The true cost of converting to natural gas

By Larry Slone

On Monday, Oct. 15, the city council introduced Ordinance 12-46, the city administration’s request for $50,000 to pay for the process of establishing a city-wide special assessment district providing natural gas to city lots. This money will presumably include costs for presenting the public information meetings on Oct. 16, 17 and 26.
Certainly, a thorough review of natural gas’s long-term benefits and costs is necessary, because it could potentially save city subscribers thousands of dollars a year. Of course, there are also other relevant issues, such as: Reluctance of some residents to convert; subsidies; snowbirds; and benefit to Enstar, the service provider. But I won’t be discussing them here.
I said a “thorough” review. At this time, such an occurrence isn’t likely to happen. Although the city administration will happily provide information on the process and costs associated with bringing gas to your lot, they are shying away from informing the public about the scary part: the much-greater cost of re-plumbing your house from the curbside to the stove switch.
Apparently this reluctance reflects the city council’s nervousness about exposing the city to liability from angry subscribers feeling misled about the true costs of converting to gas.
Nonetheless, such information — the other side of the equation — is absolutely crucial for informed judgment. Each of the several thousand potential subscribers can’t be expected to individually research the costs. It seems only reasonable to me that the city should provide, out of that $50,000 of your taxes, an “estimate” from local plumbing sources of “typical” conversion costs. And if they won’t, then I will.
Here’s my estimate and analysis:
The overall cost per typical single-family residence of converting fully to natural gas will likely be about $37,000 in today’s dollars, figured over 15 years. That is approximately $3,500 to bring the branch line to your lot, $20,000 to convert the house, including appliances to natural gas, then $10,000 for interest (home equity loan at 5 percent for 15 years) on the $23,500 borrowed money, and finally, $3,300 for additional taxes (11 mils for non-seniors times 15 years) on the increased ($20,000 or so) home value.
What’s the benefit? The current cost per btu produced of natural gas is approximately one-eighth that of electric, and less than one-third that of fuel oil. Therefore, the higher your home energy cost, the greater the potential benefit. You do the math, but I expect that the typical residence on natural gas will save as much as $200/month, or $2,500/year.
Under this scenario, applying that saved $200/month to the $23,500 loan, it will take 15 years to pay it off and reach parity. That’s a long time for you and me, obviously; but very beneficial to the next generation.

Larry Slone frequently attends Homer City Council meetings and is a Homer resident.

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Posted by on Oct 17th, 2012 and filed under Point of View. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

1 Response for “The true cost of converting to natural gas”

  1. deb says:

    Whoa Larry where did you get your cost figures the head of Solyndra? You are way off base. and I hope the folks wont believe any of this without some research. First off anyone who wants t know how wonderful natural gas will be for HEATING YOUR HOME should talk to the folks in Anchor Point…some people have gone from 500 a month in propane bills to 50 bucks a month…. that is a HUGE difference.

    The savings to us all in the heating costs to our homes and busines will SAVE this community. Our cost to heat schools, city hall and hospital will save us ALL money too…

    I know some people cant see the forest for the trees… but anyone negative to natural gas is just not getting the REAL picture. we need it… it will save us money and it CANT COME TOO SOON!!! Bring it ON!

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