Massachusetts Household Heating Costs

Estimate of energy prices for heating fuels during 2022/23 Winter Heating Season

Preliminary estimate of energy prices for heating fuels during the 2022/23 winter heating season. This report is also available in various languages using the ‘Select Language’ drop-down at the top of this webpage. If you are looking for assistance with your heating bills, see available resources in the Help with your heating bill section.

Table of Contents

Summary

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

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. In 2022, this 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:

  • There is expected to be 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 (3.1%) 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 28.6% higher for homes heating with natural gas, 18.6% higher for heating oil, 3.0% for propane, and 54.6% 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

Normally, DOER publishes an annual heating report in early November to help residents understand market conditions for home heating. Due to increased volatility in global markets impacting consumers, DOER is producing a pre-season report this year to provide early information to consumers, which will be followed by the release of an updated report in November.  As a consequence of the Russian invasion of Ukraine earlier this year, energy markets have been marked by high energy prices and heightened uncertainty. In particular, globally traded natural gas has seen unprecedented pricing increases, which does supply New England during winter months.  This report is being provided in response to increased interest in more forward-looking cost estimates and can be used 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. A full heating report will be released in early November and will provide updated price, consumption, and expenditure estimates for households in Massachusetts. 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 4.9% warmer than normal winter temperatures (1981-2010) while 3.1% 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+, U.S. oil and natural gas production, and inflation. EIA 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 is providing preliminary estimates for heating fuel prices based on currently available wholesale and retail energy pricing. Updated heating fuel prices for the 2022/2023 winter will be provided in the full report published in early November. While propane and heating oil are variable throughout the winter; DOER provides an average heating season price in this report. 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). In the off-season, DOER collects pricing monthly; however, due to increased volatility this summer, price data will be available every other week at the Massachusetts Home Heating Fuels Prices website. 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

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 and 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). Electric resistance heat is the least cost-effective technology to heat with at $117.23/million Btu, but electric powered air-source heat pumps are approximately three times more cost-effective than electric resistance heat at $39.07/million Btu. With this winter’s estimated pricing, natural gas heating is the lowest cost at $26.71/million Btu.

Figure 2: Cost to Produce Heat this Winter (2022/23) for Different Technologies

Cost to Produce Heat this Winter (2022/23) for Different Technologies

Source: DOER Analysis

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 Outlook, and utility company filings at the Massachusetts Department of Public Utilities (DPU). In this pre-season report, DOER compiled readily available data to provide preliminary consumption and expenditure estimates. Figure 3 shows estimated household winter expenditures for space heating by fuel source for recent past years and the preliminary estimate for the 2022/23 winter season. These estimates will change between now and the full heating report published in early November as additional data becomes available.

Figure 3: Winter Season Average Residential Household Space Heating Expenditures

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, which will be updated in the November report.

Heating oil remained the most expensive fuel to heat an average household this past winter, costing $2,237 through the winter. Propane was less expensive at $1,583 while natural gas heating totaled $840 in the 2021/22 heating season. Electric heating, primarily electric baseboard heating, was cheapest at an estimated $816 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 pre-season estimates of space heating expenditures for the 2022-2023 winter for a residential customer for each fuel type, including the preliminary estimates of Massachusetts’ retail energy prices and average fuel consumption for space heating. The full report released in early November will include updated price and expenditure estimates that will account for updates in winter weather forecasting from the National Weather Service, consumption forecasting from the U.S. Energy Information Administration, and basic service and compliance filings submitted by electric distribution companies to the DPU. In addition, the final report will provide an updated natural gas price to reflect any additional filings by local distribution companies which may impact natural gas prices for residents. Electric basic service rates, accounting for the supply charge on electricity bills, through the winter should be available for National Grid, Unitil, and Eversource in September, October, and November, respectively. 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

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 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 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 though not approved by the DPU. Any updates or changes to the delivery and supply rates will be reflected in the full report published in November as is available at that time. 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 $91.42/barrel (b), or $2.18/gal this winter, which would be 13 cents/gal (6.3%) higher than last winter. Heating oil averaged $3.76/gallon for Massachusetts consumers last winter; DOER is using a projected 13.0% increase to consumers for this upcoming winter, averaging $4.25/gallon. Since Russia’s invasion of Ukraine in February, heating oil price has averaged $5.11/gallon in Massachusetts, reaching a record high of $5.90 in May 2022. Due to increased volatility in heating oil and propane prices, DOER has increased the frequency of its off-season price data collection as part of the State Heating Oil and Propane Program (SHOPP). Biweekly price data is available at the Massachusetts Home Heating Fuels Prices website. Starting in October, price data will be collected and reported on a weekly basis.

Propane: EIA releases wholesale and residential propane price estimates in the Winter Fuels Outlook in October. Until then, DOER bases future residential propane price estimates on the historical relationship between WTI crude oil price and Massachusetts retail propane price. Based on this methodology, DOER is using a projected propane price of $3.61/gallon in the 2022/23 winter season. Off-season propane prices collected through SHOPP show a decreasing trend in propane prices falling from a high in May 2022 at $4.00/gallon to a most recent price in August at $3.82/gallon. EIA’s forecast of decreasing WTI crude oil price accounts for the expected decrease in winter season propane prices. 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. While basic service rates for Eversource are available through the end of 2022, National Grid and Unitil have not completed procurements for supply through the end of the year. For the purposes of the winter heating report, DOER estimates the supply charge (i.e. basic service rate) based on the ISO-New England’s off- and on-peak locational marginal pricing futures, forecasted capacity and ancillary prices, and the Renewable Portfolio Standard charge. The electricity rate estimate for residents of $0.398/kWh included above does not account for EDC’s retail adders, such as a risk premium, in basic service rates. As a result, the basic service rate may be higher through the winter.

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

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.

Contact

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Date published: September 28, 2022
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