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Winter heating bills expected to surge

With many parts of the country still enjoying relatively balmy weather, the price of heating fuels is already significantly higher than this time last year. And with repairs to hurricane-damaged refineries and natural gas production now expected to take months to complete, prices are likely headed even higher this winter. By’s John Schoen.
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With many parts of the country still enjoying relatively balmy weather, the price of heating fuels is already significantly higher than this time last year. And with repairs to hurricane-damaged refineries and natural gas production now expected to take months to complete, prices are likely headed even higher this winter.

All of which has consumers pretty nervous. A widely watched consumer confidence poll this week took its biggest plunge since 1990 — in part due to worries about the impact of back-to-back hurricanes on energy prices. 

Consumers are apparently doing more than worrying. Many are looking for ways to blunt the impact of higher energy prices. Officials in Illinois, for example, recently stocked up on brochures offering energy-saving tips, according to Christina Kielich, a spokeswoman for the federal office of Energy Efficiency and Renewable Energy.

“They said they wanted to order 20,000 to 30,000 brochures,” she said. “That’s the first time I’ve gotten that kind of a call.”

It remains to be seen just how much higher winter heating fuel prices will go from here. A lot, of course, depends on how cold this winter turns out to be. The big concern now is with fuel supplies.

With the summer driving season winding down, this is typically the time of year when oil refiners begin making more heating oil to increase stockpiles for winter. But with some 15 percent of U.S. refining capacity still shut down from hurricane damage, refiners are struggling to keep up with demand for gasoline. While heating oil stocks are in relatively good shape, a continued refinery outage could bring tight supplies later this winter.

The same holds true for natural gas. Natural gas producers are usually busy pumping up storage facilities in late summer and early fall to stockpile enough to meet winter demand. But as work continues assessing underwater pipelines and repairing damage, some 70 percent of gas production in the Gulf of Mexico remains shut down. Interior Secretary Gale Norton said Tuesday that it will take months — and billions of dollars — to repair damage and restore production, which will keep supplies tight and prices high.

So far, some 226 billion cubic feet of gas production has been lost to the storms — or about 6 percent of annual production, according to the U.S. Minerals Management Service. And natural gas distributors face a tougher challenge making up that lost production because natural gas is more difficult to import than home heating oil.

Natural gas prices have already surged since last winter. The U.S. Dept. of Energy forecasts peak residential prices of $16.37 per thousand cubic feet.  The retail price of a gallon of heating oil is expected to peak at $2.46.

All of which has revived interest in looking for was to cut winter heating bills by using less fuel. The economics are pretty simple: Most of these fixes cost less than the increased cost of fuel.

For starters, patching insulation leaks can save 10 to 15 percent on a monthly fuel bill. That includes weather-stripping or caulking around windows, ducts, switch plates, ceiling fixtures or attic or basement doors. (To find a heat leak, use a lighted stick of incense to check for spots where a draft blows the smoke horizontally.) Adding insulation, while more costly, can bring even bigger savings.

“If you have a house that was built in 1985 or before the chances are that its poorly insulated or that it’s leaky and needs to be caulked and weather-stripped,” said Kateri Callahan of the Alliance to Save Energy. “Or if it has been caulked or weather-stripped, it might be time to replace it.”

A programmable thermostat (cost: $100-$150) allows you to turn down the heat when your home is empty — offering another potential 10 to 15 percent savings. Have your furnace checked by a professional who can improve its efficiency if it needs cleaning. If you have forced-air heat, change the filters regularly.

One of the biggest upgrades homeowners can make is to a high-efficiency furnace — but it’s also the most expensive. Still, with fuel prices soaring, the investment is paying off more quickly than in the past.

The average cost of heating a typical home in the Midwest using natural gas, for example, has jumped from $602 in the winter of 2001-2002 to $1,010 last winter, according of the Energy Information Administration. For homeowners with older furnaces, as much as a third of that cost goes up the chimney. So swapping out an older furnace with a 65 percent efficiency rating to a new one getting 90 percent will save the average homeowner at least $250 per winter.

That’s why high efficiency models make up most of the heating equipment now sold in cold weather states, according to the Gas Appliance Manufacturers Association.

"Were going to see that accelerate," said Steve Attri, product manager for residential heating products at Lenox Industries Inc. "The conversation at cocktail parties is going to shift (from gasoline pump prices) to natural gas once we get into the colder weather."

Tardy tax break
Helping homeowners save energy was one of the few conservation measures that Congress included in this summer’s Energy Policy Act of 2005, the product of a four-year legislative battle. Most of the billions spent under that law will go toward boosting supplies of oil and natural gas.

Under the new law, homeowners who upgrade windows, install new furnaces, or buy weather-stripping are entitled to a tax credit of up to $500. But there’s a catch: The credit doesn’t kick in until Jan. 1, 2006. That means any money spent now to make your home more energy efficient — before winter sets in — won’t qualify for the credit.

For some people, weather-stripping the windows and turning down the heat won’t be enough to get through the winter.  Since the 1980s, those in dire need could turn to the Low Income Home Energy Assistance Program, or LIHEAP, for help paying winter fuel bills. The program is funded by the federal government and administered by local governments and community development agencies.

But since 2002, as heating oil prices have roughly doubled and residential natural gas prices have jumped more than 60 percent, LIHEAP funding hasn’t kept up — increasing roughly 20 percent over the past four years. This year Congress has only authorized the program to spend at last year’s levels, according to John Drew, executive vice president of Action for Boston Community Development, which administers the program in Boston.

“Were actually looking at authorizing oil dealers to provide about two-thirds of a tank, which will be gone before Christmas,” he said.

With temperatures still mild in most of the country, Congress is already looking at increasing the roughly $2 billion that has been allocated for heating assistance. More than 80 lawmakers want to nearly double the program’s funding for the coming season.

Congress may also need to boost funding for a $230 million program that helps families make their homes more energy-efficient with better furnaces or windows, according to Senate Energy Committee Chairman Pete Domenici. Before Katrina, the Bush administration proposed flat funding in fiscal 2006 while House and Senate budget writers sought a rise of $10 million.

After years of dismissing conservation as a “personal virtue,” the Bush administration has recently begun advising consumers to turn down the thermostat to conserve fuel this winter.   Now, as Congress takes a second look at energy policy post-Katrina, proponents of conservation say the new round of legislation is still light on measures to promote energy savings.

“Efficiency measures are woefully lacking in (the House) bill, but we haven’t seen what the Senate is going to produce, if anything,” said Callahan.