Minnesota: Prepare for higher home heating costs this winter
Minnesota families should prepare for higher heating bills this winter as natural gas prices, utility rates, and colder temperatures are expected to increase home energy costs.
According to the National Energy Assistance Directors Association (NEADA), home heating costs in the Midwest are expected to rise this winter. The season’s total average cost increases vary based on home heating method:
Propane:
+0.4% ($5)Gas:
+16% ($100)Electricity:
+20% ($250)
These are regional predictions, and electricity rates especially can vary. For Minnesota households, three main factors will impact bills this winter.
What's driving higher costs for heating?
The U.S. Energy Information Administration predicts that natural gas prices will rise to around $4.30 per million British thermal units (Btu) in 2026, up about 14% from 2024 prices. This rise in prices will be reflected in the line item on your bill related to the cost of gas, not service or delivery charges.
This affects not only gas heating, but any electricity generated using gas as well. According to NEADA, Midwesterners who rely on gas to heat their homes could see their winter bills jump by over 16%, or about $100. These increased costs are based on the market price of natural gas, which can vary over time. The U.S. Energy Information Administration predicts natural gas market prices will rise to around $4.30 per million British thermal units (Btu) in 2026, which is about 14% higher than prices seen throughout 2024. These market changes will not only make gas heating more expensive, but also drive up the cost of generating electricity with natural gas as well.
The National Oceanic and Atmospheric Administration forecasts that Minnesota and the Northern Plains region will likely see below normal temperatures this winter, with a 40 to 70% probability of colder than average conditions during January through March 2026. Colder temperatures mean heating systems will run more often, using more energy even if prices stay the same. More often than not, however, colder weather contributes to higher costs. As more people heat their homes, the increased demand is reflected in market prices. This is especially true during "polar vortexes" or especially cold winter storms.
Minnesota's largest utilities have requested rate increases that are currently under review or were recently approved by the Public Utilities Commission (PUC):
- CenterPoint Energy (gas) - APPROVED in May 2025: The PUC approved a settlement that increased rates by $60.8 million for 2024 and $42.7 million for 2025. This was lower than CenterPoint's original request, in part thanks to CUB. Customers should have received a small refund to cover the “interim” rate charged while the rate case was ongoing. Still, the average residential bill increased by about 5%, which is about $50 annually, compared to 2023. Because gas is used more regularly during the winter heating months, these increased rates may be more noticeable on your bill.
- Dakota Electric Association (electric): In June 2025, Dakota Electric agreed to a settlement that would increase rates by about 9.6%, down from their originally requested 11%. If their original request had been approved, it would have raised average residential bills by $13 each month. While the PUC has yet to review the settlement, an “interim” rate adjustment of 9.5% has been in effect since March 2025.
- Greater Minnesota Gas, Inc. (GMG) (gas): GMG is requesting a 7.7% rate increase, and has been applying an "interim" rate adjustment of the same amount to customers' bills since the start of 2025. The PUC will review the case on October 9, with a deadline to decide of December 1, 2025.
- Xcel Energy (electric): Xcel requested a 9.6% rate increase for 2025 and an additional 3.6% for 2026. An interim rate increase began January 2025, increasing bills by about 5%. If approved, the average residential customer would pay about $13.79 more per month. Read more about the proposed increase here.
- Xcel Energy (gas): Xcel is expected to submit a request on November 1 to increase its gas rates. While it will take some time for the PUC to review the request and decide what rate increase, if any, is warranted, Xcel gas customers can anticipate an “interim” rate increase on bills beginning January 1, 2026. CUB will share more details about this increase when they are known.
- Otter Tail Power (electric): Otter Tail is also expected to file a rate case on November 1. As part of that proposal, the company will likely request to implement an "interim" adjustment that will go into effect at the start of 2026.
Who will be affected?
Much of the below information is based on a September 2025 report from NEADA, which released home heating projections for the Midwest as a whole. Any potential cost increases for Minnesotans will also be impacted by rate cases currently pending at the PUC.
