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New England’s wholesale electric prices soared by 55 percent last year

By: Jon Chesto |

If New England’s governors wanted something to help buttress their case for an unprecedented new electricity tariff, ISO New England just gave it to them.

The Holyoke-based grid operator reported today that the volatile natural gas market in this region pushed wholesale electric prices up by 55 percent last year. We’re already seeing some of this at the retail level, but the real impact will likely be seen in our monthly bills next winter.

Driving this increase is a 76-percent jump in natural gas prices in New England over the same time frame. This region has become increasingly reliant on natural gas as older plants are retired, but pipeline constraints are making it tougher to take advantage of the cheap shale gas from Pennsylvania.

Wholesale electric rates had hit their lowest point in 2012 since the current market system took effect in 2003. So we had been enjoying some benefits from the low-cost Marcellus Shale gas. But it’s going to get harder to do so as more people and businesses convert from heating oil to natural gas, putting added pressure on the pipeline network.

To address this, the six governors’ top utility regulators recently began pushing for a tariff on the electricity market to help pay for the expansion of the region’s natural gas infrastructure. More than half of the region’s power generation typically comes from natural gas, but home-heating customers often get priority over power plants for the gas, creating problems on the coldest days.

It’s unusual to tax one industry — the electricity market — to pay for expansion in another industry, the natural gas sector. In both cases, these extra costs generally are passed along to the consumer. We might not see this potential tariff spelled out, if and when it takes effect, on our bills. But we will be paying for it just the same.

It’s an open question whether imposing this tariff will be less expensive for consumers, in the end, than just allowing the electricity and natural gas markets to run their course. ISO’s newest numbers seem to help the argument that sticking to the status quo will be pricier in the long run than paying more now to get some new pipelines installed.

That said, ISO New England is primarily concerned with keeping the lights on, and bringing new natural transmission here will at least go a long way toward addressing the grid operator’s reliability concerns.