Recently, two Boston gas utility companies sought state permission to cut their rates because natural gas prices continue to be low, and the area's energy consumers are showing their support for the change by switching from fuel oil to gas.
In Massachusetts, heating-oil customers fork over nearly $4 per gallon, and there is no price drop on the horizon. As a result, state utilities NSTAR and National Grid are enjoying a boom in heating oil-to-natural gas conversions this year.
NSTAR, the largest Massachusetts-based, investor-owned electric and gas utility, transmits and delivers electricity and gas to 1.1 million electric customers in 81 communities and nearly 300,000 gas customers in 51 communities and employs more than 3,300 people.
National Grid's gas distribution network serves about 3.5 million consumers in upstate New York, New York City, Long Island, Massachusetts, New Hampshire and Rhode Island.
NSTAR is experiencing a strong year as more than 900 gas conversions have taken place this year as of September 1. The company expects to end the year with nearly 2,000 conversions because the last four months of the year represent a popular time for conversions. This rate of turnover is much higher than 2010, which saw some 867 in conversions for the company. In fact, this year could be NSTAR's best conversion year in more than 15 years.
Also, National Grid is reporting a surge in oil-to-gas conversions. Specifically, the number of residential and business conversions in Massachusetts and New Hampshire during the five-month, April-August period rose 10.8%, to 2,958, from the same time a year ago.
Elsewhere, in September, New Jersey regulators approved reductions in the natural gas rates for customers of Public Service Electric & Gas. Co. (PSE&G) and South Jersey Gas Co. because of declining commodity costs. PSE&G's residential rates will decline by 1.3% on Oct. 1, saving a typical customer about $2.07 per month. The reduction is the seventh straight decrease by PSE&G since January 2009, when wholesale natural gas prices started to drop.
South Jersey Gas customers will pay 3.4% less, saving about $4.61 a month. The utility's rates have declined 9.4% this year and fell 10.6% last year.
Also, Entergy Mississippi says its electricity rates for average residential customers, those using 1,000 kilowatt hours per month, will be $1.27 lower for the next three months due to the reduction in cost of natural gas, a standard electricity source for the utility. A typical customer's bill will average about $88.40 per month from October through December.
The trend is expected to continue throughout the northeast and elsewhere as natural gas continues to be a bargain compared with heating oil, although the fuelswitching trend will likely be spread over several years because the equipment cost to switch can be as high as $6,000 in one-time expenses to replace oil heat with gas. Many customers switch over only after their current heating oil-powered unit reaches the end of its useful life.
To alleviate a portion of the cost and lure new customers to gas, some utilities are offering cash subsidies for installing a gas furnace and getting rid of an oil-fired one.
Conversely, the Wisconsin Public Service Commission granted St. Croix Gas of River Falls a 4% rate increase last week, although the utility's customers may not notice it, says Donald Piepgras, company president. The increase could cost customers as much as $50 annually, and was driven by energy conservation legislation, enacted since the last rate increase, which requires St. Croix Gas to collect 1.2% of its gross revenues and pay it to the state to fund energy savings programs administered by Focus on Energy.
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