The math of heating your home used to be simple and rewarding. You lowered the thermostat, wore a sweater, and saw your bill drop significantly. That direct relationship between conservation and savings is being quietly dismantled in 2026. Gas utilities across the country are fundamentally changing the formulas that determine your monthly costs. They are not just raising the rate per therm. They are altering the “Baseline Allowance.” This is the daily amount of gas you can use at the cheapest price.
By lowering this threshold, companies are effectively pushing millions of average households into expensive pricing brackets. You might use the exact same amount of gas as last January. Yet, because the goalposts have moved, your bill could be much higher. This is a “stealth rate hike” that rarely makes the evening news. It affects your wallet just as severely as a standard price increase.
The Shrinking Baseline Allowance
The core of this issue lies in a number hidden on your bill called the Baseline Allowance. State regulators typically set this daily limit to cover 50% to 60% of an average home’s winter needs. It is intended to ensure that basic heating for survival is affordable for everyone. However, utilities update these averages periodically based on historical weather data and efficiency trends.
Recent winters in many regions have been milder than the long-term historical average. Homes have also become more energy-efficient due to better insulation and modern furnaces. Consequently, the “average” usage has dropped. Utilities use this data to justify lowering the daily baseline allowance for 2026.
If your baseline was 1.8 therms per day in 2024, it might drop to 1.5 therms this year. This seems like a small fraction. Over a 30-day billing cycle, that reduction adds up to 9 therms. Those are 9 therms that used to be billed at the cheap rate. They are now billed at a punitive “Tier 2” rate.
The Tier 2 Pricing Trap
Most residential gas bills function on a tiered system. Tier 1 is the “baseline” usage, billed at the lowest possible rate. Tier 2 applies to every therm used above that daily allowance. The price difference between these two tiers is often drastic. In many service areas, Tier 2 rates can be 30% to 50% higher than the baseline rate.
This structure penalizes you disproportionately for crossing the threshold. When the baseline shrinks, you cross into Tier 2 much faster. A cold snap in late January can easily push a modest home over the limit. You are essentially paying a luxury tax on a necessity. The utility collects more revenue from you without technically raising the advertised price of gas.
The Revenue Decoupling Surcharge
Another factor inflating 2026 bills is a regulatory mechanism known as Revenue Decoupling. This rule creates a disconnect between a utility’s profits and the amount of gas they actually sell. It guarantees the utility a specific amount of revenue to maintain pipes and safety infrastructure. This revenue is guaranteed regardless of how much gas customers buy.
If the winter is warm and everyone uses less gas, the utility collects less money than expected. Under decoupling rules, they are allowed to recover those “lost” funds the following year. They add a surcharge to your current bill to make up for last year’s shortfall. This appears as a “Decoupling Adjustment” or a similar line item.
This creates a frustrating paradox for budget-conscious seniors. The community successfully saved energy last year. Now, you are all being penalized for that success with a higher fee per therm. You are effectively paying a “conservation tax” to ensure the utility meets its revenue targets.
The New Fixed “Base Services” Charges
Some major utilities are moving away from usage-based billing entirely for infrastructure costs. Starting in March 2026, PG&E will implement a “Base Services Charge” for electric customers. Similar models are being discussed or implemented for gas services in various regions. This shifts costs from the variable rate to a fixed monthly fee.
This new charge is expected to be around $24 per month for most customers. It applies even if you turn your furnace off completely. This structure hurts low-usage households the most. A senior living alone in a small apartment sees their bill floor rise significantly. You can no longer “save your way” to a $15 bill. The fixed costs are now unavoidable.
Rising Carbon Compliance Costs
Natural gas bills in states like California and Washington also include hidden environmental costs. Utilities must purchase carbon allowances to comply with state cap-and-trade programs. These costs are woven into the per-therm rate you pay. As the state reduces the number of available carbon credits, the price of those credits rises.
Utilities pass this “Cap-and-Trade Compliance Cost” directly to you. While you may receive a “Climate Credit” once or twice a year, the monthly cost often outweighs it. The price of heating your home now includes the price of polluting. This cost will only increase as 2026 environmental mandates tighten further.
Strategies for the New Billing Reality
The days of setting the thermostat to 68 degrees and forgetting it are over. You must now manage your usage daily to stay under the shrinking baseline. Check your bill to find your specific daily therm allowance. Divide that by 24 hours to understand your hourly “budget.”
Consider lowering your thermostat by two degrees to create a buffer against the Tier 2 threshold. If you have a smart thermostat, program it to aggressively cut heat during the day. Every therm you keep in Tier 1 saves you significantly more than it did last year. In 2026, the game is not just about using less. It is about staying under the line.
Did your gas bill jump into “Tier 2” pricing this month despite normal usage? Leave a comment below—let us know your daily therm allowance!
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