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HVAC Residential Market / Furnaces

Winter Heating Bills Set to Increase

Natural Gas Costs Expected to Rise 13 Percent, Propane to Jump 9 Percent

November 18, 2013
Trans

Lower temperatures and higher energy costs offer HVAC contractors the perfect recipe for a busy winter season. The U.S. Energy Information Administration (EIA) is reporting that more than 90 percent of homes in the U.S. will receive higher heating bills this winter season, in comparison to last winter, as heating fuel prices continue to surge.

When compared to last winter, the EIA projects natural gas heating costs to rise 13 percent this season. If the temperature averages 10 percent colder than normal, those costs could increase as much as 25 percent.

Price Flexibility

The EIA’s most recent statistics (March 2013) note the average cost of residential natural gas prices at $9.35 per thousand cubic feet. A 13 percent increase would push that price to $10.56 per thousand cubic feet. The EIA predicts that the average household will spend approximately $679 in natural gas home heating costs this winter. Homes heating with propane are expected to spend an average of $1,666, or 9 percent more than last winter, and those utilizing electric heat are expected to spend $909 this winter, which is 2 percent more than last year.

Charlie McCrudden, senior vice president of government relations, Air Conditioning Contractors of America (ACCA), said it’s fairly typical for energy prices to rise in the winter months, in response to the rising demand for heating fuels.

“According to the EIA, fuel expenditures for individual households are highly dependent on local weather conditions, market size, the size and energy efficiency of individual homes and their heating equipment, and their thermostat settings, he said.

“The EIA’s latest predictions are that average household expenditures for homes heating with natural gas and propane are projected to rise this year between the months of October 2013 and March 2014. However, there is some good news. While the average household expenditure for heating costs is projected to increase compared to last winter, the price will still settle below the average cost of the previous five winters.”

Prices won’t be rising for everyone, though. The EIA predicts the cost of heating oil will decrease 2 percent compared to last year. The average price of residential heating oil on Nov. 6, according to the EIA, was $3.818 per gallon, excluding taxes. A 2 percent drop would lower the price to approximately $3.754.

Ralph Adams, service manager, Parker Fuel Co., Ellicott City, Md., and co-chair of the Oil & Energy Service Professionals’ (OESP) education committee, said he believes heating oil prices were overinflated to begin with.

“It didn’t make sense where the prices were,” Adams said. “They should’ve come down from what the retail price was. It’s a good thing for our industry (now). Another thing playing into that is natural gas prices spiking up. Natural gas was way cheaper than it should’ve been because there was such a glut of it. One of the things people will have to worry about is when they open up and start shipping natural gas out of the country, those prices are really going to go up.”

Michael Timberlake, senior associate for new media relations, Alliance to Save Energy, said, as energy prices rise, the need for greater energy efficiency increases.

“American households are now, on average, spending nearly $2,500 a year just on home energy costs, significantly more than they spend on property taxes, clothes, education, produce, or medicine,” he said. “But consumers still don’t look at energy efficiency as a way to save money as much as they should.”

The Weather Outside Is Frightful

Chris Orr, certified consulting meteorologist, said temperatures in the Northeast, Great Lakes, and northern Plains — spreading from Maine through New York to Minnesota — should be colder than normal, especially in the dead of winter from mid-December through the end of February.

“I expect it to run 1-2 degrees colder than normal,” Orr said. “Between now and mid-December, it’s going to be very volatile. We’re going to have some cold blasts come in and those will last maybe two days, where it gets really cold, then it’ll warm up by about 20 degrees for 3-4 days, then it’ll cool off again.”

Orr said he expects the most extreme winter conditions to occur in the area from the Great Lakes through the Northeast, but he anticipates a quicker spring thaw this year.

“The South, if you take from North Carolina to Eastern Texas, that area should be running about 1-2 degrees warmer than normal this winter,” Orr said.

“There will be two things going on out West: Washington and Oregon will be colder than normal, not by a lot, probably 1-2 degrees, and Southern Colorado into Arizona, New Mexico, and West Texas, I think that area will be above normal, by as much as 3-4 degrees.”

Brrrr…ing in more Business

Doug Lindstrom, owner, Lindstrom Air Conditioning & Plumbing, Pompano Beach, Fla., doesn’t have much of a winter season at his business. He said, while laughing, he thinks they only turned the heat on three times last year. But he does consult with a number of snowbirds flocking in from northern states such as New York and Michigan.

“That’s actually our season for plumbing,” Lindstrom said. “It’s pretty much the exact opposite of air conditioning down here. The weather’s pretty mild in the winter, though, so a lot of people don’t even have their air conditioners turned on.”

That’s why it’s so important for contractors in Lindstrom’s position to utilize preventive maintenance agreements to their advantage during this time of the year. He said his company tries to schedule 60-65 percent of its maintenance calls in the winter months, from November through March.

“Maintenance plans and maintenance customers, they’re the key to the air conditioning business,” Lindstrom said. “If you don’t have maintenance customers, you’re behind the eight ball.

“I think the main thing (for winter) is to focus on maintenance agreements, sales, and spending the extra time with each customer. There are simple things you can do that go a long way, especially this time of year.”

Adams said Parker Fuel Co. requires its service-plan customers to purchase heating oil from the company. Overall, Adams said it was a unique year for their service plans. “Nobody wanted to get their furnaces serviced during the summer,” he said. “Now, all of a sudden, everybody wants it done now. It’s been more of a mad rush this year than any year in the past. Even if they have a service agreement, they all have held off getting it done. It’s been a mad rush trying to get them done.”

Combating High Prices

McCrudden said increasing energy prices offer contractors an opportunity to educate homeowners on how they can save money.

“Energy efficiency is the low-hanging fruit, and homeowners can save real money by upgrading to higher-efficiency models of heating, cooling, and hot water appliances,” McCrudden said. “Incentives that encourage homeowners to retire an older, inefficient system early will show immediate benefits.”

Timberlake echoed that assessment, noting contractors might find it good business to emphasize and promote higher-efficiency equipment and services to customers, especially items in the home-performance arena.

“More interest in improving energy efficiency may lead to increased interest in HVAC contractors for repairs, installations, and assessments,” Timberlake said.

Adams said when customers complain to him about higher fuel prices, he tells them he’s stuck and getting squeezed just like they are. That’s led to the company changing the way it does business.

“Our minimum delivery for a long time was 150 gallons,” Adams said. “We would not bring out anything less than that, but when the price spiked up about three or four years ago, we got together and dropped that 150-gallon mark to 100 gallons. But that also costs us more money for delivery, so we charge 10 cents more per gallon. We try to work with the homeowners the best we can, but balance it so we don’t lose money in the process. Everybody’s in the business to make money, and if you don’t make money, you won’t be in business very long.”

When all is said and done, contractors have the most influence in helping homeowners develop a cost-savings plan to offset rising winter costs.

“As much as half of the energy used in a home can go towards heating and cooling, and HVAC contractors have a key role to play in helping their customers save,” Timberlake said. “Contractors can help their customers by sharing with them where their energy bucks are going and by offering many valuable services and tips that can save customers thousands.”

Publication date: 11/18/2013 

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