electricity supply from a municipal aggregation. If your city or town launched a municipal aggregation, you may have been automatically enrolled in the program. Municipal aggregation rates are often fixed for a longer duration than Basic Service rates (for example, 18-36 months).
The supply charge estimate used in this report is based on basic service rates and do not account for consumers choosing competitive supply or municipal aggregation products. Electricity rates are expected to increase into the winter season as EDCs procure electricity supply for basic service rates in a high-price fuel market. Since natural gas is the primary fuel used to generate electricity in New England, higher than average wholesale natural gas prices expected through the winter season will sustain higher residential electricity rates. Based on currently announced basic service rates, the load-weighted average across Massachusetts is $0.398/kWh. This estimate combines the supply and delivery charges and represents the total cost of electricity to a resident.
DOER analysis includes data from CME Group. All data from the CME Group website should be considered reference only and any resulting DOER analysis should also be considered reference only and should not be used to make market decisions.
Historical and estimated future price, consumption, and expenditures by fuel type for Massachusetts households is summarized in Table 2 below.
Table 2: 2022/23 Estimated Space Heating Consumption and Expenditures, MA
Source: DOER Analysis
For consumers interested in following energy markets and prices throughout the heating season, the 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.
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| Date published: | September 28, 2022 |
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| Last updated: | November 30, 2022 |