Written on: November 12, 2014

Electric Rates to Rise 26% Because of Natural Gas

The cost of a kilowatt hour will jump 26 percent for Connecticut Light & Power’s residential customers starting next year.

The unwelcome spike in electricity generation prices is a direct result of bottlenecks in natural gas pipelines. And although it’s little consolation, prices are jumping throughout New England.

Default generation rates, which are developed by CL&P and state officials, will be 12.629 cents per kilowatt hour from January 1st to June 30th for residential customers, up from 9.99 cents per kilowatt hour in the last six months of 2014.

“Outrageous, Excessive, Unconscionable” Sen. Richard Blumenthal

As proposed, the increase would mean an additional $150 a year for a customer who uses 700 kilowatt hours a month, with $114 of the increase just from the fixed fee. On Tuesday, Blumenthal had his own choice words for the company’s request: “outrageous,” “excessive,” “unnecessary,” “unfair,” “unconscionable,” “dead wrong” and “unacceptable.” Blumenthal has two main concerns with the increase. First, CL&P is asking for a big jump in its fixed fee, which is paid by all customers each month, “before you even turn on a light,” as speakers at the press conference put it. Second, the company is asking regulators to increase its profit margin to 10.2 percent from 9.4 percent. The proposed 10.2 percent return on equity would put CL&P near the top of the list for electric distribution utilities in the United States while rates throughout the industry are trending downward, Blumenthal said in his letter to regulators. CL&P sees the increase as necessary. The company has worked hard in recent years to control operating costs, which have resulted in savings for customers, said spokesman Mitch Gross.

Gas Shortage the Culprit

For the past two winters, as homes and businesses use up more and more of the three pipelines feeding New England, there was not enough room for power plants to get their gas, and what little room was left was expensive. As shown on the graph from the federal Energy Information Administration, winter price spikes reflect inadequate supply in New England. Regionally, the Algonquin City Gate price for gas spiked to almost $80/MMBTU last winter, while nationwide gas spot prices on the NYMEX spiked to $8.15/MMBTU in February. It was more economical for power plants to buy diesel than spot gas in New England to fuel their plants.

There are half a dozen plans to build or expand pipelines in the region, but they are years off. The worry about over-reliance on natural gas been raised before by numerous officials, including Gordon van Welie, the chief executive of ISO New England, which runs the region’s power grid and electricity markets. “The lack of pipeline infrastructure has raised fuel adequacy for natural gas generators to the top of the list of pressing concerns for New England’s power system,” he said.

Moratorium on gas conversions needed

The Connecticut Energy Marketers Association has called for a moratorium on further gas expansion plans until the problem of gas shortages has been resolved.

CEMA will be meeting with legislators from both parties to address this critical issue. If the gas utilities continue with their plan to convert almost 300,000 homes and businesses to gas, not only will electric generators continue to see price spikes and service disruptions, but consumers will as well, which could result in a calamitous public health and safety debacle. Several gas utilities in Western Massachusetts have already realized this, and have said they will stop signing up new residential and commercial customers because they are reaching their capacity to deliver enough gas through existing pipelines. Connecticut utilities need to follow suit and stop conversions until they can absolutely guarantee adequate supply.

Source: Hartford Courant, Boston Globe