Drop In Natural Gas Prices Highlights Start Of N.E. Heating Season
Along with the arrival of cooler weather comes a renewed battle between heat providers in Central Massachusetts.
Although the United States Energy Information Administration (EIA) predicts that the average price for a gallon of heating oil will be fairly stable compared to last year, ranging from $3.70 to $3.83 over the heating season, dealers will have to contend with plummeting natural gas prices and utility companies urging customers to convert from oil to gas heat.
According to the EIA, natural gas prices in the U.S. averaged $2.84 per British thermal unit in August, down 11 cents from July and 30 percent lower than a year before.
So National Grid and NStar have asked the Massachusetts Department of Public Utilities to allow them to drop their supply rates for the upcoming heating season to what would be the lowest levels in a decade, effective Nov. 1. Customers' bills reflect the supply rate and NStar's costs of distributing the gas.
Earlier this month, Boston-based NStar said it asked the DPU for a decreased rate of 57.32 cents per therm (equal to 100,000 British thermal units, or BTUs), down 18 percent from last year's 70 cents. According to the utility, the decrease would save the average customer more than $15 per month compared to last year, dropping the average monthly bill from $161.25 to $145.60.
Meanwhile, National Grid spokeswoman Deborah Drew said the company has asked for a 12-percent decrease in its supply rate, to 63 cents per therm. However, the average customer is actually expected to see an increase of $1.37 per month because of increases in other parts of their bills. Drew said those result from “programs that are in accordance with state policies and mandates and provide customer benefit,” like energy efficiency.
Drew said the rate decrease will allow bills to remain “essentially flat” despite the increase in other charges.
For utilities, the price cuts provide leverage to lure more heating oil customers to natural gas, so for oil dealers natural gas prices are a cause for worry.
“It's a very big concern because (the lowering prices) continue to erode the market base for heating oil dealers,” said Michael Ferrante, president of the Massachusetts Oilheat Council. He said that, even though heating oil prices aren't expected to change significantly during the upcoming season, customers will still go for what's cheaper. But he added that fuel prices can change unexpectedly.
According to the EIA, crude oil accounted for 68 percent of the cost of a gallon of heating oil in 2011, so its prices are worth watching.
NStar spokesman Mike Durand agrees, saying that although oil prices may not be expected to rise significantly, they haven't fallen like natural gas prices have. This is a result of increased supply thanks to horizontal drilling and hydraulic fracturing — or fracking — that's allowed for easier access to shale gas in the earth.
He cited increased environmental awareness and natural gas as a clean energy source as factors that are helping increase interest in converting from oil.
“Even though demand has increased … supply is still exceeding demand, so prices are expected to still drop,” Durand said.
NStar expects an unprecedented number of conversions this year. Durand said the 10-year-annual average number of conversions at NStar through 2010 was 713. By 2011, that had skyrocketed to 2,020. Durand said NStar is on pace to surpass that this year, with nearly 2,000 conversions either completed or expected to be completed by the end of September and another 1,000 by the end of the year.
Drew said National Grid is also seeing record numbers of customers converting and expects nearly 8,000 to do so this year, representing a 25-percent increase over last year's 6,400 conversions.
Another driver for conversions is that many homes already use natural gas for cooking and heating water, but use oil for heat. Acknowledging this, Ferrante said, “The whole issue of combatting conversion is a very difficult sell.”
But he added that oil dealers are working to keep the customers they have, focusing on unique selling points such as installations and 24-hour support.
“You never want to lose your customers,” Ferrante said. “When you lose a customer to conversion, you lose a customer for life. Despite these efforts, they can only go so far, as the utilities aren't oil dealers' only competition.
“Last year was one of the warmest winters on record, so our dealers lost business,” Ferrante said.
Read more
Mass. Electric Costs At 6-year Low
Falling Energy Costs Help Keep Prices Steady
Coakley Seeks $16 Million In Fines From National Grid
State May Take Some Fire Out Of Biomass, Regulations Could Impact Fitchburg Plant
Study: 'Smart' Infrastructure Key To New England Economic Growth
WBJ Web Partners
Most Recent
Most Recent
0 Comments