Hot Topic of the Day: Energy Costs

Jack Frost has, in recent years, recommended that our customers in the Vectren service area should use a heat pump for their heating needs. Disruptions in pricing resulting from the economic downturn have temporarily led to huge decreases in natural gas prices. Vectren is proposing that natural gas in the coming 2009 / 2010 winter will be down by half! These disruptions lead to our current recommendation for Hybrid heating, which is a heat pump/natural gas combined heating/cooling system (explained on another page). The following is a cost comparison showing the cost of various methods of heating for this coming winter, based upon what we know in August, 2009. Comparisons like this are complex because fuel suppliers offer declining prices as the amount of fuel purchased goes up, and that includes Vectren for both gas and electricity. But we strive to make these comparisons reasonable and fair:

Electricity, resistance:........$3.50 per 100,000 BTU’s of heat (Note 1)
Propane gas:.....................$2.10 per 100K BTU's................(Note 2)
Natural gas:........................$1.00 per 100K BTU's................(Note 2)
Fuel Oil:..............................$1.70 per 100K BTU's................(Note 2, Note 3)
Hybrid (heat pump/gas):...$1.00 per 100K BTU's.................(Note 4)
Electricity, heat pump:.......$1.35 per 100K BTU's.................(Note 4)

Note 1: Resistance heat is the heat obtained from “pushing” electricity through a wire to create heat. Portable electric heaters use resistance heat. As you can see, they aren’t very cost effective. On the other hand, a portable heater that temporarily heats, say, a bathroom while using the shower is more cost efficient than heating the entire home via the thermostat.

Note 2: Any combustion of fuel requires venting, so part of the heat energy is lost up the chimney. How much is lost depends upon the efficiency of the equipment. The very highest efficiency gas furnaces are going to lose about 5% of the heat you are paying for. So-called 80% furnaces, which even today are (sad to say) often installed in new housing, lose 20% or more of the heat you are paying for “up the chimney.” This makes their cost of operation higher than what is shown above.

Note 3: Oil heating is less expensive than normal due to the economy's reduced demand for oil. Pricing varies daily like the price of gasoline. As the economy picks up, don't expect this price to continue.

Note 4: As the economy picks up, natural gas demand will pick up world-wide. Heat pumps are temporarily at a cost disadvantage, but we continue to think the longer-term will demonstrate advantages with heat pump heating. Please refer to other pages on this site for an explanation of how heat pumps work. The figure shown includes the special pricing for electricity that Vectren makes available for heat pump users. The greater the use, the bigger the savings. Most people can expect annual electrical cost savings of 15% to 20%, because cost savings extend to the cooling season and apply to all electrical use in the home. (Unfortunately, this electrical pricing break does not apply to Hybrid heating systems. So, while the heating costs are very comparable, the summer electric rate savings are not available to Hybrid users.)