Keeping Warm Will Cost More This Year

Just as Nebraskans endured some of the highest gasoline prices in the nation as summer began, many are now preparing for another seasonal energy price shock.

All natural gas companies serving the state have warned their customers: the price of natural gas will be a lot higher than last year and the likelihood of a third warm winter in a row is not good.

The federal government's energy prognosticator, the Energy Information Administration, is predicting this winter could be the most expensive since 1985 for those who heat their homes with natural gas. The Energy Information Administration reported daily spot wellhead prices for natural gas were averaging $3.50 to $4.50 per thousand cubic feet since June, nearly double the price of a year ago.

"The historic price patterns disintegrated this summer," Doris Jansky, who tracks energy trends for the Energy Office said. "One of the givens of the natural gas industry was a price peak in the coldest part of winter with the price bottoming out in the summer. That just didn't happen this year. The price stayed up all summer long." According to industry sources, many natural gas companies purchase a significant amount of gas in the summer when prices are cheapest, then store it for use during the winter heating season when prices are highest.

Local Odds

Some of the state's major utilities projected cost increases for the coming heating season, based on higher costs for natural gas and a return to normal winter weather patterns: 

Industry sources said the current price rise had its origins in 1998, when natural gas prices plunged below $2 for a million British thermal units. A warm winter exacerbated the falling price. Because of low prices, exploration for new reserves plummeted.

A Host of Reasons

Natural Gas Prices

Elsewhere, the nation's economy was humming and electricity use was surging along with it. Utilities seeking new ways to meet the growing demand turned to environmentally cleaner - and cheap - natural gas. Since electricity use peaks in the summer with air conditioning use, the growth in natural gas use does not strain supplies during the heating season when natural gas use soars.

Natural gas use by electric utilities has been rising so fast, natural gas suppliers have been unable to transfer as much gas as normal to storage areas. According to the Energy Information Administration, injection rates for natural gas storage is running 20 percent below 1999 levels.

In short, static natural gas supplies ran into a raging demand which triggered the price explosion.

Propane's High, Too

Propane Prices

The state's rural residents, some who use propane for heating, will not escape the rise in prices either. According to information gathered by the Energy Office, the price of propane in April had risen more than 28 percent over prices a year earlier. By August, the Nebraska average price for propane was 83 cents a gallon. Several propane dealers said prices are 45 percent higher than last year.

"Traditionally, the price of propane will peak between early March and middle April," Jansky said. "However, during extended cold periods when supplies could become tight, we have seen prices surge."

While propane supplies in the Midwest remain below the normal range for the period, suppliers believe inventories will be adequate. "During our monitoring of the industry," Jansky said, "we found suppliers were making a concentrated effort to fill customers storage tanks to forestall any supply shortages."

Some of the Same

Since propane is both present in natural gas and refined from crude oil, any increase in the cost of these fuels can be expected to show up in retail propane prices.

A return to seasonal winter temperatures would boost consumption which means consumers will be paying more to heat their homes. As the winter heating season draws near, expect propane prices to become more volatile, especially if supplies tighten.

What to Do

There are a number of ways to reduce the financial bite on your wallet. "Fall really is a time when people should begin to prepare their home for winter. Just as you get your car ready for the first freezing temperatures, you should do the same for your home," Jansky said. The list of heating bill cutting options she recommended:

Other tips on reducing energy use in your home can be found in Energy Savers: Tips on Saving Energy & Money at Home.

Copies are available from the Energy Office or the information is accessible on the Internet at www.ere.doe.gov/consumerinfo/energy_savers/

Limited Income Options

If you - or someone you know - has a limited income and experiences difficulty paying utility bills, contact your local Nebraska Health and Human Services Office to see if bill paying assistance is available.

Another source is free weatherization of your home. This federally-funded service has been used by more than 50,000 Nebraskans since 1978. More information about this service can be found on page 2, or by contacting Pete Davis in the Energy Office at pdavis@mail.state.ne.us

Return to the Summer 2000 Newsletter