The extreme winter weather that hit the nation February 14-15 has led to some Illinois consumers paying high natural gas prices. In issuing a disaster proclamation for all 102 Illinois counties in the wake of the snow and subzero temperatures, Gov. J.B. Pritzker’s administration sounded the alarm a few weeks ago:
“Extreme weather has resulted in frozen wells in key natural gas producing states, including Texas, Oklahoma and Kansas. The sub-zero temperatures are resulting in increased demand and decreased supply, causing natural gas prices to spike. Utility companies across the nation are reporting soaring wholesale costs, and without federal intervention, those increased prices could result in higher utility bills for Illinois residents in the coming weeks.
So what’s happening in Illinois? Read CUB’s Q&A.
Has Illinois experienced a spike in natural gas prices?
Yes, in some areas. The Springfield State Journal-Register reported that some communities in Illinois that have their own municipal utilities experienced shocking increases in utility bills, forcing some schools to close because they couldn’t afford to heat their buildings properly. The mayor of Riverton, a community near Springfield, said the village spent $640,000 in a five-day stretch. That’s nearly 70 percent of what the community spent all last year on natural gas.
The Energy Information Administration, the statistical arm of the Department of Energy had already predicted that heating expenditures in the Midwest would be up this winter, even before the nation was slammed with the extreme weather. As of February, just before the storm, the EIA estimated natural gas heating expenditures in the Midwest were predicted to be up 14.6 percent, electric heat up 4.8 percent; and propane up 2.1 percent.
On the electricity side, ComEd and Ameren customers who are on real-time pricing rates–which reflect the electricity market–saw a spike in prices during the week of the winter storm. Read our WatchBlog article about that spike.
Why are we seeing an increase in prices?
An extreme cold snap brought record-low temperatures across the nation. That meant more people used electricity and natural gas to heat their homes, driving up demand. Natural gas pipelines and wellheads froze in Texas and other areas of the South, limiting supply across the country. The limited supply coupled with high demand have caused skyrocketing market prices.
What are the major, regulated gas utilities charging in Illinois?
Major regulated gas utilities in the state are charging elevated prices this month, although it’s difficult to know whether that is just a normal increase in winter prices or if it’s connected to the extreme weather in mid-February. Everyone should be prepared for the possibility that we could see an even bigger price spike in months to come, similar to what happened after the polar vortex of 2014. Below are the prices for March, compared to February. (Historical gas prices are here.)
|North Shore Gas
How are gas prices regulated in Illinois?
Natural gas utilities do NOT profit off gas supply. Under state law, they pass on the costs of natural gas to consumers, with no markup. (The companies do make a profit off the rates they charge us to deliver gas to our homes. In fact, CUB is currently fighting more than $300 million in proposed delivery rate hikes.)
State regulators in Illinois and consumer advocates like CUB do monitor gas prices, and each year they review the gas-management procedures of each utility. Although it’s rare, the Illinois Commerce Commission (ICC) can order refunds if, after the fact, commissioners determine companies have not been prudent. (The utilities are obligated to practice hedging, which means using a combination of long-term contracts, gas from the utilities’ own storage fields and wise purchases on the spot market to secure the lowest prices possible. Avoiding heavy spot market purchasing is key when prices are elevated.)
What are alternative suppliers charging?
Consumers in Northern Illinois can choose another company to supply them with natural gas, but alternative suppliers are allowed to set their prices as high as they want. Far from being an opportunity to save money, the natural gas market has been rife with bad deals and rip-offs. So CUB is monitoring prices offered by suppliers in the wake of the storm.
We expect to see elevated variable rates–prices that change on a monthly basis. Also, companies charging a fixed rate, which would presumably protect a customer from a spike in natural gas prices, could claim “force majeure,” which is a legal term to describe a company claiming it can no longer honor a contract because of unforeseeable circumstances beyond their control. We have yet to see companies attempt this in 2021, but it could very well happen. Just Energy, which has been a notoriously bad actor in the Illinois market, reports it may go out of business in connection with losses connected to the extreme weather.
CUB will continue to monitor the market. But everyone who lives in Nicor Gas territory or North Shore/Peoples Gas territory should pick up their bills to see if they are overpaying with an alternative supplier. If you do have a supplier and you’re overpaying, call the company and ask to cancel the offer and go back to the utility. (Call CUB’s Consumer Hotline, if you have any questions: 1-800-669-5556.)
Was there manipulation in the energy markets?
It is well-documented that the subzero weather that hit the nation caused problems at the well-head and at natural gas facilities along the supply chain. But whenever there is a spike in prices, for whatever reason, consumer advocates and regulators investigate whether any energy companies took advantage of the situation to profit. The Federal Energy Regulatory Commission (FERC) has launched such a probe.
How long will the increases occur?
We’re not sure. After the polar vortex of 2014, for example, natural gas prices remained elevated for most of the year. Back then, Peoples Gas’ price shot up about 80 percent, to about 93 cents per therm in March, then to $1.19 a therm in April, and ranged from 69 cents per therm to 86 cents per therm through September. Nicor Gas’ price shot up 33 percent to 68 cents a therm and stayed at that price from March through August. Fortunately–as is the case now–we are heading into warmer months when natural gas usage should be lower.
Will there be state and federal help for Illinois consumers?
Because of the pandemic, additional money is available to help low-income consumers afford their utility bills. You can contact the Low Income Home Energy Assistance Program (LIHEAP) to see if you qualify for assistance: 1-877-411-9276.
Also, Gov. J.B. Pritzker has announced a $15 million low-interest loan program to help Illinois municipalities and residents hit with soaring gas costs. In addition, the latest proposed federal coronavirus stimulus package also has funding for utility bill assistance. CUB will keep you updated on any new opportunities to get help paying utility bills.
What can consumers do?
Energy efficiency isn’t a feel-good measure, it’s a necessity for controlling costs, especially now. Visit our Clean Energy page, order our Guide to Going Green, and read tips here and here. A summary:
Don’t overwork your heating system. Close blinds or cover your windows with blankets as an extra layer of protection against icy night winds. But let the sunlight through during the day to help heat your home. Clear radiators, registers, air returns and baseboards of obstructions. Dust, carpet and furniture can block the heat and leave a room chilly.
Reduce the drafts. Pinpoint drafts in your home. Your hardware store can provide the materials to seal those leaks, but improvise if necessary.
Clean or replace filters for a forced-air heating system. A dirty or non-functioning filter does nothing but drain money from your wallet. Check it every month—and clean or replace it if it’s dirty.