Liberty Utilities, the state’s largest provider of natural gas for home heating, is predicting that increases in the cost of gas on the wholesale market could cause residential heating bills to rise by 10 percent this winter.
In a Sept. 3 filing with the Public Utilities Commission, projecting the cost of gas for the winter of 2013-2014, Liberty estimated that the average cost of heating a home with natural gas from November through April under the new rates would cost $874, compared to $792 last winter, an increase of $82 or 10.4 percent.
“This increase is an increase in the cost of our supply of energy,” said Liberty spokesman John Shore. “This is the energy that we go out onto the open market to purchase, and we don’t mark up that cost at all. We just pass it along directly to the customer.”
Declining natural gas prices contributed to a huge increase in demand in the past two years, with no increase in supply.
That imbalance between supply and demand is likely to be reflected in prices this winter, particularly if the weather is severe.
Companies like Liberty are not only competing with other utilities to provide gas to heat homes and businesses. They are now facing increased competition from power plant owners, many of whom have switched to natural gas to provide electricity.
“We’re seeing a lot of increased use not only by what you would expect — residential, commercial or industrial — but also by other utilities,” Shore said. “Utilities are now using gas to power their generation systems, and the interstate pipeline system that’s in place is limited in what it can deliver to New England.”
Liberty serves approximately 87,000 customers located throughout the Merrimack River Valley from Nashua to the Lakes Region and parts of Berlin.
The company revealed in its PUC filing that it has 23 contracts that hedge the price of gas supplies for the upcoming winter, with prices ranging from $3.516 to $4.460 per dekatherm. The prices for natural gas hit rock bottom in January of 2012, when the February price paid for “delivered” natural gas from producers fell to $2.32 per dekatherm on the New York Mercantile Exchange — the lowest price in a decade.
But the party may be winding down, particularly in New England, which is at the end of the pipeline infrastructure serving the nation.
ISO New England, which manages the region’s electricity grid, recently warned that until additional pipeline capacity is built, the region could miss out on many of the benefits from the extraction of shale gas deposits in Pennsylvania, Ohio and West Virginia.
ISO recently announced a joint project with New York ISO, Ontario’s Independent Electric System Operator, the Tennessee Valley Authority and other partners to analyze the natural gas infrastructure serving a large portion of the Eastern United States, with a grant from the U.S. Department of Energy.