Pa., NJ, natural gas bills are skyrocketing and customers are unhappy

Byron Goldstein keeps a close eye on energy usage at his Glenside home. So when he received a $651 bill from Peco Energy for the combined use of electricity and gas in January, 37% more than the $477 he had paid the previous January, he knew that something was wrong.

Goldstein found that Peco’s gas supply fees had skyrocketed since January 2021, which accounted for most of the increase. Goldstein, 74, was unhappy with the company’s response to his phone calls, so he filed a formal complaint with the Pennsylvania Public Utility Commission, urging the state regulator to reverse the rate increase. Peco’s “scandalous and irresponsible” price.

He was not alone. Across the Philadelphia area, thousands of utility customers have opened their bills in recent weeks to learn that the cost of heating their homes has soared far more than the 7% inflation rate. Social media platforms lit up with posts from disgruntled customers, directing their anger at energy companies, regulators and politicians.

“I’ve never paid so much for heating in the winter,” a Philadelphia resident wrote on Nextdoor.com, where several threads contained hundreds of comments about the price hike.

The price has indeed increased: A typical Peco customer who used 150 hundred cubic feet (ccf) of gas was charged $171.25 in January, up 38% or $46.90 from January 2021, according to PUC data. A Philadelphia Gas Works customer who used the same amount of gas was billed $261.71 in January, up 17% or $37.91 from a year ago.

Electricity bills also rose in Pennsylvania on Dec. 1, but not as much as gas bills.

The reason why your utility bill has gone up is quite simple: energy prices are rising all over the world. You see him at the gas pump. Residents who have oil or propane heaters experience this. And natural gas prices, which set the market rate for electricity, have doubled over the past year.

There are many heated debates about who or what is responsible for energy prices. In 2020, during the pandemic shutdowns, energy demand plummeted and fuel prices fell to their lowest levels in a decade. The global economy is booming, and energy demand and prices have soared, especially in markets where there is a shortage of supply.

As tensions soar following Russia’s invasion of Ukraine, global energy markets brace for what could become a crippling supply chain disruption if the conflict affects pipelines that carry the Russian natural gas on which Europe depends. Germany has also suspended the launch of the giant Nord Stream 2 gas pipeline, which has not yet entered into service.

“Prices for natural gas, as well as other heating fuels, are rising around the world, which is caused by a combination of factors,” Peco spokeswoman Mayra Bergman said in an email. “In addition, this winter was colder than last year, which has resulted in increased energy consumption and higher energy bills for natural gas and electric customers.”

It’s not just Pennsylvania. Commodity prices for New Jersey utility customers are higher this year than the previous five years, according to the New Jersey Board of Public Utilities, the state’s regulator.

“New Jersey customers may experience an increase in their respective gas and electric bills this year compared to previous years,” a BPU spokesperson said in a written response to questions. The BPU does not prepare an annual comparison of utility rates in the state, he said.

In October, the average natural gas price in the United States was $5.51 per thousand cubic feet, more than double the price a year earlier, according to the US Energy Information Administration.

Gas prices haven’t peaked this high since the winter of 2014, when an infamous polar vortex sent average prices soaring to $6 a unit.

However, a doubling of the price of raw materials does not equate to a doubling of gas bills, since the cost of natural gas itself is only part of a customer’s bill.

Typically, 10 years ago, energy costs accounted for about two-thirds of a customer’s bill. But energy prices have fallen over the past decade, with the advent of shale gas production in the United States, and now account for less than half of a typical utility bill.

As energy prices fell, regulators encouraged utilities to speed up the replacement of aging infrastructure. This has contributed to increased utility distribution charges to pay for the networks that deliver power to customers. These increases partially offset the declines in energy costs. Distribution costs now represent the largest portion of a customer’s bill.

State regulators carefully review and approve distribution rates charged by utilities, allowing private utilities to include a markup. A utility rate case is a laborious proceeding in which adversaries, including consumer advocates, are allowed to challenge a utility’s proposed rate. Because a rate case is expensive and takes nine months to review, utilities only seek rate increases every few years.

But commodity fees are different. In Pennsylvania, utilities are allowed to adjust their energy costs every three months to reflect fluctuations in the price they pay for gas or electricity. They are not allowed to make a profit on fuel costs – the cost is passed on to customers without a markup. Regulators check fuel charges every year to make sure the charges are justified.

“This purchase is overseen by the PUC,” said Terrence J. Fitzpatrick, president of the Energy Association of Pennsylvania, a utility trade group. “It’s regulated to make sure you’re paying a fair market price. There is no profit made on these sales of this energy to customers.

Fuel costs for various Pennsylvania utilities do not move in perfect unison. Utilities have different arrangements for sourcing gas from suppliers to ensure they have a reliable supply during the coldest winter days. Part of the gas is purchased under seasonal fixed-price contracts. Some are purchased on the spot market at current prices. Peco and PGW also buy gas in the summer and store it locally as liquefied natural gas (LNG), the primary purpose of which is to secure supply on peak winter days when customer demand increases.

Pennsylvania utilities recently increased energy charges on electric and gas bills on December 1. Peco issued a notice to its natural gas customers, warning that some bills could rise by 24%. But few customers apparently noticed as the weather in December was relatively mild, which lessened the impact of rising energy prices.

But the January weather was the coldest of any month in Philadelphia for the past four years. Combined with higher energy loads, this resulted in exorbitant bills. So far in 2022, Peco has delivered 17% more gas to customers than expected.

Utilities say they are getting more and more requests for assistance with paying bills.

More than 150,000 New Jersey households signed up for the state’s universal service fund program in the last three months of 2021, surpassing the number applied in the previous nine months. But it’s unclear whether that increase was caused by higher prices or the end of pandemic-related assistance programs, Peter Peretzman, a BPU spokesman, said in an email.

Pennsylvania utilities are also seeing an increase in enrollment in assistance programs, said Fitzpatrick of the utility trade association. “I hear they’re seeing some activity, which they attribute to colder temperatures and the fact that energy prices are up.”

Applications for help could resume closer to the April 1 deadline, when the winter moratorium on closures ends. Utilities are prohibited from shutting down non-paying customers in cold weather.

Although the recent increase in utility bills is shocking to many, the cost of energy is actually lower than it was 15 years ago. A residential Peco customer who used 150 ccf and was billed $171.25 in January would have paid $193.64 in 2007. Adjusted for inflation, that 2007 bill would be $268.96

But customers can have short memories. “Someone once said that from a policy perspective, the only kind of energy price we like is low prices,” Fitzpatrick said.

Goldstein, the owner of Glenside, received a formal response Thursday from a Peco attorney asking the PUC to dismiss his complaint. The utility said the public has been notified of the rate changes and that higher energy costs “are expected” for customers in Pennsylvania who use natural gas, fuel oil and propane.

Goldstein also received his February electric and gas bill last week. It was for $624, down from $463 a year ago.

Peco’s next rate adjustment is scheduled for March 1. The gas price has not yet been announced. The new electricity price is already posted on the PUC website – it will increase by around 0.6% next Tuesday.