It's going to cost substantially less to heat one's home this winter, so where are the huzzahs? Baltimore Gas & Electric announced Monday that natural gas prices are down 25 percent, and the average residential utility customer stands to save about $184 during the heating season.
Declining natural gas prices are good for electric rates, too. The Energy Information Administration announced yesterday that all U.S. households will likely pay 8 percent less to heat their homes (although the savings for heating oil and electricity customers are projected to be less than the 12 percent to 14 percent savings expected for those who use propane or natural gas).
BGE customers have seen only slight savings on electricity so far - rates are down 2 percent as of Oct. 1 from one year ago. But company officials expect that trend to continue and project the decline to total 15 percent by June of 2011 as older, more expensive wholesale contracts expire. For the average BGE household, that could amount to paying $250 less for electricity annually.
What makes prices fall so steeply? Primarily the same thing that made them rise so sharply a few years ago: the law of supply and demand. The recession has reduced consumption and forced fuel producers to lower prices in response - the reverse of what happened when an expanding world economy caused energy prices to skyrocket.
One year ago, drivers were paying about $3.60 a gallon for gasoline. With crude oil now hovering around $70 a barrel, a gallon of gas costs about $2.46 nationwide, according to AAA. In Maryland, the prices are cheaper still - slightly less than $2.38 for a gallon of unleaded.
For a commuter who covers 200 miles per week in a 20-mpg car, that's a savings of $11.33 per week, or about $147 by year's end.
Yet somehow one doesn't see celebration in the streets, let alone politicians calling for investigations into price fixing.
Why? Because the public readily accepts the fact that the market has forced energy prices to decline. That's what happens when unemployment hits a 26-year high.
But just as BGE and its parent, Constellation Energy Group, don't merit applause for merely passing along savings through regulated rate reductions, the utility ought not be treated as a scapegoat when circumstances are reversed. One can't help but detect a bit of that in the current Maryland Public Service Commission ruminations over its proposed sale of nuclear assets to the French EDF Group.
Still, it's good news that Marylanders will have a bit more money in their pockets this winter from cheaper energy, and perhaps that will prove a boost to the state's economy. Meanwhile, far greater savings are possible if more households seek energy audits and adopt appropriate conservation measures.
After all, natural gas prices that fall in a recession are just as likely to rise in the recovery. When it happens, don't let it be a surprise.
