Gas vs. Electric Heating

by Gary Foreman

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Natural gas prices are going up all the time. At what point does it make sense to replace my gas water heater (40-gallon) with an electric one? I live by myself and my July gas bill was $28. I take one quick shower a day, do two to three loads of laundry a week, and run one dishwasher load per week. I also rarely, if ever, use my gas stove during the summer. The same CCF usage last year cost me $11! This is already bare-bones usage. How astronomical is my heating bill going to be this winter? What can do I to save on natural gas?
Barbara in Columbus, OH

Barbara asks a question that's on many people's minds as we head toward winter. How will rising energy prices affect my budget and what can I do to limit the damage? Let's begin by looking at water heaters and then follow-up with some ideas on reducing energy bills.

The U.S. Dept. of Energy (DOE) says that 14% of our home energy usage is for heating water. By comparison, 44% is for heating and air conditioning. According to the Rocky Mountain Institute over $15 billion is spent by Americans each year to heat water.

Should Barbara consider switching away from natural gas? Probably not now or ever. Generally, it has been cheaper to heat water with gas than with electric. The Metropolitan Utilities District of Omaha NE estimated that an electric water heater cost 75% more to operate than a gas heater.

But that doesn't mean that Barbara can't reduce the amount of energy she uses to heat water. The Rocky Mountain Institute claims energy saving techniques can reduce the cost of heating water by two thirds. The four biggest savers are using efficient showerheads, washing clothes in cold water, insulating the water heater and lowering the water heater thermostat to 120F. Combining those would reduce a bill by 1/3.

Two of the techniques don't require Barbara to spend any money. The other two are inexpensive. Installing low-flow showerheads is a do-it-yourself type project. Barbara can put a blanket of R-12 insulation around the water heater herself. She should check the manufacturer, since some recommend against extra insulation.

Although a little more expensive, Barbara might also want to check out the cost of installing a timer on her water heater.

Ok, what about her winter heating bills? Should she consider replacing a gas furnace? Again, probably not.

What makes comparing furnaces hard is getting an apples to apples measurement. DOE estimates that 1 kWh of electricity is worth 3.3 cubic feet of natural gas in terms of generating heat. A common method of comparison translates everything into how much energy is needed to produce a BTU. But even that still just measures heat generation. It doesn't take into account the efficiency of the heat delivery system.

We won't get into the formula details. If you're seriously shopping for a new furnace or water heater, you'll need to get estimates based specifically on your own home and lifestyle. That will be better than generic estimate anyway.

Even after the current increase in prices, gas is still cheaper than electric for generating heat. And, electric prices will probably rise, too. With coal generating capacity being taken offline your electric rates will increase.

That doesn't mean that Barbara is helpless. The DOE suggests an energy audit as a good way to find out where you're using energy. Often your local power provider will do an audit free of charge. Or you can do a simple audit yourself. An internet search will uncover instructions.

In most cases, the best thing a homeowner can do is to make sure that they're not wasting energy. The DOE says that if you total up all the leaks around windows and doors it's the same as leaving a window wide open. Weather-stripping is an easy, inexpensive way to eliminate those leaks. A $3 tube of caulking could save you quite a bit.

The other key to winter heating, especially when there's only one person at home, is to only heat the areas where you are. You don't need to heat the entire home.

Yes, a central furnace will be more efficient than a space heater. But, only if they're heating the same sized area. In most cases, the space heater only has to heat one room, while the furnace will heat the entire residence. So even if the space heater is less efficient, it will still use less energy than running your furnace.

Winter energy bills will always be a challenge, especially when prices rise and you live in a cold climate. Fortunately, there are things that consumers can do to reduce their bills short of replacing water heaters and furnaces.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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