Spike expected in electricity rates

As winter approaches, many Massachusetts ratepayers are bracing for sharp spikes in their electricity bills – again.

Over the past decade, New England’s power-generation portfolio has become increasingly dependent on natural gas. Although natural gas prices nationally have fallen in recent years, gas prices in New England have not, especially during the winter months. That is because New England pipelines sometimes cannot deliver enough natural gas to the region. This creates a problem when demand for natural gas skyrockets as natural gas is used for heating as well as power generation.

In response to this limited capacity, prices may rise and alternative forms of natural gas delivery become more cost-effective, especially liquid natural gas delivered by tanker ships. New gas pipelines have been proposed, but not without opposition. New infrastructure isn’t expected to come online until at least 2018, even if all needed permits are obtained.

The state’s two largest utilities, National Grid and NStar, have published rates higher than in previous months. According to National Grid, large consumers such as municipalities will see rates for electricity supply nearly double from October to November.

While NStar lists the fixed-rate option through December for most rate classes at just over 10 cents per kilowatt hour, news reports have suggested that utilities are seeking approval from regulators for a 29 percent increase at the start of January.

Towns, cities and school systems that have not locked in rates with a supplier still have time to mitigate these budget spikes by exploring longer-term energy procurement options as potential solutions to manage future increases.

Since 1998, the MMA’s MunEnergy program has offered Massachusetts cities and towns market guidance, budgeting tools, and a wide range of procurement methods to stabilize energy costs, reduce consumption and simplify energy management. Click here for more about the MunEnergy Program.

Written by Christine Creager ( Christine.Creager@Constellation.com), Business Development Manager for Constellation’s Northeast sales team