The South Dakota Public Utilities Commission warns natural gas customers to expect higher prices this heating season and suggests South Dakotans take steps now to keep bills manageable this winter. South Dakota natural gas customers may already be seeing higher per therm charges on their bills and as temperatures drop, the bill impact will grow.
Natural gas bills have two components. The portion for natural gas delivery, which makes up about 30% of the bill, is regulated by the PUC and is not projected to change. The other portion of the bill is for the gas itself and that price, which is not regulated, is driven by market forces.
“The natural gas industry is experiencing shortages in supply while also seeing an increase in overall natural gas demand. As a result, homeowners should expect to see higher natural gas bills this winter,” said PUC Chairman Chris Nelson. “South Dakota’s regulated natural gas utilities, including MidAmerican Energy Co., Montana-Dakota Utilities Co., and NorthWestern Energy, are currently projecting bill increases for residential customers of at least 50% to 100% compared to the bills seen between November and February of the 2020-2021 heating season,” he explained.
The current natural gas shortage is the result of a number of factors. High demand due to increased exports of liquified natural gas and increased natural gas usage for electric generation along with low production due to hurricanes have led to low storage inventories heading into the peak heating season. Natural gas prices are largely a function of market supply and demand. This combination of factors is driving natural gas prices higher across the United States.
In addition to current rising prices, in February 2021, freezing temperatures throughout the U.S. resulted in unprecedented demand for natural gas and extreme wholesale natural gas prices. The South Dakota PUC worked with each regulated utility to mitigate the impact for customers. Therefore, a portion of the forecasted increase in bills this winter is due to recovery of significant February natural gas costs.
“Over the last several years, natural gas customers have benefitted from low gas prices, so this year’s prices may come with sticker shock. South Dakota natural gas utilities are estimating natural gas prices for this upcoming winter will near $6 per Metric Million British Thermal Unit (MMBtu), compared to prices usually in the $2 to $3 per MMBtu range last year. The higher-than-normal natural gas prices anticipated this winter, combined with the residual effects of the unprecedented natural gas prices experienced in February 2021 that utilities are currently continuing to recover from customers, will result in winter bills at levels not seen in well over 10 years,” commented PUC Vice Chairperson Kristie Fiegen.
Utilities aim to mitigate price increases for customers by purchasing a portion of the supply needed throughout the year at fixed prices and utilizing storage withdrawals during winter months. For companies with hedging programs, this can also help offset higher costs.
In addition to increasing the cost to heat your home, rising natural gas prices could impact other costs, as well. As the leading source of fuel for the U.S. power grid, natural gas supplies more than 40% of utility-scale electricity generation nationwide and may lead to increased electric costs for some.
“These estimated increases are only projections. Actual bill impacts may end up being higher or lower than what utilities are projecting. Regardless, South Dakota customers should prepare for higher bills by planning ahead and taking steps to manage their budgets and these costs now,” said PUC Commissioner Gary Hanson. “Completing a home energy audit is a good way to determine where your home is losing energy and identify what fixes or upgrades are worth the investment. Some utility companies offer a professional assessment to customers free of charge, so contact your local utility to find out more and while you have them on the phone, ask about a budget billing plan that helps spread out higher utility costs over several months rather than having to pay them all at once,” he continued.
Other ways to lower natural gas and electric consumption include setting your thermostat to a lower temperature, installing a programmable thermostat, maintaining and upgrading appliances for greater energy efficiency, changing furnace filters, and conserving hot water.
See a list of frequently asked questions about natural gas pricing on the PUC’s website at https://puc.sd.gov/Publications/naturalgaspricesfaq.aspx. For additional tips on conserving energy and information on energy efficiency programs, contact your local utility company or visit the U.S. Department of Energy’s website.