The Exchange

High heating bills ravage consumers

Rick Newman
The Exchange
A propane delivery truck is pictured near Rutland, Vermont

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A propane delivery truck is pictured near Rutland, Vermont January 26, 2014. A shortage of propane heating fuel during a brutal U.S. cold snap this month threatens to sharpen the year's most urgent energy policy debate. Millions felt the pinch last week as another wave of biting, bitter cold strained already low propane supplies in the Midwest, causing prices to surge three-fold over two weeks to record highs and forcing suppliers to ration deliveries. Picture taken January 26, 2014. To match Analysis ENERGY-PROPANE/USA REUTERS/Mike Segar (UNITED STATES - Tags: ENERGY ENVIRONMENT)

The polar vortex caused nationwide shivers when it swept across the United States in early January. Now it’s causing convulsions and hyperventilating as millions of American open their latest heating bill.

Emma Turpin of Richmond, Kentucky, got a $140 electric bill in December, which is typical. But the bill for January spiked to $429, which is almost equal to the $450 in monthly rent she and her husband pay for a one-level, two-bedroom house. “We’re still trying to figure out how we’re going to pay it,” she says. With a two-month-old baby at home, she’s reluctant to turn the heat down by much, as a lot of people do to cut heating bills. To shave costs, the family is eating in more and curtailing trips to Walmart, which saves on gas and provisions both. Turpin also hopes to sell a few of her fancier handbags and other items on eBay, but interest is tepid.

“It seems like everybody’s in a rut right now,” she says. As a last resort, she and her husband may see if local churches or the Salvation Army can offer any kind of heating assistance.

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Weather often wreaks havoc with household budgets, especially in the winter. Economists estimate the unusually cold weather that has frozen much of America during the past two months could cut $5 billion off economic activity, mainly because increased demand for energy has pushed prices higher, which means people are spending more for the same amount of fuel.

Overall, the added cost — so far — probably isn’t enough to cut economic growth by much. “Most people have enough experience with heating bills that they know they’ve got to be a little careful in the winter,” says economist Chris Christopher of forecasting firm IHS Global Insight. “They’re on the lookout for higher bills.”

Still, some people may have been lulled into a false sense of energy affordability over the past couple of winters, which were more mild than usual in much of the country. Alex Parker, a senior at Indiana University, lives with three other students in an apartment where the electric bill is usually around $175. The latest bill nearly hit $500. His roommates, who have part-time jobs, will work a few additional shifts to pay it off, while Parker, who has carefully budgeted expenses through May based on the amount of student loans he received, is planning to trim his grocery list and find other ways to spend less. “I can cut back on soft drinks and buy less alcohol,” he says. “And I’ll probably make bigger meals that will last longer, like a big pot of soup or chili.”

Simple tips for lower costs

Consumers who usually blow off tips from their utility company are suddenly paying close attention. Simple ways to cut down on your heating bill, other than turning down the thermostat and wrapping yourself in a Mylar blanket: Make sure storm windows are shut tight and use plastic film to further insulate windows. Replace worn weatherstripping around doors and windows. Shut off the heat in rooms you don’t use very often. Seal up any spot in the house that seems to be causing a draft. And close the flue in your fireplace, if you have one.

Some homeowners are exploring more-efficient ways to heat their homes, such as using a wood-pellet stove to supplement the normal heating system and perhaps lower the overall cost, or replacing an old furnace with newer, more-efficient equipment.

Irene Toe of Barrington, Ill., bought a home last spring expecting winter heating bills to run between $200 and $300. But she’s been getting $500 bills, forcing her to keep the household temp as low as 55, and even spend more time at her sister’s house than she normally would. To rectify that, she’s planning to switch from a 15-year-old electric furnace to a new gas system, which is generally considered the cheapest and cleanest form of heat (though even gas prices have soared this winter, due to increased demand). It will cost $10,000 or more to make the switch, but Toe has done the math and knows the switch will pay off if she lives in the house for more than a few years, as she plans. “I don’t mind paying $200 or $300 per month, but $500 is too much,” she says. “I just want to be more efficient.”

The cold snap could clip the economy more if it persists into spring, since by then many people will have exhausted any extra money put aside for winter expenses. “Where bad winter weather has an impact on consumers is at the bookends of the season,” says Christopher.

Unanticipated problems

There could also be unanticipated problems other than high heating bills, if the cold lingers. Scott Spaulding, a veterinarian in Janeville, Wisc., hasn’t paid a dime more than expected for heat this winter, even though temps in Wisconsin have routinely fallen below 0. That’s because he planned ahead and locked in a price for propane of $1.60 per gallon last summer. His propane supplier assures him they’ll honor that price, even though propane has recently fetched $6 per gallon or more, due to temporary shortages caused by soaring demand.

But Spaulding noticed that, instead of filling his tank during a recent delivery, the supplier only left it about 40% full. He looked into it and discovered that many local propane companies are rationing supplies to reduce the chances of running out. “The company tells us there’s nothing to worry about, but what if they go bankrupt?” he says. “Other suppliers in our area aren’t taking any new customers.”

Local officials have pledged to help if necessary, and Wisconsin Gov. Scott Walker recently declared a state of emergency to deal with the propane shortage. Still, Spaulding keeps the heat as low as 55 and does other things to conserve the propane left in his tank.

Whether it affects your bank account or not, the winter chill seems inescapable.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman.

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