High-cost of heating hangs over the holidays - Albuquerque Journal

High-cost of heating hangs over the holidays

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

Copyright © 2022 Albuquerque Journal

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

Consumers can thank scorching summer heat that drove up natural gas prices to 15-year highs in August, as electric utilities everywhere sucked up supplies for natural gas-based generation to keep air conditioners running full blast during peak summer demand.

That cut domestic gas supplies, driving U.S. fuel storage down to more than 12% below normal levels by early September. And that, in turn, pushed wholesale prices for natural gas up to their highest levels since the shale-gas revolution flooded the nation with low-cost natural gas more than a decade ago.

Add to that the global boom in post-pandemic energy demand, plus the war in Ukraine that has crippled European fuel supplies. Together, those things have pushed U.S. exports of liquid natural gas to unprecedented levels, reducing domestic supplies and aggravating prices across the nation.

It’s kind of a perfect storm, or a Grinch’s playground, that foreshadows significant hardship – particularly among low-income families – as winter weather sets in and heating bills climb, 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 basic goods – and rents are also going up,” Wolfe told the Journal. “It’s hitting families hard, especially with winter coming on and natural gas prices now at their highest level in 15 years. … Budgets are much tighter, making it harder for struggling families to get through.”

NM prices

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

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

Higher prices have no impact on company profits. By law, the utility simply passes through the cost of fuel on customer bills.

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

San Juan gas hit 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 of last year.

Those prices are projected to continue through the key winter months of December-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 $5 to $7 range before it starts to come back down in March,” Bullard told the Journal.

The impact on consumer bills depends a lot on the weather, and on individual consumption levels during the coldest months, said utility Vice President for External Affairs Gerald Weseen.

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

Although colder-than-normal temperatures are expected in northern regions, a little warmer-than-normal weather is projected for the Southwest, potentially buffering high gas prices as local consumers use less fuel to heat their homes, Bullard said.

But accurate predictions are difficult. Unforeseen weather spikes – such as the Arctic vortex that struck the U.S. in February 2021 – could change things.

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

A bit of good news

Apart from the weather, New Mexico consumers will face fewer winter hardships compared with other regions that use oil or electricity for heating. Consumers pay more for those fuels than the natural gas consumed by most New Mexico households, said American Gas Association spokesman Jake Rubin.

“Natural gas remains the most-affordable heating option today,” Rubin told the Journal. “That’s true across the board.”

Permian Basin gas is also much cheaper than other domestic sources, encouraging N.M. 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 completed a few projects this year in the Permian that increased our throughout.”

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

“Prices have eased a bit from a couple of months ago,” Bullard said. “For December and January, we were projecting prices around $8, but that dropped back to the $5 to $6 range.”

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

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

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