Heating costs could jump this winter amid surging natural gas prices
Xcel Energy, the sole natural gas provider in Fargo and Grand Forks, estimates that average North Dakota households will have to pay $164 more than normal to heat their homes this winter. That's assuming nothing goes wrong, like in last February's freeze.
BISMARCK — As cold weather begins to take hold in North Dakota, a global natural gas shortage has many concerned about the costs of utility bills in the winter ahead.
Natural gas prices around the world have soared over recent months, climbing to more than double their level from January in U.S. markets, and hitting their highest point since 2008 earlier this month.
In North Dakota, both Xcel Energy and Montana Dakota Utilities (MDU), which together provide the bulk of the state’s natural gas, have cautioned that customers are likely to see big jumps on their heating bills this winter. Xcel, the sole natural gas provider for the Fargo and Grand Forks areas, is estimating that the average household will be charged $164 dollars more than normal this winter. And customers with MDU can expect to find inserts in their upcoming heating bills outlining the company’s projection for an increase of about $185 for average households this winter compared to last.
“I’m extremely concerned,” North Dakota Public Service Commissioner Brian Kroshus said at a regulatory hearing earlier this month. “Consumers need to prepare that it's going to potentially be a tough heating season.”
As economies around the world have ramped up from pandemic stagnancy, back-logged global supply chains have driven shortages of everything from computer chips to lumber to breakfast cereal. Some similar factors are at play in energy markets, too, as U.S. oil drillers from Texas to North Dakota have been content to hold their output stagnant even as oil prices have surged to their own seven year high. That has meant that production of natural gas, produced alongside oil, has remained low in spite of the growing demand.
And after last year’s relatively mild conditions, a more bitter winter could be in store for North Dakota this time around. Jacob Spender, a meteorologist with the National Weather Service, said their Grand Forks office is monitoring for a possible La Niña, a weather phenomenon that would drive Red River Valley temperatures below their already-frigid averages in early 2022.
Still, natural gas is a notoriously volatile commodity, and unseasonably high temperatures in the last two weeks have helped to pull prices down from their 13-year peak on Oct. 5.
Some large providers like Xcel and MDU have the advantage of storage capacity, which both companies said has allowed them to stockpile gas underground in anticipation of the higher-priced winter.
Mark Hanson, a spokesman for MDU, said that the Bismarck-based utility stored about a quarter of its winter supply at lower summer prices, while the company contracted another quarter in more affordable, long-term buys as well. Matthew Lindstrom, a spokesman for Xcel, said the Minneapolis-based provider has purchased financial hedges and locked in a majority of its winter supply under long-term deals and underground storage as well.
But when demand gets high, companies sometimes have to turn to the less predictable daily markets. Lindstrom noted that those daily prices tend to remain fairly stable, but Xcel and MDU’s cost estimates for the coming winter assume average weather conditions and no supply shocks.
An event like the February 2021 cold snap, which caused power systems to fail and froze natural gas pipelines and wellheads in Texas, could drive heating prices up even further.
North Dakota customers are still paying off the more than $50 million in unplanned heating costs that hit the state during the February freeze .
Expectations of a higher cost winter also come as state regulators approved Xcel this week for its first natural gas rate increase in 15 years — an interim bump of $5.60 for the average household.
Kroshus said the increase had “terrible timing,” but regulators approved it to ensure the safe delivery of gas to homes.
In an effort to mitigate the compounding costs, the Public Service Commission also voted Thursday, Oct. 21, to further spread out Xcel’s cost recovery from the February cold snap from 15 months to 24 months.
High prices could hit low-income households
Regulators, utilities and ratepayer advocates have all cautioned that the combination of winter weather and soaring heating costs could hit low and fixed-income households the hardest.
Advocates for low and fixed income households in North Dakota have similarly expressed concerns about the winter ahead. Josh Askvig, state director for the AARP in North Dakota, noted that many low income households have to make difficult trade-offs as it is.
“When you’re putting pressure on having to make decisions” like forgoing food or prescription drugs to avoid having your heat shut off, “this is a health hazard,” Askvig said.
Utilities and regulators have recommended several steps like home energy audits, weatherization and the installation of smart thermostats to mitigate costs this winter. But Kroshus has also noted that these steps may not counteract the effects of the energy markets on low income households.
“The most troubling part of this question is the impact that this is going to have on fixed income households and low income households,” Kroshus said. “They're really at the mercy of the markets.”
Residents can apply to the Low Income Home Heating Assistance Program (LIHEAP) through the state Department of Human Services, which has program funds available from October to May of next year. In announcement of the program at the start of October, the department reported that it supported around 12,800 households last year, at an average of $890 per home.
In August, the human service department also announced that its rental assistance program would also be available to help with renters’ utility costs, including water, sewage and heating services not covered under LIHEAP. The department reported that it spent $5.6 million towards supporting more than 1,700 North Dakota renters between January and July of this year.
Applications for both the Department of Human Services heating assistance and rental assistance programs are available at https://www.applyforhelp.nd.gov/ . For help with LIHEAP program applications, call 701-328-3513, select option 6 and then select option 2.
Minnesota residents can find more information on the state's energy assistance program at https://mn.gov/commerce/consumers/consumer-assistance/ or by calling 1-800-657-3710.
In addition to the human service department programs, the North Dakota Department of Commerce offers assistance for weatherization to low income households, which can be used to prevent heat from escaping and driving up utility bills. Applications are open at https://www.communityservices.nd.gov/lowincomeprograms/weatherizationassistance/ . Residents can also get more information on the program by calling 701-665-4496 or 701-486-3330.
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at email@example.com.