As the winter season takes hold of the northeast, people retreat indoors to the warm comfort of their heaters. Last year everyone enjoyed low natural gas rates as the demand shrank due to the pandemic and a relatively mild winter. This winter is a completely different story.
Natural gas prices have already been on the rise since the start of fall. It’s a clear signal that the cost to heat a home will be much higher this year. But why exactly is the price of natural gas climbing?
The rising natural gas and energy prices aren’t caused by any one thing but rather a perfect storm of events. There are three primary factors at play:
- There is a rising demand around the world for natural gas.
- Natural gas production has been impacted by the pandemic and there is a shortage of natural gas.
- Meteorologists predict it will be colder this winter.
In short, right now natural gas demand is higher than supply, and the demand is likely to keep outpacing supply into the winter. That means wholesale pricing at the commodity level is increasing, and those higher prices trickle all the way down to the end user.
The volatility of natural gas prices can be difficult to deal with, but we’re here to help customers understand the natural gas situation and how it affects their energy plan.
How Much More You’ll Spend Depends on the Heating Source and Winter Weather
By now you’re probably wondering how much more you’ll pay to heat your home this winter. That all depends on three things: your energy plan, your energy source for heating and how cold it gets.
The Energy Information Administration (EIA) monthly Winter Fuels Outlook for October 2021 highlights the dramatic increase in heating demand sources and how the winter weather will affect costs.
Here’s a breakdown of the anticipated market data and price increase by heating source:
Electricity – 6%
Natural Gas – 30%
Heating Oil – 43%
Propane – 54%
Even the increase in electricity costs during winter is related to the price hikes in natural gas because natural gas is the primary fuel for generating electricity as well. That means consumers will likely see higher energy bills this summer when they start turning on their air conditioners.
Since the temperature is such a significant contributing factor the EIA provided a few additional estimates to help people guesstimate their future heating costs.
If the winter is 10 degrees warmer than expected the increase in price will be less significant:
Electricity – 4%
Natural Gas – 22%
Heating Oil – 30%
Propane – 29%
If the winter is 10 degrees colder than expected the increase in price will be even higher:
Electricity – 15%
Natural Gas – 50%
Heating Oil – 59%
Propane – 94%
It should be noted that the EIA statistics are based on the national average for natural gas. Fortunately for those living in New England, the current rates are right in line with the national average so the numbers should be fairly accurate for residents in Maine, New Hampshire and Massachusetts. However, the average cost per thousand cubic feet does creep higher than average in November, December and January when winter is in full swing.
What Consumers Can Do: Check Your Contract
All this information can seem a bit bleak for end users that don’t have much control over commodity prices. A lot of people simply swallow the extra expense and cut energy consumption as much as possible. But there’s something else you can do to potentially avoid the rising natural gas prices.
Every consumer should check their energy contract to figure out if now is the time to switch plans or possibly renew an existing plan to lock in a lower rate. You’ll likely fall into one of three categories:
You have a variable rate energy plan. Customers with variable rate plans are the people who will likely see the biggest increase in their energy bills. These plans are very sensitive to price changes since the rates change from month to month based on current market prices. Look to see when the variable rate plan expires. If it’s within the next three months plan to make a switch to a fixed rate plan or your rate could continue to go up.
You have a fixed rate energy plan that will expire soon. If the rate on your plan is better than the current average for natural gas, check your contract to see if you have the option to renew. Also look to see what the requirements are for renewing. Provider Power customers can renew their energy plan within 30 days of expiration. If it’s unclear whether you can renew, be sure to call your energy supplier and ask directly.
You have a long-term fixed rate energy plan. If you’re in this category there’s less to be concerned about because your rate isn’t going to change during the winter and might even remain the same into the summer. It’s still a good idea to keep an eye on how the natural gas prices are trending so you are prepared to renew in time if that seems like the better option.
Need help deciding what type of energy plan will be the most affordable in the coming months? Want to know more about the rising natural gas prices and how it might affect your energy plan? Provider Power customers can contact the customer care team by phone for direct assistance. They’re available Monday to Friday to answer all of your questions!