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Can new furnaces kick heating bill woes?
As mounting heating costs look like a certainty nationwide, households eye more efficient furnaces.
October 20, 2005: 10:31 AM EDT
By Rob Kelley, CNN/Money staff writer
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NEW YORK (CNN/Money) - The winter of '05 may not just be colder than previous winters -- it may also be dramatically more expensive.

The prices of heating fuels are expected to rise across the board this winter, according to predictions by the Energy Information Administration (full story).

Households that may have considered a new furnace out of the question a few years ago could actually save money long-term with a more efficient replacement as heating costs soar.

Natural gas prices are predicted to see the biggest hike this year, at 43 percent, followed by a hike of 32 percent for oil, 25 percent for propane and a milder 3 percent for electricity.

Households using natural gas can expect to shell out an average of $350 more this year than last year, with oil users seeing hikes of $378, propane users $325 and homes with electricity up $38.

And private forecaster EarthSat on Monday announced their forecast that this winter will be significantly colder than the five- and 10-year averages (full story).

Taking stock of your heating

Surveying your home's heating situation -- the efficiency of your current furnace system and how well it's performing in the home -- is the first step in thinking about a new one.

There are essentially three types of furnaces, says Harvey Sachs, Director of the Buildings Program at the American Council for an Energy-Efficient Economy (ACEEE).

Units with a pilot light are the oldest, and operate at only 55 to 60 percent of their potential fuel efficiency. If you use your heating a lot, furnaces with pilot lights are ripe for a replacement, because newer types can achieve over 90 percent efficiency.

Standard-efficiency furnaces don't have pilots -- instead using a spark or a hot wire called an intermittent ignition. They are generally 80 percent fuel efficient. Sachs says these are acceptable for many households, especially those in Southern climes, but heavy heating users should look at the potential benefits of newer models.

Modern condensing furnaces are the true champs of efficiency, converting 90 percent or more of their fuel into heat. They also use intermittent ignitions, but have a prominent water output -- a plastic pipe that drains the condensate water from the dwelling.

"Frankly if you're in Northern Virginia or points north -- draw a line west across the country -- the long-term economics favor putting in a condensing furnace," said Sachs.

Assuming a winter heating bill of $2000, if you upgraded from an 80 percent efficient furnace to one at 95 percent efficiency, your costs would be reduced to $1685 -- a savings of $315 per year.

Considering that condensing furnace systems cost from $2000 to $7000, it would take more than six years to pay off the cost of even a cheap model. But if you're planning to stay at your residence for the long-term, it could be worth it.

The ACEEE has a list of guidelines for purchasing a new furnace here.

Other measures

Though the furnace is the central component of your home's system, there are other important factors to consider before making a purchase.

"If the current furnace hasn't failed, the biggest source of waste is usually the duct system, and it's the area people know the least about fixing," said Sachs. "Nationally, the average house wastes about a quarter of its heating energy through duct leakage."

He advises hiring an experienced contractor who will survey your home and figure out in which rooms the heating could be more efficient. The ACEEE also offers a guide to selecting a contractor, available here.

In terms of heating bills, you can achieve other savings without upgrading a single component -- a call to your heating company will suffice.

If at all possible, join a heating fuel co-op, recommends Michael Gordon, President of Consumer Powerline. Co-operatives have a set mark-up rate for fuel, so your bill will only vary with the wholesale market costs. For-profit heating fuel providers are free to set their own retail rates.

If there is no co-op in your area, ask your heating company if your rate can be tied to a wholesale indicator. If your costs are instead pegged to a retail rate, the company can adjust it at its own choosing.

Finally, some states offer special residential heating audits, paid for by the systems benefit charge, a special tax designated for heating uses. Gordon encourages homeowners to inquire with their state Departments of Public Service about whether the audits are available in their area.

High prices not a sure thing

In determining whether to plunk down for a new furnace, you need to do some serious guesswork on what heating prices will be in coming years -- and even the experts have had difficulties making reliable predictions.

"Half the winters where EIA projects anything like this, their figure ends up collapsing," said Gordon. "The market is very fluid -- look at the drop in prices last year -- and we've seen a 10 percent price adjustment even in the last week."

He says that the conditions during the second half of winter are especially hard to predict.

Still, the EIA does provide a range of figures depending on whether the season is warmer or colder, and you can use these in your calculations to determine whether a new heating system is for you.

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For a look at how families are coping with escalating heating costs, click here.

For more coverage on personal finance, .  Top of page

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