Cold weather boosts heating fuel costs
As if the cold wasn’t miserable enough on its own, it’s also expensive. New England rang in the New Year with spot prices for natural gas up 334 per cent from Jan. 1, 2017.
Though Nova Scotia is connected into the New England grid at Dracut, Massachusetts through the Maritimes and Northeast Pipeline, most consumers are protected from the wild fluctuations brought on by the cold weather due to longer-term contracts and a diversity of supply arranged by Heritage Gas.
“Heritage Gas has purchased the majority of its gas supply for the coming winter and we are forecasting pricing to be similar to or lower than the price last winter,” read a statement provided by Heritage Gas spokeswoman Alice Mccarron.
But that doesn’t make natural gas cheap.
Julian Boyle has about five million square feet to heat in 60 buildings around Halifax Regional Municipality.
The director of operations for Killam Properties pays about three times as much for natural gas in Nova Scotia as his coworkers pay to buy it for Killam’s properties in Ottawa and Toronto.
“We’ve seen the price go up the last three years pretty significantly,” said Boyle.
Despite that increase, Boyle said the price to heat with natural gas remains comparable to the price to heat with oil.
“The best buildings are the ones that don’t use any energy at all,” said Boyle.
“So when we build new we seek to make them as efficient as possible and we invest in our older ones to raise their level of efficiency.”
Some of the province’s bigger natural gas customers, like Northern Pulp in Pictou County, sign their own contracts for supply and are hit harder by the high spot prices in New England.
Four years ago the kraft pulp mill spent $ 5.1 million converting to natural gas. However, it maintained the ability to switch to alternative fuels, like propane, during prolonged price spikes.
“To ensure operational consistency over the holidays the financial decision was made to remain on natural gas” said spokeswoman Kathy Cloutier.
“However, should the price forecast indicate continued high pricing, Northern Pulp may look to use other alternative fossil fuels.”
The high spot prices in New England happen when prolonged cold winter weather increases demand beyond the capacity of the existing pipelines into the northeastern states.
“The idea in New England has been to convert coal-fired plants to natural gas, which is much cleaner,” said energy analyst Ellen Wald.
“But the issue is that New Englanders don’t like pipelines so they end up paying a lot more for gas when demand increases.”
So while the price of natural gas was spiking in Massachusettes, January futures for other areas of the United States were trading on the New York Mercantile exchange for around $2.60 per million BTU.
Hence Killam Properties being able to get gas for a third of the price in Ontario than it pays for it in Nova Scotia. Heritage Gas doesn’t get to profit off the price of the gas customers buy; the regulated utility is paid for the transmission costs of gas it buys as cheaply as possible from around North America.
The issue is that gas has to travel through the chokepoint in Dracut, Mass., making the cost of moving the gas high.
Heritage Gas is seeking to get around the log jam, having signed a 15-year deal on the Atlantic Bridge pipeline expansion that is projected to start flowing gas in late 2018.