Propane
Small Increase: Costs on bills are expected to increase by only about 0.4% this winter in the Midwest. However, propane is already more costly than gas or electric alternatives.
Fuel Oil
Small Decrease: National average fuel oil costs are projected to drop by about 4% this winter. However, propane fuel oil is already more costly than gas or electric alternatives.
What can you do?
Short-term changes in how you use energy in your home can save you money on your bills quickly and possibly at no cost. Investing in home energy upgrades can save you money in the long-run.
Immediate Low/No-Cost Actions
- For Electric Heat Users: Remove Sales Tax and Reduce Rate
If you primarily heat with electricity, contact your utility to remove sales tax from your heating bills from November to April. You could save up to 10%. Check if your utility offers discounted electric space heating rates. Take a look at CUB's guide to Electric Heat In Minnesota . - Lower Your Thermostat
Turn down the heat by 8-10 degrees when you're sleeping or away from home. This one change can save about 10% on your energy bills. - Use Curtains Strategically
Open curtains on south-facing windows during sunny days to let in free heat. Close all curtains at night to add an extra layer of insulation. - Seal Air Leaks
Use plastic film to cover drafty windows and door draft stoppers under doors. These fixes cost just a few dollars and make a big difference. - Adjust Vents and Heat Flow
If you have floor or wall vents, open vents in cold rooms and close them in warm rooms to direct heat where you need it most. - Check Filters
If you can access your furnace, replace or clean air filters monthly. Dirty filters make heating systems work harder. - Reduce Hot Water Use
Wash clothes in cold water and take shorter showers. Water heating is a major energy cost, up to 15% of a home’s total average energy usage. - Close Fireplace Dampers
Keep your fireplace damper closed when not in use to stop warm air from escaping up the chimney.
For Homeowners
- Schedule a Furnace Tune-Up
Get your heating system serviced annually. A well-maintained furnace runs much more efficiently. - Insulate Your Water Heater
Add an insulating blanket to your water heater and wrap hot water pipes. Set the water heater temperature to 120°F to save energy. - Weatherstrip Doors and Windows
Add weatherstripping around doors and windows to seal gaps. Caulk around window frames to stop air leaks.
Long-Term Investments That Pay Off
- Update your Thermostat
Programmable and smart thermostats automatically adjust temperatures when you're away or sleeping. Most utilities offer rebates to help cover the cost. If you rent, check your lease and get permission! Home Energy Audits
A professional energy audit can identify where your home loses heat and recommend improvements. Many Minnesota utilities offer discounts or free audits. Audits also qualify for a 30% federal tax credit through December 31, 2025.If you receive Energy Assistance, you can request a free home energy audit and weatherization improvements through the Weatherization Assistance Program. These improvements can permanently reduce your energy costs by up to 30%.
- Add Insulation
If recommended through an audit, improve insulation in attics, basements, and around windows. Seal air leaks with caulk and spray foam. These upgrades pay for themselves through lower bills. Consider Heat Pumps
For homes heated with propane, fuel oil, or electric resistance systems, air source heat pumps can significantly reduce heating costs (you might see it abbreviated as ASHP too). The operational cost of a heat pump can be comparable to gas, too, particularly if the home is well insulated. Heat pumps provide efficient heating in most conditions and add efficient cooling in summer. A secondary heating system is typically needed when temperatures fall below the heat pump’s temperature limit.There are incentives available for switching to a heat pump. Tax credits (expiring soon) and utility rebates can offset installation costs by thousands of dollars. New state rebates are planned, too.
- Replace Old Heating Systems
If your furnace is over 20 years old (or boiler over 25 years), consider replacing it with a high-efficiency model. Check for rebates and incentives through your utility, local government, and future state programs. - Upgrade Electrical Panels
If you're considering major electrification upgrades, check for rebates and incentives with your utility, local government, and future state programs for electrical panel upgrades to support increased electric demand.