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National Grid proposes gas rate cut: R.I. heating bills would drop by 10%

By: Alex Kuffner |

For the second year in a row, Rhode Islanders who heat with natural gas will see a substantial drop in their bills under a proposal submitted by National Grid to state regulators.

Because of the availability of cheap gas from shale fields in Pennsylvania and other states, National Grid is proposing a rate reduction that would see the bill for the typical heating customer in Rhode Island drop by nearly 10 percent.

For the 12-month period starting Nov. 1, when the rate adjustment filed with the state Public Utilities Commission would kick in, a household that uses 846 therms of gas would pay $1,129, as compared to $1,249 for the current billing period. Coupled with a rate decrease that went into effect last November, the typical customer would pay 14 percent less than what they were charged through most of 2014 — savings that total $179.

The projected bill reduction is entirely due to lower commodity prices. Under state law, National Grid is not allowed to mark up the price of gas. The utility’s profits are derived from distributing the fuel.

The decrease comes from an anticipated drop in the price of natural gas, which is plentiful because the controversial method of hydraulic fracturing, or fracking, has freed up previously unreachable deposits of the fossil fuel, and from unanticipated savings over the current rate period.

“We know the winter season can pose an extra challenge when it comes to energy costs so we’re very happy to be able to pass on the savings created with the availability of lower cost natural gas,” Timothy Horan, president of National Grid in Rhode Island, said in a statement. “Domestic natural gas is essential to providing the mix of energy sources that is essential to our region’s future growth and prosperity.”

Despite the low commodity prices and the projected reduction in heating rates, National Grid’s electricity customers should not expect a similar drop when new power rates are filed with the PUC sometime in mid-October.

Because of problems unique to New England, even as heating rates have remained low in recent years, electricity prices have experienced periodic spikes. Last year, weeks after the PUC approved lower heating rates for Rhode Islanders, National Grid proposed hefty electricity rate increases.

National Grid warned the conditions that created the unusual situation a year ago are still in place now.

“There are still constraints on the region’s gas lines,” spokesman David Graves said in an interview. “There’s still tremendous demand for a finite amount of gas that’s getting into New England.”

Demand has increased because power plants have been increasingly turning away from oil and coal to natural gas in recent years. New England now gets about half of its electricity from gas-fueled generators, according to the operator of the regional power grid. But when cold weather sets in, the distribution system can’t meet the region’s demand for gas to both heating customers and to power plants.

When there is a shortage, heating customers get priority, leaving the electricity generators to rely on oil or the potentially more costly spot market for gas.

The end result is that heating prices have stayed down but electricity rates have experienced nearly unprecedented volatility over the past few years.

National Grid and other companies are working on proposals to expand the capacity of the region’s pipelines, but those projects are still at least a year from completion. They have also met with opposition from some communities and environmental groups.

The utility has also proposed building a facility at an existing natural gas storage tank at Providence’s Fields Point that would convert gas into liquid form to be used as a supplementary heating source on the coldest winter days.

The new heating rate proposal was filed with the PUC on Sept. 1. Hearings on the proposal have yet to be scheduled.