Winter may worsen energy costs

The price of heat seems to be continuing an upward trend

After a summer of high energy costs, winter promises more of the same. Only higher.

The price of all major energy sources used to heat homes in this state is going up: electricity, natural gas, propane and heating oil.

To counter those rising costs, people are adding insulation, sealing ducts, replacing windows and taking other measures to make their homes energy efficient. And social services agencies are bracing for a surge of families with financial struggles.

Durham County Social Services has budgeted $240,000 more this year to help people pay heating bills, a 27 percent increase over last year's costs. The agency plans an advertising blitz to encourage residents and church groups to contribute.

"We expect a real crush of people," said Clay Holloway, who manages the county's Adult Services and Family Crisis Program. "We're seeing a lot of new clients coming in. And we haven't gotten to the cold season yet."

When winter arrives, natural gas users with PSNC Energy will pay about 12 percent more this October than they did last year. In December, electricity customers of Progress Energy will pay 11.5 percent more if state regulators approve an increase. Towns that provide electricity service to residents -- such as Apex, Clayton and Wake Forest -- already have approved similar rate increases.

Hoping to mitigate those costs, John Wiley spent $5,400 this summer to add insulation and otherwise seal his Chatham County home against the elements. Wiley, a retired neurosurgeon, said the upgrades cut his electricity costs by 15 percent, between $40 and $50 a month this summer.

"We did it mainly to reduce the overall energy bill," Wiley said. "Energy costs are not going to go down in the future, and in the end, our costs are going to be higher."

Those who use natural gas, heating oil and propane could see the highest spikes. Households in the South will pay about 39 percent more for heating oil this winter and 17.5 percent more for propane, according to the U.S. Department of Energy's most recent winter fuels outlook.

Volatile markets

The volatility in the markets makes it hard to assign absolutes. The costs of natural gas, propane and heating oil have been dropping significantly since this summer, in some cases more than 50 percent. But on Monday, the price of crude oil jumped $25 a barrel -- the biggest one-day price increase ever -- before receding somewhat. Oil is an energy barometer and often sets the cost for other fuels.

When there are savings, those are only gradually passed to customers. For instance, last week PSNC asked state regulators to approve a 14 percent decrease effective Oct. 1. Even with the cut, the cost of natural gas will still be higher next month than it was a year ago. Natural gas users could get more breaks if gas commodity prices drop.

That's because PSNC and Piedmont Natural Gas are permitted by state law to request pricing changes once a month. Their costs can change several times a year to reflect the volatility of the wholesale markets. Not only are utilities prohibited by law from charging customers more for fuel than it costs the company to purchase, but they also are required to negotiate the best prices.

The state's 500 propane dealers charge customers based on wholesale cost, which has been changing from week to week.

David Smith, manager of Carolane Propane in Hillsborough, is advising customers to delay refilling their tanks until he's able to bring down his price. Carolane Propane, stocked with more than 40,000 gallons purchased this summer, plans to reduce prices by blending fuel bought at cheaper prices, Smith said.

"It's not here yet," Smith said. "We feel it's in the best interest of the public, with the way the market is trending, to hold off."

But Smith said that many of the company's 4,100 customers have little choice: They're either running out or they've agreed to an automatic refill schedule.

Carolane charges $2.90 a gallon now, up from $2.75 a gallon last year, Smith said.

Progress Energy customers are the ones who aren't likely to see relief anytime soon. Electric utilities are permitted to change their prices only once a year to account for fuel costs. This year, Progress proposed raising residential costs 16.2 percent but later agreed to charge 11.5 percent this year and delay the rest of the increase.

Looking for an edge

Some people are working now to take the edge off those future bills.

Paige Green and her husband are building an energy-efficient home in Pittsboro with the federal government's Energy Star rating.

The growing interest in energy efficiency is reflected in the number of new Energy Star-rated homes in the state, as tracked by the U.S. Environmental Protection Agency: A record 2,932 were built here in 2007.

It'll cost the Greens about 6 percent more than a conventional home to add extra insulation, a high-efficiency heat pump and a wood stove. "We were thinking more environmental and one of the perks is lower energy costs," said Green.