Natural gas bills are at their highest level in years, and the two major reasons are: overly aggressive spending by gas utilities and skyrocketing supply prices. 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. This winter could be worse, as prices continue to be elevated or the 2022-23 winter heating season.
Why are we seeing high bills?
Consumers are getting hit with a “double-whammy”–higher charges on both the supply and delivery sides of gas bills.
- Aggressive utility spending on the delivery side of bills. In recent years, utilities have launched aggressive spending programs that have increased the delivery charges on our bills. That’s what we pay the utility to deliver gas to our homes–plus a profit for the company. In previous years, when gas prices were lower, the impact of utility spending wasn’t as noticeable on our bills. That changed in 2021.
- Spiking natural gas supply prices. Natural gas prices go through periodic price spikes, and this one was sparked by an extreme cold snap that brought record-low temperatures across the nation in February of 2021. The extreme weather, which has been attributed to climate change, froze natural gas in 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 sent prices soaring.
Since then, other factors have helped keep prices elevated, including: 1) increased demand as economies recovered 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 because the gas industry didn’t see those efforts as profitable; 4) increased demand for natural gas to generate electricity during warmer summers; 5) disruptions in gas supply caused by Russia, a major oil and gas producer, invading Ukraine; and 6) Hurricane Ida in the summer of 2021 knocked more than 90 percent of gas production in the Gulf of Mexico offline, 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.
Why are gas utilities increasing delivery charges on bills?
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.
Crain’s Chicago Business reported that Peoples Gas, the utility for Chicagoans, has collected more than $600 million in surcharges since 2016–and the QIP charge had ballooned to about $15 every month for the average household. “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 percentof Peoples’ customers received disconnection warnings–that’s nearly 1 in 3 customers in Chicago.
Other utilities have pushed for big rate hikes. For example, Ameren hit customers with a $76 million gas increase in 2021, and Nicor slammed their customers with a $240 million hike, the highest gas increase in Illinois history. Since 2017, Nicor has increased delivery rates by more than $500 million, or about 77 percent.
CUB and other consumer advocates have warned of a worsening heating-affordability crisis in Chicago and across the state and we have been on a campaign to end the QIP charge and rein in needlessly aggressive infrastructure spending by gas utilities across Illinois.
Natural gas utilities don’t 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 over an 11-month rate case.
Supply prices are monitored differently than delivery rates. Each year, state regulators conduct a review to ensure that the utilities did a reasonable job, given market conditions, to try to hold down costs for customers. 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.)
If natural gas utilities aren’t profiting off the high supply prices, who is?
Natural gas producers and marketers, the companies that sell gas to the utilities, have made record profits: ExxonMobil, Shell Global and Chevron pulled in $23.3 billion, $20.6 billion and $17.9 billion, respectively, in just the first half of 2022.
Whenever there is a spike in prices, for whatever reason, CUB supports 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 they can 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. To summarize:
- The utility is likely your best bet.
- If you shop, be wary of:
- A low introductory rate that will skyrocket after a short period. Ask how long a rate lasts, and what the new rate will be.
- Add-on fees that raise the cost of the plan. Scan the fine print.
- Multi-year deals. The utility’s price will eventually come down so be careful about getting locked into a long-term deal that goes sour a year or two into it.
- Force majeure. 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 its control. Read the fine print.
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?
- See if you qualify for energy assistance. The application process for the Low Income Home Energy Assistance Program (LIHEAP) has reopened through May 31, 2023, or until funds are exhausted. Households at or below 200 percent of the federal poverty level are eligible for LIHEAP funding. To apply or learn more, visit www.helpillinoisfamilies.com or call the Help Illinois Families Assistance Line at 1-833-711-0374.
- Contact your utility. If you are having trouble affording your gas bills, it is vital that you contact your utility. Ask if you qualify for any energy assistance programs the utility offers; see if you can set up a payment plan to give you a longer time to pay off your bills; and inquire about no or low-cost energy efficiency programs the company offers.
- Let our leaders know. Urge state and federal officials to take action against high utility bills.
- Practice energy efficiency at home. For tips and information about helpful energy efficiency programs offered by your utility, visit CUB’s Clean Energy page. Also visit CUBHelpCenter.com for more information about energy assistance, tips on cutting your bills and your rights to avoid disconnection. We have tips here , here and here. A summary:
- Don’t overwork your heating system. Close blinds or curtains 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. Weatherize your windows and doors, and pinpoint other drafts in your home. Your hardware store can provide materials to seal those leaks.
- 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.
- Switch the direction of your fan – In the winter, your fan should rotate clockwise (from your position looking up at it) at the slowest speed. Turning clockwise, the fan’s blades pull cold air up, which then pushes warm air down toward the room’s occupants. Used in combination with a wise temperature setting, this tip can save consumers up to 15 percent on their winter bills. If you’re not sure how to change the direction of your ceiling fan, watch CUB’s quick how-to video.
- 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.