Restricted gas delivery fuels spike in electric rates
Not since 2008, when electric rates spiked 22 percent, have rates jumped like they will the first of the New Year.
National Grid Rhode Island announced Friday that the Rhode Island Public Utilities Commission completed approval of rates resulting in a total bill increase of 12.1 percent for the company’s residential customers receiving Standard Offer Service. A customer using 500 kilowatt hours per month can expect their bill to go from $78.91 to $88.38.
But according to data provided by PUC spokesman Thomas Kogut, the new rate is still less than what customers were paying after a 22 percent increase in 2008. At that time, the user of 500 kilowatt hours was paying $93.44 per month.
The question is whether what happened following the spike of rates in 2008 will reoccur. Back then, the rates quickly plummeted along with the stock market and the economy. It was the start of the Great Recession, and the demand for energy fell. By January 2009, the average monthly electricity payment was $79.71.
If that happens this time, it hopefully will be for a reason other than the recession – natural gas.
Natural gas is both the hero and the villain in the energy story.
In short, as National Grid spokesman David Graves explained, the gas distribution system can’t handle the projected demand at this time of year. This means that since residential and commercial natural gas users are given preference, electric generating plants must convert to more costly fuel oil, thereby pushing up the cost to generate electricity.
“The cost of electricity is going through the roof,” said Graves. He said while there are supplies, there “is not enough pipeline capacity” to get it to the power generators plus everyone else. This situation is expected to change in the summer when the demand for natural gas for heating drops. Also, he said there are ongoing efforts to expand the pipeline capacity. A rate re-adjustment, which hopefully would be down, could come as soon as next April, he said.
“Unfortunately this increase is driven by market forces we cannot control,” said Timothy F. Horan, president of National Grid in Rhode Island, in a statement. “We understand that for some of our customers, any rate increase may be difficult to manage and National Grid wants to work proactively to help Rhode Islanders control their energy costs as much as possible.”
The company urges conservation as a means of reducing the impact of the increase.
For National Grid Standard Offer Service customers, 11.9 percent of the increase will be seen in the Supplier Services section of their electric bill, and is attributable to increasing wholesale power prices in New England.
According to National Grid, about 50 percent of New England’s electricity generation is fueled by natural gas.
Ironically, in November, National Grid natural gas customers saw a 1 percent decrease in gas rates. Those rates are a product of the company’s long-range natural gas purchase policies in Rhode Island, which help to mitigate price fluctuations.
Even with this increase, Kogut said National Grid rates are still lower than those for Mass Electric and on par with Nstar, which also serves Massachusetts.
Both Kogut and Graves point to the advantages of natural gas as a clean-burning and low-cost fuel.
Now, it would appear, the impact of natural gas on the cost of electricity may continue to be felt until the capacity of delivery systems is expanded.