Constraints in the supply of natural gas to the region will lead to the largest increase in winter electric bills in decades.
National Grid experts said the increases kicked in on Nov. 1 and would be reflected in this month’s bills. Rates are expected to increase a total of 37 percent through May 1, resulting in an increase of about $33 per month for the average residential user.
“For the supply portion of the electric bill, this is the highest increase we’ve ever seen,” said Jake Navarro of National Grid. “It’s a real concern…There’s going to be a very substantial increase in our customer’s electric bills on Nov. 1. It will all come on the supply side, which we don’t control. We’re looking at a 37 percent increase and that definitely is substantial.”
National Grid controls the delivery of electricity – such as the substations, poles and lines. However, the company only buys the actual electricity for customers on the commodities market. Prices have been volatile and National Grid is required to purchase all of its electricity through May 1. That means that electricity is bought at a set price for the whole season, which is required by state regulators in order to protect consumers from wild price fluctuations in the cold weather.
The downside of that this year is that the electricity market in New England is through the roof, causing the steep increase in this month’s bills.
Navarro said the main problem is that the Boston area generates its power mostly with natural gas, and because the region is at the “end of the pipeline,” there are often shortages for generation during the coldest of days.
“In New England in recent years, we’ve seen some big generation plants be retired and that has given way to natural gas as the fuel of choice for electricity generation,” he said. “On a typical day, there’s no issue at all. There’s plenty of gas for residential use and for generation. The problems happen on the very coldest days…On a really cold day, there’s so much demand for usage by residents – and residents get first choice for usage – that there isn’t enough gas to use for electricity generation.”
In a case like that, electricity generators have to switch to costlier fuels like oil, find more expensive sources of electricity or shut down altogether. Those realities are priced into the rates, which cause increases.
“The market entirely prices in the numbers of days they think we’ll see those high usage days, such as we saw last year during the winter in what they called the Polar Vortex that hit us,” he said. “This winter the market is expecting more of those really cold high-usage days so as a result the market for electricity has gone way up.”
At the state Office of Energy and Environmental Affairs (EEA), the administration has been keeping close watch on the increasing rates and is putting out a call for consumers to become even more energy efficient.
In other words, if you’re still holding on to those old incandescent light bulbs, now may be the time to switch up to an LED bulb.
“We anticipate there will be basic service rate increases across the board,” said Mary-Leah Assad of EEA. “The basic service rate increases for electricity customers highlight the need for our continued aggressive investments in efficiency and a diverse energy mix to maintain energy price stability. As the winter season approaches, the Patrick Administration has worked with the utilities to provide Massachusetts residents and businesses with the information they need, including weatherization tips, energy efficiency ideas and how to get assistance with utility bills. In October, the Administration announced $5.1 million in expanded efficiency resources to help the Commonwealth’s consumers manage their energy costs this winter.”
Navarro said National Grid is also recommending that consumers look now to become even more efficient on electrical usage.
“We’ve really been trying to promote the opportunity to lower energy usage to lessen the impact of the increased cost of electricity,” he said. “We have a lot of tips that we send out and rebates on efficient appliances and lighting.”
The bottom line, however, is that the area needs more natural gas piped into the region. Right now, Massachusetts gets most of its natural gas from the Marcellus Shale region in Pennsylvania. The gas and oil boom in that area has dramatically reduced the cost of natural gas, but the problem of getting that cheap gas here remains an impediment to enjoying those lower prices.
Currently, there are three proposals to construct pipelines that would increase the supply. One of them, the Tennessee Pipeline, has garnered tremendous opposition in the Berkshires – as opponents have sought to block the pipeline project from coming through their region.
Navarro said National Grid doesn’t endorse any of the three options, but understands there needs to be some new line coming into the region to increase supply.
“The short-term solution here is that we need more natural gas to supply electricity generation and the demand for natural gas,” he said. “It’s still a cleaner burning fuel, especially compared to what we have. We still see high demand for people who want to connect to our system for gas. We have some of the most expensive natural gas in New England for electricity generation because we’re at the end of the pipeline. We need more infrastructure to bring natural gas to New England.”
Rates will be recalculated by state regulators and the electricity companies in the spring and those new rates will go into effect on May 1. They are expected to be much lower than the current winter rates.