Heating bills are likely to burn a hole in wallet

09/24/2005

Joy Powell, Star Tribune
September 25, 2005

So you think prices at the pumps have been bad? Brace yourself for the heating bills on the way.

Minnesota’s energy-assistance agencies are predicting a 50 percent increase in what consumers will pay for natural gas this fall and winter.

Even before two big hurricanes ripped through oil-producing patches of the Gulf Coast, the state’s biggest natural gas distributors said they expected price increases of up to 30 percent. Now they’re uncertain how much higher costs could rise.

As cooler weather approaches, utilities are urging consumers to insulate, caulk and conserve to avoid record-high bills.

“Customers should get out and do what they can right now before the heating season,” said Joe Klenken, regulatory specialist for CenterPoint Energy, a Houston-based firm serving more than 770,000 Minnesota customers.

How high fuel costs will go depends on how severe the winter is, as well as the extent of hurricane damage on the Gulf Coast. About 20 percent of natural gas produced in the United States comes from that region.

Minnesota gets its natural gas mainly from Texas, Oklahoma, New Mexico and Canada. The utilities buy ahead of time to ensure supplies. But wholesale prices are set nationwide on the New York Mercantile Exchange.

“Supply isn’t going to be our trouble—the trouble is going to be the high price we’re going to have to charge for it,” Klenken said. “When we’re paying more for natural gas, the customer pays more.”

Since 2000, consumer prices for natural gas have doubled. Heating oil prices have risen almost as much.

About 75 percent of a customer’s bill is determined by the fuel cost, said Ed Legge, a spokesman for Minneapolis-based Xcel Energy, the state’s second largest gas distributor. “The fuel cost is totally a national phenomenon, versus anything we can control,” he said.

Rising energy costs will pinch some and pound others.

“These utility prices are going to become unaffordable to a lot more people who might not have given it much thought before,” said Catherine Fair of Community Action Partnership of Ramsey and Washington Counties, a private nonprofit agency that provides energy assistance.

Minnesota’s energy-assistance program currently serves only about 28 percent of the eligible population. Outreach efforts are underway to help thousands of people avoid shutoffs.

“If natural gas prices go up 50 percent, we’re going to have low-income people in a world of hurt,” said Pam Marshall, executive director of Energy Cents Coalition, a statewide advocacy group based in St. Paul.

That hurt may hit hardest in the spring. “While the utilities will probably be really understanding with people throughout the winter, in the spring many people will have enormous utility bills and their electricity will be shut off,” Marshall said.

Already in St. Paul, worried residents have been streaming into the office of the Community Action Partnership of Ramsey and Washington Counties. They have past-due energy bills totaling thousands of dollars, said Fair, who manages the energy-assistance program. Many had their power cut and want it restored before winter.

“It’s a desperate situation,” Fair said, “because heat is a basic need.”

Food or heat

This fall, Mary Carlson will again put plastic on windows in her drafty old duplex in St. Paul’s Frogtown neighborhood. A boiler and radiators heat the rented house, but not very well. Last year, Carlson did what she could to keep out the cold. Still, she barely squeaked by when heating bills mounted to a quarter of her monthly income.

A former nursing assistant, Carlson, 52, now has osteoarthritis and receives Social Security disability payments. Energy-assistance officials told her that her heating bills will rise by 30 to 70 percent this season.

She signed up with Xcel Energy under the state’s Cold Weather Rule, which blocks power shutoffs from Oct. 15 to April 15, as long as customers follow a payment plan.

Carlson is counting on help from Community Action Partnership of Ramsey and Washington Counties, which provides grants averaging $500; last year, recipients had a median income of less than $10,000. The agency also will help weatherize the duplex that Carlson rents.

“Without this assistance,” she said, “I would probably be chewing my fingernails, wondering if I’m going to buy my food or pay my heating bill—which one is going to go.”

To help families weather rising prices for home-heating fuels, the National Energy Assistance Directors’ Association is calling on the Bush administration to support more funding for the federal Low Income Home Energy Assistance Program. It administered $2.25 billion in grants nationwide last year, with Minnesota receiving about $85 million.

Sens. Mark Dayton, D-Minn., and Norm Coleman, R-Minn., are among those supporting a $1.276 billion emergency funding increase. It’s needed, Coleman said, to avoid a crisis that could hurt millions of Americans, including Minnesotans.

Since 2000, demand for natural gas has stayed high because production levels have not kept up with growing demand, said CenterPoint spokesman Rolf Lund. Not only are more homes and businesses turning to natural gas, but power plants are also using more of it to produce electricity, he said.

CenterPoint and Xcel officials say they are doing what they can to hold down prices, including buying gas under fixed-rate contracts and stockpiling it around the state.

The U.S. Department of Energy, for its part, has predicted a staggering 71 percent increase this winter in natural gas costs in other parts of the Midwest, including Wisconsin, but not in Minnesota. Nationally, the increase is predicted to hit 52 percent.

Because the full impact of the hurricanes and the intensity of winter weather are uncertain now, CenterPoint does not know if gas prices will rise as high as the Energy Department is predicting. Lund said CenterPoint expects to know more later this week.

“Certainly, the highest [natural gas price] numbers you see on the New York stock exchange probably should not be reached here,” Klenken said. “Most utilities do try to get a balanced portfolio of supplies lined up every year, so they’re not stuck buying gas just when it’s terribly high like this.”

Meanwhile, homeowners who can afford to are busy getting their homes insulated before the cold hits.

At Weatherization Research and Production, a company based in Shoreview, president Greg Harris said he is getting more calls than ever for insulation to be blown into attics and walls. For the first time, he said, homeowners who once added insulation are ordering more.

“People mention specifically the increased cost of fuel,” Harris said. “No doubt about it.”