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High natural gas prices, cold winter drive electric prices sky high

High natural gas prices and the cold winter have pushed electricity prices – and consumers’ bills – sky high. Here’s why it’s happening and what you can do about it.

By: David Robinson |


Edward Fallon got quite a jolt when he opened his electric bill earlier this month.

His March bill jumped by 46 percent from the previous month, spiking to $136 from $93 during February.

All this during a month when the Hamburg retiree actually used 6 percent less electricity than he did in February.

“This is quite a hit,” said Fallon. “My usage is down, but my bill is way up. That’s not a lot of fun.”

And Fallon isn’t alone. Electric bills across Western New York – and New York State, for that matter – are soaring for both residents and businesses.

Jean McGrath, who heats her one-bedroom apartment in the City of Tonawanda with electricity, saw this month’s bill jump to $413 from $278 the month before – a 49 percent increase.

“This is like a house bill, not an apartment bill,” she said. “Who can afford this, even on payment plans?”

Here’s a look at why electric bills are soaring, and what consumers can do about it.

Why are bills spiking?

The cause is a combination of the cold winter weather, which is causing people who heat their homes and businesses with natural gas to use much more of the fuel. With demand up, natural gas price are rising, and electricity prices are heading higher right along with them, because about 55 percent of New York’s power-generating capacity runs on natural gas.

And the painful evidence is just now arriving in consumers’ mailboxes, in the form of electric bills that have soared.

The increase is particularly jarring for National Grid customers, who had a temporary reprieve from the steadily upward push of electricity prices during February, when state regulators agreed to a one-month deferral in the commodity price of power for the utility’s residential and small business customers. National Grid consumers will pay those higher February commodity prices over a period of several months, possibly over the summer, but the exact time frame still needs to be determined by the state Public Service Commission.

But now that the freeze has ended, National Grid consumers are getting whacked with the full brunt of the increase in retail electricity prices since January. NYSEG customers didn’t have a temporary freeze, but the increase for them has been similarly steep.

Average retail electricity prices, which are passed on to consumers without mark-up by the utility, have roughly tripled this year. While electricity prices averaged a little less than 4.1 cents per kilowatt-hour at the beginning of January, they now average about 12.3 cents per kilowatt-hour. That’s enough to add about $50 to the monthly bill of a residential customer who uses 600 kilowatts of electricity.

Electric bills have two components: First there’s the price consumers pay a utility to deliver electricity to their homes and businesses – a rate that is regulated by the State Public Service Commission – along with assorted surcharges that are tacked on to each monthly bill.

Those costs are regulated by the state Public Service Commission, and they actually have been relatively benign for consumers. Residential delivery rates for National Grid dropped by 6.6 percent last year. Delivery rates for New York State Electric & Gas Corp. have been frozen since September 2012.

But the painful part of the bill during the last few months has been for the price of the electricity that consumers use. Those prices are determined by the wholesale electricity market that operates within New York, and they’ve been going up, up and up. Utilities pass along those prices at cost, but when electricity triples in price, the impact on consumers’ bills can be stunning.

Much of the increase is linked to the spike in natural gas prices earlier this year, since the fuel is used for more than half of the state’s electricity generating capacity. Natural gas commodity prices, which opened the year at $4.23 per 1,000 cubic feet, shot up to a more than six-year high of $6.49 on Feb. 24, only to tumble over the last month. Natural gas prices are up by about 5 percent this year and are around 26 percent higher than a year ago.

The cold weather also has driven up the demand for electricity, and that’s helped push up power prices by forcing more costly and less efficient power plants to operate to meet the needs of consumers.

Shop around

Unfortunately, there is no magical way to make your electric bills stop soaring.

But there are some small steps you could take to take away some of the sting.

One option consumers have is to switch their electricity suppliers. Utilities like National Grid and NYSEG pass along their electricity costs to customers without any mark-up, but those prices vary from month to month as wholesale power prices move up and down.

Energy marketing companies also can sell electricity to consumers and businesses, but the prices they charge also have shot up. Last week, marketers were offering to sell electricity at prices that ranged from a one-month teaser rate of a little more than 6 cents per kilowatt to 17 cents per kilowatt under variable pricing plans that change from month to month, just as the utility’s commodity costs do.

Consumers can take some of the volatility out of the market by locking in electricity prices for terms of as long as two years under fixed-price options offered by some marketers, said Phil VanHorne, the president of BlueRock Energy, a Syracuse-based energy marketer.

But with electricity prices at their highest level in years, consumers have to make a judgment on whether this is a short-term spike in power costs that will recede as the summer approaches or the dawn of a new era of higher electricity prices.

Most energy analysts think prices should come down during the summer, although how much of a drop is open to debate. So if you lock in a price now, are you signing yourself up to pay more for your electricity than you would if you simply continued to ride out the ups and downs of the power market?

Consumers can compare the prices and offerings of energy marketers at a website maintained by the PSC, www.newyorkpowertochoose.com.

Use less

The other way to control your electric bill is to use less power.

Replacing incandescent light bulbs with compact fluorescent lights can save as much as $9 a month, according to National Grid. That’s because those squiggly CFL bulbs use about 75 percent less electricity than conventional light bulbs.

Be vigilant about turning off your lights when you leave a room. Unplug electronics when you’re not using them. Turning off your computer at night can save as much as $10 a month, National Grid says.

If you have an electric water heater, turn down the thermostat to 120 degrees. And if you’re in the market for new appliances, look for models that are Energy Star compliant. Those models can use as much as 40 percent less electricity than models sold before 2001.

Be balanced

Only 6 percent of the homes in Erie County heat with electricity, so the biggest seasonal factor that can add to power consumption is air conditioning during the summer. Consumers can smooth out those swings by signing up for budget billing programs that both NYSEG and National Grid offer. The programs spread out your annual bill into 12 equal payments.