37 percent rate hike looming for National Grid customers starting Nov. 1, other utilities later as natural gas prices soar
By: Peter Howe |
For years energy experts have warned that New England would pay a price for wanting to use more and more natural gas for heating buildings and to replace dirty coal-fired power plants for producing electricity, while not making any investments in expanding gas pipelines.
Tuesday came shocking word of just how much that situation will cost in a matter of weeks, as National Grid, Massachusetts’s biggest utility, said it needs to seek a 37 percent rate hike for the six months beginning November 1.
“There’s too much demand for not enough gas on a cold winter day,” is how National Grid Massachusetts CEO Marcy Reed explained the rate hike, which was first reported by Bruce Mohl on Commonwealth Magazine’s website.
In recent years, National Grid and other utilities have helped and encouraged thousands of homeowners and businesses to switch from heating with oil to gas, even as natural gas has also come to be the dominant fuel source for the region’s power plants, accounting for more than 50 percent of the power consumed in the state. On top of that, Reed said, the market seems spooked by the possibility of another brutally cold winter: “Last year’s polar vortex might happen again this year, and the market is thinking about that and reacting to that,” Reed said.
The increase National Grid is seeking reflects the cost of electricity it buys on the wholesale market for customers, and it doesn’t add to the company’s profits. It calculates that it will translate to a monthly increase of $33 a month for a homeowner or business using 500 kilowatt-hours of power monthly, or a 37 percent increase in the overall bill. The big driver is that the cost of electricity – which is added to delivery charges and green energy fees to become the total bill – has jumped to 16.2 cents per kilowatt-hour, up from 10 cents last winter and 8.3 cents under the current warm-weather rates. The rate shock will hit 1.3 million Grid customers in 172 of the state’s 351 cities and towns.
NStar, Western Mass. Electric, and Unitil file for winter rates later this autumn, and it’s expected they, too, will have to seek much higher rates because they are buying electricity in the same wholesale markets as National Grid.
Dan Dolan of the New England Power Generators Association said the rising winter prices are a side effect of New England wanting more electricity from gas, and less from other sources, without moving ahead to build more pipeline capacity into the region.
“We had a nuclear plant in Vermont, Vermont Yankee, that’s retiring, a coal plant in Massachusetts, Salem Harbor, that’s retiring, and with that, it’s basic economics: Fewer plants, less supply to meet demand, and there’s a price response” in the form of higher rates, Dolan said. He added that there are clear signs the market is responding, including proposals for new pipeline projects, more power plants that can switch from gas to fuel oil when demand for natural gas for heating is at its highest, and new contract options being allowed by the regional wholesale power market overseer, Independent System Operator New England, to let gas-fired plants smooth out their fuel costs over longer periods. But, Dolan said, “As with everything involving energy infrastructure, these things take time.”
Kinder Morgan is facing intense local and environmentalist opposition to its plan for a new 177-mile pipeline across the northern side of Massachusetts, costing about $3 billion, connecting to existing pipeline networks in Dracut. Northeast Utilities and Sempra Energy have proposed an alternative $3 billion plan to upgrade the capacity of existing pipelines that come through Connecticut, Rhode Island, and Massachusetts and serve dozens of gas-fired electric generators. But it could be several winters before either plan clears federal approvals and gets built and put into operation.
While there are barely five weeks until the new rates begin hitting National Grid customers, Sue Coakley, head of the Northeast Energy Efficiency Partnerships in Lexington, Mass., said, “There are a lot of things consumers and businesses can do” in that time. With available rebates, “smart power strips” that shut off power to idling computers, TVs, and other electronics when they’re plugged in but not actually being used could actually pay for themselves within the year. The higher rates are a good reason to finally make the move to more-efficient fluorescent or LED lighting, Coakley said, and “refrigerators, if they’re older, they’re probably using a lot of electricity. You’re going to pay dearly for that this winter, so this is a good time to replace refrigeration.”
Also, if you’ve been on the fence about signing up for a “level billing” or “budget billing” plan that lets you pay for a year’s worth of electricity in 12 equal installments, right now is exactly the right time to sign up, because it will enable you to defer the cost of expensive winter electricity to May, June, and July. “It definitely helps when it comes to managing the cash flow out of your wallet,” Reed said.
Beyond that, Reed said, the only way New Englanders will see relief on winter electric bills will involve more gas supply, more alternative and renewable energy, and more energy efficiency and conservation. “How do we get more gas pipelines into the region? We need more gas, bottom line,” Reed said. “How do we source other renewables, whether it’s wind offshore or onshore, transmission to those places,” or other new energy sources to ease the winter squeeze when Massachusetts and New England are putting intense demands on limited supplies of gas to both stay warm and keep the lights on.