Heating bills bucking upward trend
BY SANDRA GUY Business Reporterfirstname.lastname@example.org January 29, 2012 12:54AM
ComEd — The average resident’s monthly bill decreased 1.6 percent last year
Peoples Gas — The average annual bill fell about 6.4 percent last year.
Updated: March 1, 2012 8:16AM
Your heating bills may go down this winter, and not because of the relatively mild weather so far. Thanks to lower prices of electricity and natural gas on the open market, Chicagoans may enjoy savings despite rising expenses for upgrading utility pipelines, meters and other infrastructure.
Last year, average electric and natural gas bills actually were lower than in 2010.
Natural gas is selling for prices not seen since the 1990s because of the recession, relatively mild weather and technological innovations that have caused a shale-gas drilling frenzy using hydraulic fracturing, or “fracking” as environmentalists call it.
Natural gas prices closed at $2.60 (per 1,000 cubic feet) on Friday — 81 percent lower than the fuel’s July 3, 2008 peak of $13.58 amid a commodities and fossil fuel boom, said Travis Miller, associate director for utilities coverage at Morningstar, a Chicago-based market data provider.
Because of the low market prices and mild weather, Peoples Gas customers could see bills that are 10 percent to 15 percent lower than last winter, depending on how much natural gas people use. The drop comes despite rising costs for maintaining the system.
In a Peoples Gas bill, one charge reflects the cost of keeping the system working, and that cost increased $2.75 to $22.25 a month on Jan. 21. The monthly charge had been $9 for more than a dozen years, but increased to $15.50 in February 2008, then to $19.50 in January 2010.
Peoples doesn’t make a profit from the natural gas itself. It passes along the cost, in this case at a far lower price than usual. Enjoy the savings while they last. The “fracking” process that extracts natural gas from shale is proving so profitable, oil drillers want to start building export terminals and sending the fuel overseas, which would raise the price here. Gas prices could jump more than 50 percent by 2018 if those export plans go through, the U.S. Energy Information Administration said.
Peoples isn’t the only utility that has raised its charges. Northern Illinois’ major utilities have been winning rate increases to pay for their maintenance and upgrades of their pipelines and distribution systems through what are called “delivery” charges.
Average monthly delivery charges for Commonwealth Edison, People’s Gas and Nicor have jumped in the past five years. Those delivery costs account for about one-third of a customer’s bill.
ComEd won a politically charged battle this past fall with Gov. Pat Quinn by lobbying the Illinois Legislature to pass a law that critics say will guarantee yearly rate-hike increases for each of the next 10 years.
The legislation allows ComEd to upgrade its system so it can replacing aging cables and poles, increase the number of “smart” electric substations and upgrade other equipment so it can more quickly pinpoint outages and renew power. ComEd has estimated the improvements will add about $3 to the average customer’s monthly delivery bill over the 10-year life of the project, starting in January 2013.
The price of electricity itself makes up the other two-thirds of a customer’s bill, and it is passed along to customers without markups. The price of electricity in Northern Illinois has dropped about 29 percent from five years ago, to about $25 a megawatt hour from $35, said Morningstar’s Miller.
ComEd customers have another advantage: Some of ComEd’s older contracts to buy electricity at a higher rate are expiring and will be replaced by today’s cheaper purchases, said Arlene Juracek, director of the Illinois Power Agency, an agency the Legislature created four years ago to buy ComEd’s electricity.
No one can say exactly how much a ComEd customer’s bill might be affected by the declining price of buying electricity.
Yet Midwesterners are expected to save 2.9 percent, or $33, this winter versus last winter if they heat their homes with electricity, says the Energy Information Administration. The forecast accounts for potentially less snow and cold air than initially expected because of a shift in low-pressure systems from the desert Southwest.
ComEd customers also are enjoying a newly competitive market, and 225,000 residential customers, or 7.6 percent of ComEd’s 3.4 million in the service territory, have switched to another electric utility, according to the Illinois Commerce Commission’s tracking numbers. Nineteen companies now provide electricity to people here.