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Matthew Steger WIN Elizabethtown

Heating Energy Cost Comparisons

There are a myriad of ways to heat your home, but the three most common methods in our area are natural gas, fuel oil, and electricity.  Each has some advantages and disadvantages.

Some background –
Heat is generally measured in terms of BTUs (British Thermal Units).  A BTU is defined as the amount of energy needed to heat one gallon of water by 1 degree F (typically measured at water’s most densest point, which is 39 degrees F at standard air pressure).  Another unit often used to measure energy usage is a “Therm”.  A Therm is equivalent to 100,000 BTUs.  All fuels are considered commodities and their prices regularly fluctuate, so the pricing mentioned below are examples based upon several reliable sources using 2018 figures.  Heater efficiency, home insulation, and home size will all affect a home’s heating costs.

Efficiency is defined as the amount of energy put into something compared to the work output.  If a heating system is 90% efficient, that means that for every $1 of energy put into the heater, $0.90 worth of heat is produced.  The remaining $0.10 is wasted, such as exhaust up the flue.  The lower a heater’s efficiency, the more money you have to pay for the same amount of heat compared to a higher efficiency heater.

Natural Gas -
Natural gas is the most widely used method to heat a home.  It is delivered via underground pipeline to your home and its use is metered so you pay for what you use and you, theoretically, have an endless supply.  For well over 20 years now, PA has a program called “PA Gas Switch” (http://www.pagasswitch.com) which allows consumers to shop around for a PA licensed natural gas supplier.  This can save you a good amount of money if you do your homework.  This does not change your local gas delivery utility (such as UGI or Columbia Gas); it only changes who supplies your natural gas to the local utility.

Natural gas has an energy content of approx. 1,030 BTUs/cubic foot (natural gas suppliers price their product by the cubic foot).  Natural gas is delivered automatically and can’t run out like a fuel oil tank can run empty.  Natural gas is obtained by underground drilling as well as being a byproduct of the crude oil refinery process.

The advantages of natural gas are that it is very clean burning (assuming the appliance is properly serviced on a regular basis), inexpensive, and we have an abundance of this resource in the United States.  Natural gas ultra-high efficient furnaces can achieve approx. 96% efficiency, although most furnaces are considered high-efficiency and are designed to operate at about 90~92% efficiency. 

Some people fear natural gas as it can lead to an explosion, although rare, if there is a damaged fuel line or a gas leak and a nearby ignition source (such as a spark) is present.  Natural gas has no odor by itself, however natural gas companies add a chemical called mercaptan which gives it an odor (some describe it as smelling like rotten eggs) to help detect a leak.

The average natural gas customer in the northeast US pays approx. $1,800 per year in natural gas although this is not broken out separately as many homes also heat their potable water with natural gas.  Cost per million BTU for natural gas (90% gas furnace) is approx. $14.10 (depends upon supplier and time of year).  Due to Marcellus shale drilling, the price of natural gas has actually come down in recent years. Some of the cheapest natural gas available in PA (as of March 2018) via the “PA Gas Switch” program can be had for less than $0.50/cubic foot. This price is considerably less than what the actual natural gas utilities have as their ‘rate to compare’ (if you choose to buy your natural gas straight through your gas utility); in other words, changing natural gas suppliers can save you real money every month.

Something important for consumers to keep in mind is that the various price programs available on the “PA Gas Switch" website have fixed and variable rate plans. A fixed rate plan means you are locked in to a specific price for your term. Some terms are monthly and others are 2 or 3 years.  A variable rate plan means the price may vary so you may not actually know what price you are paying.  Of course, a fixed rate plan tends to be much wiser since you are locked into a known price for your term.  When searching for available price plans on the “PA Gas Switch" website, you can opt to search only fixed rate plans.

Fuel Oil-
Fuel oil (aka number 2 heating oil) has an energy content of approx. 138,700 BTU/gallon.  Fuel oil is manually delivered to your home by a fuel delivery supplier.  Since you can only store as much as your fuel tank will allow, you can run out of this fuel, however auto-delivery is an option with most suppliers.  If you have a boiler which heats your home and it also makes your domestic hot water, and your tank is empty, you will have no heat or hot water.  Oil tanks or their supply lines can leak, so regular inspection of the tank and supply line is recommended by a qualified HVAC professional, licensed plumber, or your fuel oil delivery company.  In areas where natural gas isn’t available, electricity or fuel oil are the most common alternate heating choices, although pellet stoves and LP/propane are other options.  Fuel oil is obtained from the refinery process of crude oil so as the price of crude oil fluctuates, the price of fuel oil can do so also.

