This past winter, natural gas bills were at their highest level in more than a decade, and the two major reasons are: overly aggressive spending by gas utilities and skyrocketing supply prices. Gas prices continue to be at extreme levels. Read our Q&A to get the details.
How expensive has this been for consumers?
People in Illinois who heat their homes with natural gas (about 80 percent of households) paid hundreds of dollars more in the winter of 2021-22, compared with the previous winter. It was the most expensive cold season since 2008-09.
Why is this happening?
In recent years, utilities have launched aggressive spending programs, but the impact hasn’t been as noticeable because natural gas supply prices have been low. However, for the past year, supply prices charged by Illinois utilities have been about double or worse what they were the year before. CUB has been following the gas prices each month. For the latest prices, see CUBHelpCenter.com.
Why are we seeing an increase in prices?
In part, it’s the lingering effects of an extreme cold snap that brought record-low temperatures across the nation last February. The extreme weather, which has been attributed to climate change, froze natural gas pipelines and wellheads in Texas and other areas of the South, limiting supply across the country just as heating demand was shooting up. The limited supply coupled with high demand sparked skyrocketing market prices that contributed to high utility supply rates all year.
Other factors have helped keep prices elevated, including: 1) increased demand as economies worldwide begin to recover from the pandemic; 2) increased Liquid Natural Gas (LNG) exports to other parts of the world, such as Europe, keeping supply lower here; 3) less gas exploration and well construction in recent years; 4) increased use of gas for electricity generation in a hot summer of high air-conditioning use; and 5) Hurricane Ida knocked more than 90 percent of gas production in the Gulf of Mexico offline in late August, according to the Energy Information Administration.
“The boom-bust cycle of this fossil fuel is making consumers pay,” CUB Director of Governmental Affairs Bryan McDaniel said.
Other than high supply prices, is there any other factor driving up gas bills?
Yes. In recent years, even before the supply prices skyrocketed, gas utilities have pushed to increase another part of your bill: Delivery charges, what you pay to have the regulated utility deliver gas to your home.
CUB and other consumer advocates have been on a campaign to rein in overly aggressive infrastructure spending by gas utilities across the state that has led to rapidly rising heating bills. In fact, CUB has repeatedly warned of a worsening heating-affordability crisis in Chicago and across the state.
Major Illinois utilities–Ameren Illinois, Nicor Gas and Peoples Gas–successfully pushed for legislation in 2013 that allowed them to add the “Qualified Infrastructure Plant” surcharge to bills to help them bring in revenue more quickly and easily than through a traditional 11-month rate case. With Peoples Gas, the utility for Chicagoans, the surcharge has ballooned to about $13 every month for the average household. That’s more than 10% of their yearly bill, Crain’s Chicago Business reported.
Other utilities have pushed for big rate hikes. For example, Ameren hit customers with a $76 million gas increase last year, and Nicor slammed their customers with a $240 million hike, the highest gas increase in Illinois history.
“So many people in the city are having trouble paying their bills as it is,” CUB Executive Director David Kolata told Crain’s. “This is a reckoning that was just waiting to happen. The infrastructure investments that were so out of control have been somewhat hidden.”
In September 2020, long before gas prices skyrocketed, roughly 30 percent of Peoples’ customers received disconnection warnings–that’s nearly 1 in 3 customers in Chicago. CUB has advocated for exploring new and better ways to heat homes than through fossil fuels.
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. However, the companies do make a profit off the rates they charge us to deliver gas to our homes. When utilities ask for delivery rate hikes, CUB fights them.
But supply prices are monitored differently than delivery rates. Each year, state regulators in Illinois and consumer advocates like CUB 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 careful with the way they managed gas supply. (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.)
Are the high prices caused by manipulation in the energy markets?
It is well-documented that the subzero weather that hit the nation last February caused problems at the well-head and at natural gas facilities along the supply chain in the South. But whenever there is a spike in prices, for whatever reason, consumer advocates always call for investigations into whether any energy companies took advantage of the situation to profit.
What are alternative suppliers charging?
Consumers in Northern Illinois can choose another company to supply them with natural gas, but alternative suppliers are impacted by the same market conditions as the regulated utilities. And 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. If an alternative supplier offers a deal that seems too good to be true, be careful, because there’s a good chance it is.
So with the current situation in the gas market, be careful of elevated alternative supplier 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.” That’s a legal term to describe a company claiming it can no longer honor a contract because of unforeseeable circumstances beyond their control.
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. (If you don’t like the experience you have with the supplier, file an online complaint with CUB.)
What can consumers do?
If you’re struggling to pay your bills, call your utility and find out what energy assistance is available. Also, see if you can sign up for a plan that will allow you to pay off your bills over a longer time period.
Also, 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.
- Set your thermostat to 68 degrees when you are home and awake. When you’re asleep or away, you can turn it 7-10 degrees lower. NEVER go below 55 degrees, because you could freeze your pipes.