High heating costs hang over the holidays

New Mexico Gas Co. senior service technician Tommy Lucero installs a meter at a home in Albuquerque on Thursday. The utility forecasts an average consumer bill of $163 for the next month. (Roberto E. Rosales/Journal)

Copyright © 2022 Albuquerque Journal

The Grinch is at it again this holiday season, filling the average consumer’s sock with higher winter heating bills for the second year in a row.

Consumers can thank the scorching summer heat that pushed natural gas prices to 15-year highs in August as electric utilities everywhere siphoned supplies for natural gas-based generation to keep air-conditioning systems running at full steam during the summer peak load.

This reduced domestic gas supplies and pushed US fuel storage more than 12% below normal levels by early September. And that, in turn, drove wholesale natural gas prices to their highest levels since the shale gas revolution flooded the nation with inexpensive natural gas more than a decade ago.

Added to this is the global boom in energy demand after the pandemic and the war in Ukraine, which has paralyzed Europe’s fuel supply. Together, these things have propelled US LNG exports to unprecedented levels, depleting domestic supplies and raising prices across the country.

It’s a kind of perfect storm, or Grinch playground, that foreshadows significant hardship — especially for low-income families — when winter weather hits and heating bills rise, said Mark Wolfe, executive director of the National Energy Assistance Directors Association, or NEADA.

“Consumers are facing high inflation for both energy and food — two commodities — and rents are rising too,” Wolfe told the Journal. “It’s hitting families hard, especially with winter approaching and natural gas prices at their highest in 15 years. … Budgets are much tighter, making it harder for struggling families to get by.”

NM prices

Local consumers could see a 17% increase in their gas bills in December compared to the same month last year, according to the New Mexico Gas Co., which serves about 540,000 residential and commercial customers statewide.

The utility forecasts an average consumer bill of $163 for the next month. That’s up from $139 in December 2021 and just $85 in December 2020, reflecting the rising cost of natural gas over the past two years.

Higher prices have no impact on corporate profits. By law, the utility company simply passes on fuel costs to customer bills.

NM Gas Co. sources all of its fuel from the San Juan Basin in northwest New Mexico and the Permian River in the southeast corner of the state. Wholesale prices in both basins have risen by double digits since last winter, although San Juan gas has risen much more than in the Permian.

San Juan gas reached an average monthly price of $6.87 per thousand cubic feet this November, up 47% from $4.66 in November 2021. In the Permian, it rose to $5.04 this month, up about 10% from November last year.

Those prices are expected to hold up through the key winter months of December through February, said Tom Bullard, the utility’s vice president of gas management and technical services.

“For January and February, we’re generally looking at a range of $5 to $7 before moving back down in March,” Bullard told the Journal.

The impact on consumer bills is highly dependent on the weather and individual consumption during the coldest months, said Gerald Weseen, the utility’s vice president of external affairs.

“It’s mostly driven by usage,” Wesenn told the Journal. “December and January are the months with the highest usage, closely followed by February.”

Although colder-than-normal temperatures are expected in northern regions, slightly warmer-than-normal weather is forecast for the southwest, potentially dampening high gas prices as local consumers use less fuel to heat their homes, Bullard said.

However, accurate predictions are difficult. Unforeseen weather spikes — like the Arctic gyre that hit the US in February 2021 — could change things.

“We have warmer than normal winter forecasts for the Southwest, but so far we’re seeing colder weather,” Bullard said. “We’ll have to see how it holds up.”

A little bit of good news

Weather aside, consumers in New Mexico will face fewer winter hardships compared to other regions that use oil or electricity for heating. Consumers are paying more for these fuels than the natural gas used by most New Mexico homes, said American Gas Association spokesman Jake Rubin.

“Natural gas is still the cheapest heating option today,” Rubin told the Journal. “That applies across the board.”

Gas from the Permian Basin is also much cheaper than other domestic sources, encouraging NM Gas to build more pipelines and infrastructure there in recent years.

“We continue to upgrade our system and increase capacity to move more gas from there,” Bullard said. “We have completed a few projects in the Permian this year that have increased our throughput.”

Indeed, a nationwide increase in domestic production and storage since the summer has helped limit the overall rise in winter gas prices.

“Prices are down a bit compared to a few months ago,” Bullard said. “For December and January, we were forecasting prices around $8, but that has fallen back to $5-$6.”

Still, today’s prices are far higher than in the pre-pandemic years, when wholesale prices were generally between $2 and $3 per thousand cubic feet.

“We went through a period of low heating bills for a few years, and people got used to it,” said Wolfe of NEADA. “But those times are over, at least for the next few years.”

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