Higher cost of keeping warm a drag on economy
This long, cold winter has forced households across New England and the Northeast to spend an estimated 20 percent more for heat, squeezing household budgets, limiting consumer spending, and contributing to a slowdown in the broader economy.
The average winter heating bill in New England is expected to climb nearly $300, to about $1,700 from $1,400 last season, according to the National Energy Assistance Directors’ Association, a professional group in Washington.
As higher heating costs reduce the amount of money that consumers can spend on clothes, electronics, and restaurant meals, they are affecting industries that depend on that spending. Several major retailers, including Walmart, Macy’s, and American Eagle Outfitters, have blamed the harsh winter for contributing to disappointing sales and earnings.
Retailers across the country cut more than 4,000 jobs in February, according to the Labor Department. In Massachusetts, retailers shed 5,000 jobs in January, the most recent state statistics available.
“Spending on natural gas service, spending on electricity, spending on home heating oil has definitely gone up,” said Chris G. Christopher Jr., director of consumer economics at the Lexington forecasting firm IHS Global Insight. “That makes people more cautious after they pay their bills.”
The impact is falling most heavily on the poor and elderly living on fixed incomes.
Richard L. Baker, an 85-year-old Dorchester resident, had hoped to see the last of his oil delivery man by now, but another cold front moved in, requiring another delivery. The cost: $661.35.
That’s roughly a quarter of the monthly budget for Baker and his wife, Mary Baker, forcing the couple to put off purchases large and small, from eating out to a much-needed chair lift. “This cold winter, it’s really strapping us,” he said.
Prices are somewhat higher for fuels this winter, but the increase in heating expenses also is driven by a surge in consumption resulting from extended periods of bitterly cold weather. Massachusetts residents, for example, burned the most natural gas in nearly 25 years in November and December, the most recent months available for analysis, according to the US Department of Energy.
The utility National Grid estimates its Boston-area residential customers will spend about $140 more on natural gas this winter as the result of increased consumption and higher prices.
Phil Flynn, an energy analyst at Price Futures Group in Chicago, said many natural gas and electric consumers have been insulated from this winter’s rising prices because utilities buy a significant share of fuels with long-term contracts that lock in prices for several months. But as those contracts end, customers will probably see their rates rise.
“You’re going to be paying for this winter well into summer,” Flynn said.
What households pay for heating varies by fuel.
In the Northeast, natural gas users — more than half of the region’s households — are projected to pay an average of $1,100 this winter. Heating oil and propane customers will pay more than double that amount.
“If you are using heating oil or propane, this is truly an emergency for you,” said Mark Wolfe, executive director of the National Energy Assistance Directors’ Association.
Advocates for low-income people worry that additional emergencies for the state’s poor will come in a few weeks, when utilities can shut off gas and electricity for nonpayment of bills.
Under Massachusetts law, utilities are prohibited from cutting service between Nov. 15 and March 15 — though the end date often is extended to at least the end of March. For many low-income families, the bills have piled up.
“When the shut-off moratoriums start to expire at the end of this month, we’ll truly know the impact,” Wolfe said.
Federal heating assistance might have helped avoid these situations, but the program has been cut significantly in recent years. The money distributed to Massachusetts — roughly $140 million — is exhausted.
At Action for Boston Community Development, which helps low-income families in Boston, Brookline, and Newton apply for help with heating bills, representatives said the cold weather, high energy prices, and insufficient funding for aid programs have combined to hurt the most vulnerable families.
“This is the worst winter in 30 years as it applies to the people we see,” said John Drew, the group’s president. “The last benefits for oil heat customers ran out probably in mid-January.”