Rising Cost Of Staying Warm

Whether you heat with electricity, oil or gas, bills will go up

October 17, 2007|By Paul Adams | Paul Adams,Sun reporter

The record prices Marylanders paid to keep cool last summer will soon give way to eye-popping winter heating bills - no matter what the fuel.

Households heating with electricity can expect bills to be about 50 percent more than a year ago - assuming no adjustment for weather variances - as a result of Baltimore Gas & Electric's rate increase in June.

The federal government projected last week that average U.S. homes heating with natural gas would pay 10 percent more this winter, while those burning fuel oil could expect to pay 22 percent more.

But since that report was released, concerns about tightening supplies coupled with tensions along the Iraq-Turkey border have pushed crude oil above $87 per barrel, and heating oil for November delivery has reached a record $2.34 per gallon.

Prices for natural gas often rise along with those for oil.

The price shock looms when local funds to help low- income residents pay energy bills have been largely exhausted, the result of helping clients deal with summer electricity bills after BGE's rate increase. Many face a long, cold winter unless the federal government or private donors provide more money.

"There has been tremendous demand," said Mary Ellen Vanni, executive director of the Fuel Fund of Maryland. "We had more than twice as many applicants this summer than ever before."

The Fuel Fund won't get an infusion of money until January, she said.

The Victorine Q. Adams Fuel Fund in Baltimore, which has the largest base of low-income clients, has stopped taking applications for assistance, said Charles W. Griffin, board president for the fund.

Xavier Reed, owner of Can-Do Fuel Oil Co. in Baltimore, said customers are doing a lot of "price-hopping," calling around to various suppliers looking for the lowest price. His rate yesterday was $2.55 a gallon, though prices around town range up to nearly $2.90.

The Energy Information Administration, the statistical arm of the Energy Department, projected average prices for fuel oil will reach $2.88 per gallon, compared with $2.48 last winter.

With temperatures expected to be lower this winter, the EIA estimates that U.S. fuel oil customers will pay an average of $1,785 to heat this year, or about $319 more than a year ago. The average increase varies by region.

"People are going to be faced with `Do I pay my mortgage this month, or do I buy 200 gallons of oil?'" Reed said. "It's going to be tough out there."

Fixed income

The 200 gallons of oil that Bertha Robinson bought from Can-Do yesterday cost $510, or nearly half her monthly $1,100 Social Security check. Robinson, 73, lives with her 6-year-old great-granddaughter in a three-story house in Baltimore.

She turns down the thermostat at night and uses a space heater to keep her bedroom warm. During the day, she wears a sweater.

"Each year it gets a little higher," she said of oil prices. "Hopefully, that [200 gallons] will last more than just one month."

The EIA says 7 percent of U.S. households heat with fuel oil, most of them concentrated in the Northeast and Mid-Atlantic regions.

Natural gas customers, which account for 58 percent of U.S. households, can expect smaller increases. BGE locked in about half its winter supply of natural gas at earlier prices, which should result in local gas rates staying about the same as last winter's, said John Hays, principal pricing analyst for the utility.

However, the utility said customers can expect to pay about 5 percent more to heat their homes this winter compared with a year ago if the weather is more normal. Last winter was 7 percent warmer than usual in the Baltimore region.

The utility's preliminary estimate is that the typical BGE household will spend about $690 to heat with natural gas this winter, compared with about $659 last year.

That projection of $31 more is slightly more optimistic than the EIA's estimate for the United States as a whole. The EIA projects that average U.S. natural gas customers will spend $855 this winter, about $78 more than a year ago.

Propane customers can expect to pay 16 percent more this year, the EIA estimates. That translates into $1,570 for the season, an increase of $221 over last year.

It is too early to say whether the EIA's projections will prove to be overly optimistic in the face of the oil market's recent volatility.

Oil futures topped $88 a barrel for the first time yesterday, the result of growing concerns about political tensions in the Middle East and worries that domestic demand will outstrip supplies in the fourth quarter.

Analysts say supplies are so tight that any negative news can send the markets reeling.

Traders reacted sharply yesterday to news that Turkey's prime minister asked parliament for permission to pursue Kurdish rebels into Iraq - a move that could threaten oil pipelines and production in the region.

Rising demand

That news came on top of recent reports from the Energy Department and the Organization of Petroleum Exporting Countries that supplies might not be keeping pace with rising demand.

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