Americans are about to see the biggest increase in their home heating bills in more than 10 years, and it's not just because of inflation.
A new report from the National Energy Assistance Directors Association (NEADA), which represents the state directors of the Low Income Home Energy Assistance Program (LIHEAP), projects a 17.2% jump in average home heating costs this winter compared to last year, and a 42% jump in the cost of household electricity compared to the winter just before the pandemic hit.
The latest increase is the result of sky-high summer temperatures that sent the price of natural gas soaring as some customers cranked up their air conditioners to cool their homes, according to NEADA executive director Mark Wolfe. That spike in demand pushed prices higher, and was exacerbated by the retirement of coal-fired and nuclear plants, in favor of electric generators.
Meanwhile, natural gas production has been slow to come back online after waves of shutdowns during the Covid-19 pandemic.
Today, the price of natural gas is at levels not seen in more than a decade. NEADA estimates that 91% of Americans' heating and cooling costs are tied to the price of natural gas, whether directly or as the primary energy source used to create electricity.
Some utilities are able to soften the blow of dramatic price swings, or spread cost increases over time, and thus protect their customers from price spikes. Additionally, utilities are forbidden from profiting from commodity price increases.
Still, many states are now facing facing depleted natural gas stockpiles. As they begin to purchase more natural gas at current prices to offset the shortfall, customers will likely face higher bills in the coming months.
Indeed, some utilities are already notifying customers to prepare for higher costs. On Sept. 9, the New York utility giant Con Edison forecast that a typical customer’s electric bill would climb 22% to $116 a month this winter, while the average residential natural gas heating customer will see a 32% jump to $460 a month.
The company said the increases are directly related to higher natural gas prices.
The U.S. also finds itself shipping more natural gas out of the country thanks to booming demand from Europe, which is facing a shortage of supply due to the Russia-Ukraine conflict, said Gary Cunningham, director of market research at energy consultancy Tradition Energy.
"There's now an imbalance between our supply and demand," Cunningham said. "All summer when we should have been putting gas in storage, we weren’t storing it away. So, we had a cold winter, not strong growth in production, strong exports — and this is what we've got."
Last week, NEADA sent a letter to Congress asking for a supplemental increase of $5 billion to LIHEAP to help assist consumers with the higher cost of home heating and cooling. Without it, the group said, it is facing a "funding cliff," as the $4.5 billion allocated in supplemental funds for LIHEAP in the 2021 American Rescue Plan will be fully spoken for by the end of September.
"For many struggling families, higher prices can mean being forced to choose between heat, food or medication," the association said.
"About 29% of Americans who were surveyed had to reduce or forego expenses for basic household necessities to pay an energy bill in the last year, according to the U.S. Census Bureau’s Pulse Survey. And that was before fuel prices started to rise."
Tammy Stauffer, director of energy assistance for Community Action Partnership of Hennepin County in Minneapolis, told NBC affiliate KARE-TV that it already predicts grant sizes for its energy assistance will be smaller than last winter, and that previously expanded eligibility for assistance will no longer apply.
Last year, the affiliate said, the organization fielded 7,000 more applications than the previous season, an increase of 38%.
“The additional funds we had last season definitely helped us be able to help more people and to provide bigger grants to them,” Stauffer said. “I am a little worried the funding won’t be able to meet the demand.
Mark Wolfe, the NEADA executive director, said any additional funding would allow LIHEAP to reach more families.
"With these higher prices, we expect more people to apply for help," he said. "Especially lower income families also struggling with higher food prices and higher rent. We’re paying a bill, so if we're paying this bill, they'll be better able to afford food and gasoline."