Heating with gas likely to cost less

Natural gas customers in Greater Boston can expect to pay roughly 8 to 12 percent less to heat their homes this winter, but the cost of heating oil is rising as world oil prices soar.

KeySpan Energy Delivery, now a part of National Grid, is forecasting that the cost of natural gas it purchases for delivery to its Massachusetts customers will be lower than it was last winter.

The company said a typical customer in the Boston area using 160 therms of gas a month would see the monthly bill fall to $192, down 7.7 percent compared to last year. The heating season runs from Nov. 1 to April 30.

NStar Corp. said its typical customer in Cambridge, Somerville, and the western Boston suburbs would pay $206 a month, down 12 percent from last year's $234 average monthly bill. NStar said nonheating customers would see their typical monthly gas bills drop to $36, from $39.

Carmen Fields, a spokeswoman for KeySpan, said the monthly bill for a typical customer in the Lowell area would be $179, down 8.6 percent from last winter, while the typical customer on Cape Cod would pay $141 a month, down 7.2 percent.

NStar and KeySpan both hedge against price volatility by buying in advance two-thirds of the gas their customers will need for the winter and buying only one-third on spot markets during the heating season. Such hedging tends to reduce price increases when natural gas prices are rising and lower savings when prices are falling.

The gas distribution companies, which purchase the gas on behalf of their customers and pass it through at cost, filed their forecasted winter rates yesterday and Friday with the Department of Public Utilities. Typically, the DPU approves the rate requests and requires adjustments only if the company's cost of gas rises or falls by 5 percent during the winter.

NStar is planning to offer a fixed-price contract to its customers this winter, protecting them in case prices rise dramatically. Customers who want to lock in prices for the entire winter must pay 2 cents per therm extra during the winter, company officials said.

James Daly, director of electric and gas energy supply at NStar, said the cost of natural gas has been declining, compared to last winter, even as oil prices have risen.

"Crude oil has been on a tear," Daly said. "Natural gas prices are separating from the oil and fuel oil prices."

Crude oil rose to a record $80.70 a barrel yesterday on the New York Mercantile Exchange, up $1.47, or 1.9 percent. Heating oil for October delivery rose 2.09 cents to $2.23 a gallon on the exchange, the highest close since trading began in 1978. Prices have climbed 9.6 percent in the past three months.

Ken Williams, the owner of Scott-Williams Oil in Quincy, said the $2.23-a-gallon wholesale price for heating oil was up about 26 cents since Aug. 23.

"There's no reason for it. There's no shortage. There's no crisis. There's no hurricane. There's no news," he said. He said market speculators appear to be driving up the price.

A heating oil survey conducted by the state's Division of Energy Resources indicated full-service oil dealers were charging $2.55 a gallon Aug. 28. The highest price in the survey was $2.95, and the lowest was $2.24. The average price, $2.55 a gallon, was down 4 cents compared to July 31 and down a penny compared to what it was a year ago at the same time.

Bruce Mohl can be reached at mohl@globe.com.