Municipal, private utilities brace for high heating bills

After extreme weather events last winter caused ballooning natural gas bills, providers say they’re gearing up for another spike in prices expected this year.

“Rising wholesale commodity prices for natural gas, crude oil and petroleum products are being passed through to retail prices,” the U.S. Energy Information Administration said in its winter outlook report last month. “Fuel demand has increased from recent lows faster than production. This dynamic has led to … inventories increasing by less during the summer than historical averages, as in the case of natural gas and propane.”

The administration said weather’s impact on natural gas prices was considerable because of its double-impact: cold weather means consumers have to not only buy more gas to stay warm, but that widespread demand surges at the same time, ensuring that product has a higher unit cost. Thanks to its infamous climate and distance from natural gas producers, that puts the Midwest in the worst position.

“We expect the largest increase to occur in the Midwest, where we forecast that prices will average 45% higher than last winter,” the report said.

The government forecast emphasized that while weather patterns would influence energy bills, market factors would ensure a pricier winter than last year regardless of temperatures.

“In the colder-than-forecast scenario, we expect 15% more U.S. residential natural gas consumption on average than last winter, 30% higher natural gas prices, and 50% higher resulting household expenditures,” the report said. “In a 10% warmer-than-forecast scenario, we forecast natural gas consumption would be 3% lower than last winter, (but) prices would be 26% higher than last winter, resulting in household expenditures that would be 22% higher.”

Some energy companies expect an even greater jump in their customers’ monthly gas bills.

“We estimate that based on market prices that were prior to the winter season, it could be anywhere from 50-100% higher than they were last year,” said, Geoff Greenwood, a media relations manager for Mid-American Energy, which supplies natural gas to Riverside and much of Johnson and Muscatine counties. “That’s throughout our service area, that’s not a one-state figure.”

Alliant Energy expects a 50% jump based on the EIA’s findings, but has not conducted its own estimates.

“We actually haven’t put together numbers just because there’s such volatility,” Alliant Spokesperson Cindy Tomlinson said. “So we’re helping people understand, helping customers understand, what is being reported out there and really counting on those experts.”

The issue gets more complicated when it comes to municipal suppliers. The Union’s coverage area contains four cities that act as natural gas providers to their residents: Wellman, Brighton, Wayland and Winfield. All four buy their gas through the municipal supplier Clayton Energy.

“I buy the natural gas for them and transport it underground in interstate gas transmission lines and redeliver it to the communities,” Clayton Energy owner Bill Lindley said. “The cities own firm transportation on the lines, and that’s how the gas is moved to the transmission lines.”

Lindley said that communities bought the fuel at its lowest possible price over the summer, a process called “hedging” that Alliant and Mid-American representatives said their companies also used.

“We have a hedge program where we secure prices and lock them in, and we have all those communities in pretty good shape,” Lindley said. “They’re hedged even further than they were last year.”

In Winfield, city officials say they don’t expect any price shocks this winter.

“Our prices will not be going up … we have gas in storage, we purchase it on-contract, so we make sure that we have our supply purchased and our prices locked in,” Winfield Deputy Clerk Lisa Rees said. “I don’t think our prices have gone up in 13 years. That’s why last winter you had other communities that had to increase their rates for a short time because they had to buy more gas, but we had enough gas in storage to cover that cold spell.”

Like Winfield, the city of Wayland also has storage for its natural gas, but has slightly raised gas rates nonetheless.

“Because the purchase price of natural gas is increasing, the city of Wayland has increased the rate by $1 per MCF to cover the market gas we need to purchase throughout the heating season,” Wayland City Clerk Beverly Conrad said in an email. “We have contracted natural gas purchases for set volume and price through March 2023 and continue to make future purchases when pricing allows ... We strive to purchase gas at the lowest price by purchasing future gas to put in storage, but still have to purchase market gas to stay within our contract terms.”

While Brighton and Wellman also use hedging to mitigate costs, both expect a 25-30% heating bill jump for residents, according to their respective city officials. That’s because they don’t have the storage needed to completely secure a supply in advance.

“We have already purchased 125% of our average usage,” a Facebook post from the city of Wellman said. “However, despite our efforts, customers need to understand that natural gas bills will still be higher this heating season.”

However simple installing that storage sounds simple, it’s anything but. Wellman City Administrator Kelly Litwiller said it was not the city’s choice whether its pipeline came with storage or not.

“There’s different pipelines, some pipelines have storage tanks, and the pipeline that we’re on, we don’t,” she said. “We’re buying straight off the pipe and we don’t have storage tanks. When you talk about (other towns) who say their prices aren’t going to go up, that’s because they have storage. The pipeline that they have is able to purchase at lower rates because they’re able to purchase ahead and store it.”

Despite the city’s situation, Litwiller said the city was in the best position possible.

“We feel like, for where things are at all around the country … I feel like the city has prepared itself,” she said. “Because it’s across the country, we’re going to see those prices, but it has nothing to do with the way the city has purchased or done business.”

Energy providers all suggested energy conservation best practices, like opening curtains during the day and closing them at night, setting the thermostat lower when not at home, and sealing up any drafts in the house.

While high prices can put a dent in anyone’s wallet, there is help available for those who need it.

“(Mid-American) runs a program called I CARE, which is a program that allows customers to donate funds specifically for utilities assistance,” Geoff Greenwood said. “The company matches that by 25%, and those funds are distributed to local community action agencies.”

Cindy Tomlinson said Alliant had heating assistance options as well.

“For people facing financial hardships, we would encourage them to reach out to us,” she said. “We can get them connected to resources, because the last thing we want is to have to disconnect anybody.”

For additional aid, people below certain income thresholds are eligible for the Low Income Home Energy Assistance Program (LIHEAP,) which is run through community action programs like HACAP in Washington County, SIEDA in Jefferson County, and Community Action of Southeast Iowa in Henry County.

“LIHEAP is a federally-funded program that is designed to help low-income families to help meet the cost of home heating by providing a one-time payment to their heating utility provider,” HACAP Communications Manager Chris Ackman said.

While HACAP expects more applicants to the program this year, Ackman said they did not expect to turn eligible applicants away despite unchanged federal funding.

“If we see an increase, there will still probably be funding available,” he said. “It’s not necessarily based off of a demand because it’s federally funded.”

Comments: Kalen.McCain@southeastiowaunion.com