A grim forecast for heating costs (Boston Globe)

Report warns that average 2009 oil bill for Mass. household could top $3,000

By Erin Ailworth, Globe Staff

Massachusetts residents who heat their homes with natural gas or oil could end up paying nearly $1 billion more this year than they did in 2007, about a 30 percent increase, according to a University of Massachusetts report set to be released today.

"It's a tremendous amount of money out of people's pockets," said Robin Sherman, the report's lead author. "People can cut back on [heating] to some extent if it gets too expensive, but there's obviously a floor beyond which they can't go to keep themselves in their homes without freezing."

The increase will have an especially dramatic impact on the nearly 1 million households that are heated with oil, which now sells for about $4.70 a gallon, up from $2.59 a year ago, according to the Massachusetts Department of Energy Resources.

Heating costs are expected to keep rising, the report says. The state's average household oil bill next year could top $3,000, according to the report by the UMass Donahue Institute, a university think tank. All told, consumers can expect to spend $4.45 billion for gas and oil heat in 2009 - a $469 million increase from 2008.

Sherman said the cost of heating a home depends on factors such as the constantly changing price of oil - which some analysts believe is being driven by speculation - and predictions of an unusually cold winter, which could cause prices to spike even higher than they are now.

Natural gas customers also are expected to see significant price increases - about 15.6 percent from 2008 to 2009, UMass researchers said. In May, natural gas sold for $18.49 per thousand cubic feet, up from $17.03 a year ago, according to the US Energy Information administration, a statistical agency of the US Department of Energy. The institute based its findings on several sources, including US Census and federal Energy Information Administration data.

Numbers in the Donahue Institute's report may actually be conservative, Sherman said, partially because the report excludes renters who do not pay separate heating bills.

The UMass prediction comes at a time when Massachusetts residents are already bracing for historically high heating costs this winter.

"Maybe the people who are very, very wealthy won't bat an eyelash. But for the regular people who are working from paycheck to paycheck and week to week, and don't have anything in the bank account, this is devastating," said Joseph P. Kennedy II, chairman of Citizens Energy Corp., a Boston-based nonprofit. Kennedy's company provides discounted oil to low-income residents and senior citizens. To help reduce bills, he said, the state should create an energy bank to finance energy-efficient home improvements.

Dorchester homeowner John F. MacPherson is one of those struggling to make ends meet because of energy expenses. The 82-year-old World War II veteran said a large chunk of the $1,032 he receives monthly from Social Security and veterans disability checks goes to pay for heating. Though MacPherson gets financial assistance from Action for Boston Community Development, which helps low-income families with their fuel bills, he only recently finished settling oil bills from last winter.

"People ask me, 'How do you get by?' I sacrifice a lot of stuff," said MacPherson, who has taken to eating inexpensive Cup Noodles for many of his meals, limits how often he drives, and keeps the thermostat in his four-bedroom home at 68 degrees in winter. "I don't drink, I don't smoke, I don't go out," he said.

Just how dire the situation will become is hard to predict, though many in the oil industry say the home heating oil-dependent region is on the brink of a crisis - if not already in one. New England is much more dependent on oil heat than the rest of the country. About 8 million US households use oil heat, with Massachusetts alone accounting for nearly 1 million of those homes.

"Any type of increase [in cost] especially of this magnitude, is just going to make life so precarious, so difficult - perhaps even unlivable - unless we can subsidize those households so that they can make it," said John J. Drew, executive vice president of Action for Boston Community Development. "I can't even think about the next two winters. It's obviously a horror show in the making."

In anticipation of winter heating bills, Governor Deval Patrick and legislators last month created a "Winter Energy Costs" task force to figure out how to help residents cope. Patrick, along with lawmakers in several other New England states, has requested that the federal government boost the region's home heating assistance to $1 billion, from $267 million last winter. Without the increase, which would provide the Commonwealth with up to $500 million in home heating assistance, the state will be hard-pressed to help even a fraction of those in need, said Lisa Capone, a spokeswoman for the state Executive Office of Energy and Environmental Affairs.

Last winter, Massachusetts received almost $115 million in federal home heating assistance, and kicked in another $15 million on its own. The money helped about 140,000 low-income households. To be eligible for the federal program, a household's income can't be more than 200 percent of federal poverty guidelines. In 2008, that meant a family of four could earn up to $41,300.

Meanwhile, Phil Hailer, spokesman for the state Department of Housing and Community Development, said his office is already fielding calls about winter heating bills.

"The good news is that people are talking about it now . . . when the weather is 85 degrees," Hailer said.