Operating efficiency for most modern fuel oil fired appliances (furnaces and boilers) often tops out at about 80~84%.  Of course, you can shop around and choose your fuel oil supplier of choice.  The average fuel oil customer in the northeast US pays approx. $2,500 per year to heat their home; keep in mind that this may also include potable water heating if your boiler does both functions.  Cost per million BTU for fuel oil (80% oil furnace) is approx. $35.37 (depends upon supplier and time of year and the general price of crude oil).

Electricity -
Electricity is sold by your power utility in kilowatt hours (equivalent to consuming 1 kW for one hour).  Electricity has an approx. energy content of 3,412 BTU/kW hours.  Many homes, such as in rural areas, don’t have natural gas available, and many people don’t want the commitment of a fuel oil tank and regular oil deliveries.  Efficiency of electricity powered heating sources can easily surpass 100% (such as with a heat pump).

In the 1990s, the Commonwealth of PA introduced “PA Electric Switch" (http://www.papowerswitch.com).  This program allows consumers (both business and residential) to shop around and choose their best price using each utility’s “Price To Compare”.  It can save you a good amount of money each month if you do a little homework.  This program does not change your local electric utility (such as PPL or MetEd), only the generation company that supplies the electricity that your local power utility delivers to you.  Most electric generation companies use natural gas or coal to actually produce electricity; some others use water, wind, and/or solar.

Something important for consumers to keep in mind is that the various price programs available on the “PA Electric Switch" website have fixed and variable rate plans. A fixed rate plan means you are locked in to a specific price for your term. Some terms are monthly and others are 2 or 3 years.  A variable rate plan means the price may vary so you may not actually know what price you are paying.  Of course, a fixed rate plan tends to be much wiser since you are locked into a known price for your term.  When searching for available price plans on the “PA Electric Switch" website, you can opt to search for only fixed rate plans.

A disadvantage of electric heating can be the cost (compared to natural gas), although this can be minimized by using the “PA Electric Switch" program.  The average home in the northeast US that heats with electricity spends approx. $3,200 (electric air source heat pump) or $5,300 (electric baseboard heat), although this includes other electrical appliances in the home.  A heat pump transfers already naturally occurring heat instead of always generating heat (except in emergency heat mode) compared to full electric heat (such as electric baseboard heaters).  Ground source (aka geothermal) heat pumps have even a lower cost for electricity consumption and a higher efficiency.

Some advantages of electric heat include no need for a fuel tank since electricity is already supplied to the home with a theoretical unending supply.  Electric heat means no chimneys or combustion which often means less needed maintenance and little to no chance of carbon monoxide generation.  Electric baseboard heaters are inherently about 100% efficient and operate cleanly.  Cost per million BTU for electric (electric baseboard) is approx. $26.38 and for an air source heat pump approx. $11.64 (depends upon supplier).  Some of the cheapest electricity available in PA (as of March 2018) via the “PA Electric Switch” program can be had for less than $0.60/KW Hr. This price is considerably less than what the actual electric utilities currently have as their ‘rate to compare’ (if you choose to buy your electricity straight through your electricity utility); in other words, changing electricity suppliers can save you real money monthly.

On occasion during a home inspection, a client will ask how much an oil-to-gas conversion would cost.  Of course, this is only a possible option if natural gas service is available at the street.  The local gas utility or a qualified HVAC professional can provide some cost calculations to run a gas line to the home, install gas distribution piping within the home, as well as costs to replace oil appliances with natural gas appliances.  In almost all cases, oil fired appliances can’t be converted to natural gas so the actual heater (furnace or boiler) would need to be replaced. Keep in mind, though, that natural gas heating systems have a much higher efficiency than oil fired systems.

Summary -
Whether you have a furnace, a boiler, or a heat pump, having each system professionally serviced yearly can help your heating system in top efficiency, safe to operate, and help save you money.  Electric baseboard units essentially require only a quick cleaning from time to time to remove dirt/dust.  You can also lower your energy costs by properly insulating your home, weather stripping doors and windows, and caulking your home’s exterior.

To learn more about the “PA Gas Switch” and “PA Power Choice” programs, check out the PA Public Utility Commission’s website at: http://www.puc.state.pa.us

© 2018 Matthew Steger


Matthew Steger, owner/inspector of WIN Home Inspection, is a Certified Level 1 Infrared Thermographer and an ASHI Certified Inspector (ACI). He can be reached at: 717-361-9467 or msteger@wini.com.

WIN Home Inspection provides a wide array of home inspection services in the Lancaster, PA area. This article was authored by Matthew Steger, ACI - owner of WIN Home Inspection in Lancaster, PA. No article, or portion thereof, may be reproduced or copied without prior written consent of Matthew Steger.