Americans are about to see the biggest increase in their home heating bills in more than 10 years, and it’s not just because of inflation.
A new report from the National Energy Assistance Directors Association (NEADA), which represents state directors of the Low Income Home Energy Assistance Program (LIHEAP), predicts a 17.2% increase in average home heating costs this winter compared to to last year, and a 42% increase in the cost of household electricity compared to the winter just before the outbreak of the pandemic.
The latest increase is the result of sky-high summer temperatures that sent natural gas prices skyrocketing as some customers turned up their air conditioners to cool their homes, according to NEADA executive director Mark Wolfe. This surge in demand pushed prices up and was exacerbated by the withdrawal of coal and nuclear power plants in favor of electric generators.
Meanwhile, natural gas production has been slow to come back online after waves of shutdowns during the Covid-19 pandemic.
Today, the price of natural gas is at levels not seen in more than a decade. NEADA estimates that 91% of Americans’ heating and cooling costs are related to the price of natural gas, either directly or as the primary source of energy used to create electricity.
Some utilities are able to cushion the blow of dramatic price swings or spread cost increases over time, thereby protecting their customers from price spikes. In addition, utilities are prohibited from profiting from rising commodity prices.
Yet many states now face depleted natural gas inventories. As they begin to purchase more natural gas at current prices to make up for the shortfall, customers will likely face higher bills in the coming months.
Indeed, some utilities are already warning customers to prepare for higher costs. On Sept. 9, New York utility giant Con Edison predicted that a typical customer’s electric bill would climb 22% to $116 per month this winter, while the average residential heating customer natural gas would see a 32% jump to $460 per month.
The company said the increases were directly tied to higher natural gas prices.
The United States also finds itself shipping more natural gas out of the country thanks to booming demand from Europe, which is facing a supply shortage due to the Russia-Ukraine conflict, said Gary Cunningham, director of market research at the energy consultancy firm Tradition Energy.
“There is now an imbalance between our supply and our demand,” Cunningham said. “All summer, when we should have been storing gas, we didn’t store it. So we had a cold winter, not strong production growth, strong exports – and that’s what we have.”
Last week, NEADA sent a letter to Congress asking for an additional $5 billion increase to LIHEAP to help consumers with the higher cost of home heating and cooling. Without it, the group said, it faces a “funding cliff” because the $4.5 billion allocated in additional funds for LIHEAP in the 2021 US bailout will be fully funded by the end of September.
“For many struggling families, higher prices may mean having to choose between heating, food or medicine,” the association said.
“About 29% of Americans surveyed have had to cut back or give up spending on basic necessities to pay an energy bill in the past year, according to the US Census Bureau’s Pulse Survey. was before fuel prices started to rise.”
Tammy Stauffer, director of energy assistance for the Community Action Partnership of Hennepin County in Minneapolis, told NBC affiliate KARE-TV that he already expects the grant amount for his energy assistance to be lower than from last winter, and that the previously expanded eligibility for assistance will no longer apply.
Last year, the affiliate said, the organization submitted 7,000 more applications than the previous season, an increase of 38%.
“The extra funds we had last season definitely helped us help more people and provide them with bigger grants,” Stauffer said. “I’m a bit worried that the funding can’t keep up with the demand.
Mark Wolfe, executive director of NEADA, said any additional funding would allow LIHEAP to reach more families.
“With these higher prices, we expect more people to seek help,” he said. “In particular, low-income families are also struggling with higher food prices and higher rent. We pay a bill, so if we pay that bill, they will be better able to afford food and gasoline.”