If you pay to heat your house or apartment, winter is traditionally a pain in the wallet. Last year at this time Massachusetts was facing steep energy rate hikes that in some cases tripled customers’ bills – and we were warned that rates would continue to climb – probably for years.
But as winter approached this year, prices went down. The average residential National Grid electric customer will pay $15 less per month than last year. Eversource customers will pay $23 dollars less. For Cape Light Compact customers the reduction should be $34.
What changed?
“Well, people got it wrong,” says Christopher Russo of the consulting firm Charles River Associates. “Trying to prognosticate on where future commodity prices are going is challenging. If I could do it, I’d be a very rich man.”
Russo says the same problem that forced prices up last year still exists – we still can’t get all the natural gas we need into the region. But electric rates have gone down despite that because natural gas is extremely cheap at the moment.
Why? People who own shale fields in Pennsylvania have debts to pay, Russo says, and they’re pumping more natural gas than expected.
Says Russo:
“They have debt payments the same way we have mortgage payments or loan payments or anything else. And even though the price is low they still need to cover their payments so their choice is they either stop pumping and earn nothing, and the price comes up a bit, or they continue pumping, depress the price, but they’re able to cover their debt. So that’s really been the surprise that people continue to extract more than we thought.”
That makes sense for natural gas. But people who heat with oil are seeing a price decline this winter, too. To find out why, we have to look beyond the United States and all the way to the Middle East. Oil-producing countries there are still exporting large amounts of oil, despite the low price.
“And one of the leading conspiracy theories -- while I’m not sure it’s entirely outlandish is that if countries with a very low cost of production – like OPEC countries, Saudi Arabia, can keep the price low for sufficiently long time, countries with relatively high cost of production, like United States, will be forced to stop pumping.”
That hasn’t happened yet. Meanwhile, Massachusetts homeowners and renters who use heating oil are paying far less. Michael Ferrante and the Massachusetts Energy Marketers Association represent hundreds of heating oil suppliers.
"Right now the statewide average for a gallon of heating oil is about $2.38. That’s down from almost exactly a dollar a year ago.”
These price declines come amidst a much larger context. There’s a debate going on over whether New England needs to build more natural gas pipelines to stabilize its energy supply and meet current demand.
Ferrante says we don’t – and he cites a recent report released from state Attorney General Maura Healy’s Office. It found New England doesn’t need new pipelines to maintain a reliable electric supply.
“Our region," according to Ferrante, "is actually quite strong at this point in time in terms of serving energy needs.”
The case for pipelines seemed to be supported last year by the rate increases. But utility companies still say we need new pipelines, despite the rate declines. Mary-Leah Assad is spokesperson for National Grid.
“We were disappointed in the results of this study because we do feel there’s a need for both pipelines to alleviate prices for our customers and respond to future demand for natural gas.”
Demand is slowly dropping, though. The high-energy prices last winter caught some homeowners attention; and a growing number are investing in new, more efficient heating systems.
Giannalda Fontana has a ranch house in Jamaica Plain. This summer she installed a technology called ‘heat pumps.’ They run on electricity and can extract heat from the air and ground on even the coldest winter days On hot summer days, it does the same with cool air. For Fontana, after a state rebate, the cost came to a little less than $7,000. As for installation, it took no more than 3 days.
