Feeling the heat

James and Bonnie Manning seem resigned to an expensive winter heating season.

The couple replaced a window in their north Fargo home about a month ago, but otherwise don't plan any special measures to ward off the cold.

"Turn the thermostat down a little and put on a pair of mitts," said James, 86. "That's all you can do."

Assuming Old Man Winter keeps his wrath in check, that might be enough to keep heating bills at last year's levels.

In its short-term energy outlook released Thursday, the U.S. Department of Energy said the outlook for household heating bills remains mixed compared to last winter.

Compared with a year ago, heating costs are predicted to jump 6 percent for natural-gas heated homes and 4 percent for homes using electric heat, according to the report prepared by the Energy Information Administration.

Heating oil expenses are predicted to drop 6 percent, while propane prices will remain about flat.

Most residents in the Fargo-Moorhead metro area heat their homes with natural gas or electricity.

The 2000 census found 26,284 homes used natural gas and 25,850 used electricity in Fargo, Moorhead, West Fargo and Dilworth. About 1,600 homes used fuel oil, while 734 used propane.

Despite its unpredictable cost, natural gas remains the most popular heating option among local homeowners.

A survey by Xcel Energy found 76 percent of homes and 64 percent of commercial buildings built in the metro area last year had natural gas heating systems.

Natural gas supplies hit a five-year low last spring and summer, but have since rebounded to near-normal levels, said Bonnie Lund, Xcel Energy spokeswoman in Fargo.

Mild weather during the last four to five months allowed the natural gas industry to boost production and fill storage tanks. As of a week ago, nearly 3.2 trillion cubic feet of working gas was in storage -- 200 billion cubic feet more than the level considered sufficient to meet a non-severe winter heating season.

"I'd say the concern (about supply) has moderated a little bit," said Lund. "But it's all weather dependent, so a long, cold winter can certainly affect price again."

With normal winter conditions, Minneapolis-based Xcel Energy is predicting natural gas costs from zero percent to 15 percent higher than last year, Lund said.

The average Fargo-Moorhead home used 880 therms of natural gas last year at a cost of 73 cents per therm, or $642 for the year, Lund said.

With a 15 percent cost increase, customers would pay $96 more than last year during the heating season from November through March, Lund said. A colder-than-normal winter would bring higher costs.

Local customers are paying 74 cents per therm in November, a 10-cent increase over last month.

Xcel Energy serves 34,870 customers in the local coverage area that includes Fargo-Moorhead, West Fargo, Dilworth, Glyndon, Minn., and Casselton, N.D.

The company is a natural gas distributor, meaning it purchases gas on behalf of its customers.

"We don't profit off increased prices," Lund said. "We don't own the wells."

Ronald Knutson, director of the federal Low Income Home Energy Assistance Program in North Dakota, said applications for assistance are arriving at about the same rate as a year ago.

The program served 14,200 households in the state last year, and officials expect to serve 15,000 this year.

"There was (concern) earlier when there was so much talk in the media about the increased natural gas prices," Knutson said. "But we later heard from some of those companies that things weren't going to be as bad as they thought."

Electric heat rises

Cass County Electric Cooperative, which serves 23,000 customers in an eight-county area of southeastern North Dakota, isn't planning any rate increases through 2004, said Matt Richter, communications coordinator.

Co-op customers are currently paying an average of 5.8 cents per kilowatt-hour, or about 10 percent more than a year ago, Richter said.

He attributed the increase to the co-op's wholesaler, Minnkota Power Cooperative, having to raise prices to keep up with inflation and maintain its coal-fired power plant near Center, N.D.

Customers can guard against fluctuating natural gas, oil and propane prices by installing a dual-energy system and using off-peak electric heat, Richter said.

The system uses electricity as the main heat source about 90 percent of the time, but switches to a fossil fuel backup system during periods of peak demand.

Combining the two sources allows the co-op to maximize efficiency and offer lower heating rates, Richter said.

"It's a good program as long as people have adequate backups," he said.

Xcel Energy also offers discounted rates for dual-fuel systems, but the company doesn't promote the option heavily, Lund said.

"We tend not to push it that much because you have to have two heating systems and maintain two heating systems, and the price of natural gas generally beats the price of electricity anyway," she said.

East drives oil price

The price of heating oil is expected to average $1.32 per gallon this winter, or about the same as last winter.

However, prices could rise significantly if the Northeast -- the nation's largest market for heating oil -- experiences another harsh winter.

Cold weather alone on the East Coast could add 10 to 15 cents per gallon, and perhaps even more at the local level, the Energy Department said.

"If they get a big cold snap or a big storm, that affects prices nationwide," said Dave Olson, co-owner of Lileks Oil Co. in West Fargo.

No. 2 fuel oil, which fills indoor tanks, sold for about $1.25 earlier this week, Olson said. No. 1 outdoor fuel oil costs about 8 cents more per gallon, and local supplies are running low, he said.

Fuel oil prices should remain stable as long as refineries keep up with demand and the nation experiences a normal winter, said Vance Nichelson, owner of Nichelson Oil Inc. in Fargo.

"But anything can happen," he said.

Oil prices have fluctuated wildly in the past couple of years, Olson said. Five years ago, a 2- to 3-cent spike in the diesel price was a major deal, he said. Now, it's likely to occur two or three times a week.

An unstable world market and a lack of new oil refineries have made it difficult to predict prices.

"It's so volatile," Olson said.

Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528