Natural Gas: By the Numbers

April 30, 2014

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, April 28, 2014, and found the current statewide average cash price for No. 2 heating oil was $3.60 per gallon, down two cents from last week. The average statewide price for kerosene decreased one cent in the last week, to $4.08 per gallon. Propane prices are also lower; the average statewide price for propane (for heating customers) is now $3.14 per gallon, a drop of 5 cents per gallon. Last year at this time, heating oil averaged $3.50; kerosene, $3.96, and propane, $2.75 per gallon.

As Maine citizens close out this heating season, they can take advantage of the opportunities available to lower their heating bills next winter. Over the last month, the Governor’s Energy Office has highlighted several efficient alternatives to the standard, older, inefficient oil furnace. This week’s topic is natural gas: prices and heating systems.

The best way to save money as a natural gas customer is to install an efficient boiler or furnace. Natural gas appliance efficiency is measured in units called annual fuel utilization efficiency, or AFUE. AFUE measures how many British thermal units (Btu) of heat an appliance produces per 100 Btu of natural gas (1/100th of a therm). The Energy Information Administration (EIA) predicts that on average, natural gas appliances have an annual fuel utilization efficiency (AFUE) of around 82. However, many of the new Energy Star certified boilers have an AFUE of 95. If a 1,000 therm natural gas customer were to switch from a boiler of average efficiency to a new Energy Star certified model, they could produce the same amount of heat with 137 less therms of natural gas. Given the current state average price of $1.62 per therm, that would be a savings of about $222 per year. If you are converting from an older, inefficient oil furnace, the savings will be even greater.

However, to accurately assess how much you may save, it is important to include an up-to-date price of the fuel into your calculations. Like electricity, natural gas service has two components: cost of supply, and the cost of delivery. These costs vary, depending on which company delivers gas to your home. In Maine, there are four local distribution companies (LDCs): Bangor Natural Gas, Maine Natural Gas, Summit Natural Gas, and Unitil Maine. Each company uses a different pricing structure to arrive at the “all-in” price per therm (a therm is equal to 96.7 cubic feet of natural gas, and contains 100,000 British thermal units (Btu) of energy). The average household consumes between 850 and 1,000 therms of natural gas per year.

For example, Maine Natural Gas uses a model that includes a variable price option and a fixed price option for the cost of gas. Bangor Natural Gas has a standard price option that adjusts each month with the market price of gas. Unitil and Summit Natural Gas use similar models where the prices are fixed, but are adjusted twice a year. Unitil’s cost of gas is adjusted every May and every November. Summit adjusts the delivery portion of the bill in June, and the cost of gas in October. If this weren’t complicated enough, the delivery rate can change depending on your monthly use (similar to electricity). These rates are summarized in the tables below.

Maine Natural Gas- Current Pricing Structure (April 2014)
Fixed Price Option (per therm) Index Price Option (per therm) Fixed Customer Charge (per month) Transportation and Delivery (per therm, 1st 50 therms) Transportation and Delivery (per therm, over 50 therms) All-in Price per therm
$0.8344 $0.6868 $24.34 $0.3920 $0.3480 $1.43
Bangor Natural Gas- Current Pricing Structure (April 2014)
Customer Charge (per month) Transportation Charge (per therm) Energy Charge (per therm) Past Gas Cost Adjustment (per therm) All-in Price per therm
$14.29 $0.356 $0.813 $0.216 1.56
Unitil- Current Pricing Structure (April 2014)
Customer Charge Distribution Charge (first 40 therms) Distribution Charge (excess of 40 therms) Cost of Gas Charge/Therm All-in Price per therm
$22.24 $0.4095 $0.3140 $1.0159 $1.66
Summit Natural Gas- Current Pricing Structure (April 2014)
Customer Charge (per month) Distribution Charge (per therm) Energy Charge (per therm) All-in Price per therm
$20.00 $0.85 $0.7486 $1.8386

During the winter months, these rates may be higher due to constrained natural gas pipeline capacity. Residential customers with a variable rate option will likely see the most significant difference between summer and winter prices. For more information on the natural gas prices in your area, please visit your LDC’s website.

Using this week’s average heating oil price ($3.60) and converting to a common heating unit value (million Btu), the price of fuel oil is $25.96. This compares with an equivalent heating unit value for natural gas of $16.20 (at $1.62/therm); propane, $34.38 (at $3.19/gallon); kerosene $30.22 (at $4.08/gallon); wood pellets, $14.67 (at $242/ton); cord wood, $11.36 (at $250/cord) and electricity, $43.96 (at 15 cents per kwh). The average rate used for natural gas is an unweighted average of the fixed and variable costs (using the spring season supply prices) of all four natural gas utilities’ rates, based on an average consumption of 1000 therms per year.

The above fuel-only prices do not take into account the type of heating system, nor its efficiency. For example, the electricity cost is for traditional baseboard heat. Other electric heating technologies, such as heat pumps and electric thermal storage (ETS), may offer consumers cost savings. Cold climate heat pumps, a recent technological advancement, are much more efficient than baseboard electric heat, so total energy costs are lower than many other types of heating fuels. ETS offers savings by utilizing off-peak electric rates, available in many areas of the state.

The Energy Office has a calculator on its web site that allows consumers to obtain more detailed estimates of home heating costs, and the price impacts of various types of fuel, heating systems and heating appliances. Heating costs vary considerably from home to home. The home heating calculator can assist homeowners in finding the best heating option for their home, location, lifestyle, and budget http://www.maine.gov/energy/index.html

As of April 28, 2014


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

3.60

3.57

3.62

3.62

3.58

3.70

High

3.90

3.90

3.70

3.80

3.70

3.75

Low

3.35

3.35

3.50

3.38

3.35

3.62

Kerosene

4.08

4.06

4.10

4.08

4.07

4.10

Propane

3.14

3.12

3.28

3.06

2.96

3.43

It is important to note that the price for heating oil is a statewide average, and that prices in a given geographic region of the state may be considerably higher or lower than this average. This week, within the Energy Office sample, the highest heating oil price ($3.90) was found in one region in the state, and the lowest heating oil price ($3.35) was recorded in two regions. Also, the statewide average price for propane is based on a use of at least 900 gallons a year. Households using propane just for cooking or hot water generally pay a higher per gallon price. The table above provides current Maine cash prices in dollars rounded to the nearest penny.

Efficiency Maine Trust links Maine homeowners and businesses with qualified, certified contractors who provide access to energy improvement options. For program details call 866-376-2463 or visit www.efficiencymaine.com

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For Immediate Release

Contact:
Lisa Smith
(207) 624-7445
lisa.j.smith@maine.gov