Heating buildings: how much will it cost?

The heating season starts this week and owners are gearing up for what they are hoping is a mild winter with low oil and gas prices.

Industry experts said the prices traditionally rise during the winter and reminded owners to ensure equipment has been serviced and is performing at optimum efficiency and safety.

The law requires that owners must provide heat from Oct. 1 to May 31, 1993. Between the hours of 6 a.m., and 10 p.m., when the outside temperature falls below 55 degrees, buildings must maintain a temperature in tenants' apartments of at least 68 degrees. Between 10 p.m. and 6 a.m., the inside of apartments must be at least 55 degrees when the outside temperature falls below 50 degrees.

Rent Stabilization Association president John. Gilbert III said, "If I really knew (what the prices would be) I would be in the futures business."

The RSA is, however, in the fuel business in the form of bulk buying at a predetermined price structure for members.

Michael Prinze, director of sales and marketing for the RSA, said the oil companies fear gas more than each other.

"I couldn't recommend one or the other because owners switch back and forth and complain," he said. "The price of gas usually reflects the price of oil because they need to remain competitive."

While no one really knows what the prices will be, Gilbert said, it seems that the supply is adequate. "Unless the Farmer's Almanac is correct predicting a mild winter," he said, "then one has to assume because of the cooler summer and 12 inches of snow already in Alaska, we'll have a little bit colder winter and that will have the most impact on oil prices."

Louis Romano, senior vice president of sales and marketing at Castle Oil, the largest supplier of oil in the city, believes prices will be stable and comparable to last year's pricing unless there is a problem with the world-wide supply or severe cold weather. Any kind of interruption or world-wide crisis would make it spike upward, he said.

"The last couple of years have not been cold," agreed Dan Margulies, executive director of the Community Housing Improvement Corp. (CHIP). "If the winter is normal or cold we could be in some trouble and prices will spike."

Margulies said gas prices are slightly up because Hurricane Andrew temporarily destroyed 5 percent of the country's daily output. "We've been seeing a lot of prices creep up this fall but the supply is adequate," he added.

Gas prices have gone up steadily since February from below $1 per 1,000 cubic feet to over $2.452 per 1,000 cubic feet last week when it rose 12.4 cents in one day for October contracts.

While the OPEC nations set the price of crude oil -- and that was $22 per barrel last week, at the delivered level, Romano noted, prices at the barge are not that high yet. "There is a seasonality to pricing and as the winter progresses, the price goes up," Romano explained. "There is a correlation between the two."

The 1992 gas prices were lower than the price of oil, said Brooklyn Union Gas spokesperson, Ed Yutkowitz. "For the short term we would anticipate the cost would continue to be lower than oil," he said, adding the company does not release long-term forecasts. In general, he said, the price "has been consistently lower for gas."

Based on a 50-family dwelling, the current price of gas is approximately 54 cents per gallon which, he said, is 15 percent lower than No. 6 oil.

"The rise is in the futures market and we are not seeing that yet in spot," explained Robert Loftus, another Brooklyn Union Gas representative.

Figures supplied by the Rent Stabilization Association showed a No. 6 oil price of 50 cents per gallon on Sept. 15, up from .4785 per gallon on Sept. 1. During the last heating season, the price of oil was highest in November when the price was .5023 cents, the highest it had been since the previous heating season during the Gulf War buildup when prices topped at .7857 per gallon in November of 1990.

Steam rates remain constant, explained Con Edison spokesperson Martha Liipfert, particularly because it is also used for air conditioning as well as heating. "It's not a supply problem as it is for natural gas," she explained.

For the smaller buildings, Margulies noted, a number of heating experts recommend gas because it is "pretty idiot proof." The oil burners need more maintenance and if they are not maintained they rate not as efficient, he explained.

Owners should ensure oil tanks are well maintained and cleaned, Romano said, and should have had "overalls" done on the boilers and the burner already to make sure they are operating efficiently. "At this point they should fill their tanks," he added. "I don't think it will get any cheaper," he added.

Liipfert said owners should be in touch with their heating contractors and make sure the equipment is totally checked out before a cold snap.

"Make sure the flues and ventilation systems are as they should be to prevent carbon monoxide buildup and ensure the most efficient use of energy," she said.

"While it's hard to have a crystal ball," said Liipfert, "our rates are based on normal winter weather and a 'normalization factor' so that the fuel adjustment part of the gas charge is decreased when the weather is colder and increased when the weather is warmer. It's to keep the level of the bills more constant," she explained.

Oil companies are coming off of two very tough years, Gilbert said. The temperature has been very mild, and they were very competitive and cutting prices to capture market share that negatively influenced profit margins. "So while they increased volume, profits decreased," he said. "I think the oil companies are trying to firm up their pricing while being as competitive as possible."