Why is my gas bill so high?

The price of natural gas is twice what it was three years ago. Here are a few of the reasons why.

Does it feel like you’re paying a lot more this winter than usual to heat your home using natural gas? You probably are!

In November, the price of natural gas in the Chicago metropolitan area was TWICE what it was three years earlier. And this is AFTER prices fell from their June peak of 2.3 times as high. The chart below shows the CPI price index for utility (piped) gas service relative to December 2019 both for the Chicago metropolitan area and the U.S. city average.

I don’t have a good explanation for why natural gas prices have gone up so much faster in the Chicago metropolitan area than nationally (let me know in the comments below if you do!), but here are some of the reasons natural gas prices have risen nationally so much since 2019 (and really since 2020).

The war in Ukraine

The war in Ukraine has driven up the price of natural gas on global markets. Because natural gas is not a product that can be easily transported overseas, you might think global forces shouldn’t affect us too much. You’d be right, except that the U.S. has been rapidly expanding our liquified natural gas (LNG) export capacity in the last few years and demand for U.S. LNG exports is driving up prices here some. As U.S. exports of LNG continue to grow, global prices will have a greater effect on prices in the U.S.

Explosion at Freeport LNG in June

In June there was an explosion at the Freeport LNG (liquified natural gas) processing facility in Houston, TX. This is the second largest liquified natural gas processing facility in the U.S. and had processed as much as 20% of U.S. liquified natural gas, primarily for export. Despite this happening more than six months ago, the facility has not yet reopened.

Extreme winter weather

Third, this winter we have had unusually extreme weather, particularly in areas not used to extreme cold, such as Texas. This has driven up demand for natural gas nationally which is reflected in prices.

Inflation and rising prices of other goods

Finally, while natural gas is a commodity, the price you ultimately pay for this commodity to arrive at your house depends on the price of many other goods (wages for utility workers, cost of materials to build and maintain pipelines, etc.). In the last few years we have had higher than usual inflation. Since the end of 2020, prices of all non-energy items have risen by 12.1% in the United States and 10.8% in the Chicago metropolitan area. While this overall rise in prices only partially explains the 43.2% and 93.7% rise in the price of utility gas service over the same period nationally and in the Chicago metropolitan area (respectively), it is yet another factor contributing to higher natural gas prices

Your (natural gas) mileage may vary

How much more you end up paying for natural gas this winter will depend a lot on the ability of your utility provider to raise rates. I reviewed my utility bills and found that in November 2022 I paid roughly 10% more per therm of natural gas used than the previous November. This is mostly in line with the recent rate increase request by my utility provider which was approved by the state (you can read more about the approved rate increase here: State Approves NIPSCO Rate Increase). This is also much less than the 33% increase the Chicago metropolitan area saw on average over the same time. Most regulated utilities elsewhere in Indiana and Illinois have requested similar or larger rate increases for the winter, but how much rates go up for you will ultimately depend on the result of the regulatory process.

Stay warm!

UPDATE: December utility bill arrived and on it natural gas prices per therm were 24% higher than one year earlier (compared to December 2021). Put another way: this past December I used 9.5% fewer therms than the previous December, but the total bill for those fewer therms was 12% more.