BALTIMORE — Some people are bracing themselves for how much cold weather this winter might bring but those who already are turning on the heat for the first time this season also might be in for a shock when they get their next energy bill.
The price of food and gas has jumped this year as inflation hit levels not seen since the 1980s. One of the main drivers of high inflation is the rising cost of energy itself.
Energy providers are warning customers what to expect as temperatures drop this fall and winter.
Shipley Energy president matt sommer said “future price of energy is pretty unpredictable with everything going on in the world. What the weather is like this coming winter will certainly impact the prices as well.”
BGE director of customer care Marcus Walker said “these are some challenging times and no one wants to see or hear anything about higher energy bills, customers will face higher energy bills.”
It doesn't matter whether someone uses gas or electric to heat their home.
Loyola University Maryland Sellinger School of Business professor of finance Karyl Leggio said “91% of all heating bills are driven by natural gas prices, even if you have electric. Most power is generated by natural gas so doesn’t matter if your house is electric, you’re still going to see some big increases.”
Leggio explained it's because futures contracts for natural gas have energy providers expecting to pay higher wholesale prices themselves.
“It’s sort of like when you look at the stock market in the morning and they talk about what the expectations is for the price market over the course of the day is not a guarantee that that’s what the price will be to increase that much but the expectation are prices are going to be really high this year,” Leggio said.
How much gets passed onto consumers at home depends upon how high wholesale prices could go for natural gas.
“They’re up 95% so that’s a little scary. Now, on the positive side to mitigate that a little bit, it was worse in August. But, prices are looking high. They’re looking to be a 28% increase, that’s if we don’t have a cold winter. With a cold winter, it could be up to a 50%, 51% increase in prices,” Leggio said.
“The northeast is the primary user of oil to heat their homes. And, oil is much worse than even natural gas because oil is a direct competitor with the Russian pipelines being limited and Europe having such high demand,” Leggio added.
Leggio predicts electric bills could jump 10% to 15% this winter.
According to the U.S. Energy Information Administration, some power plants make and store liquid natural gas (LNG) onsite to generate electricity when the demand is higher than usual, such as during hot summers or cold winters, to account for supply chain issues when demand is high but the supply is low.
“Because they already have stockpiles, they’ll be able to use some of that cheaper natural gas to mitigate some of those higher prices but it probably means our prices are going to be high for a few years,” Leggio said.
“We have this limitation in terms of the supply, a lot of demand, high inflation. The natural gas facilities were hurt by covid and a lot of them aren’t back online in the same way they were, so it’s just gonna take a little while to work our way out of this,” Leggio added.
