Massachusetts consumers will pay significantly higher electric bills this winter as a persistent shortage of natural gas for generating plants drives power prices to record levels.
The cost for a typical household could top $150 a month, based on an announcement this week from one of the state’s two dominant utilities, National Grid. It said its rates will increase by a whopping 37 percent over last winter’s, solely because the cost of buying electricity from power plants has soared to the highest level in decades, according to a company spokesman.
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Other utilities, including NStar, are also warning customers to brace for higher electric bills this winter, but they have not determined final rates for the winter.
“This is pretty bad, and it’s going to really have a bearing on a lot of Massachusetts households’ abilities to just make ends meet this winter,” said John Howat, senior energy analyst at the National Consumer Law Center in Boston.
For poorer consumers and the one in 10 Massachusetts households that still heat with electricity, the price increases will be devastating, said Jerrold Oppenheim, director of a Gloucester-based consultancy that focuses on pocketbook issues facing low-income consumers.
The price shock is driven by New England’s increasing reliance on natural gas as a source for both heating homes and making electricity. The pipelines that ship natural gas into New England do not have enough capacity to meet the increased demand, and during winter, electric plants often end up paying much more for the fuel.
Other factors include the closing earlier this year of the coal-burning Salem Harbor Power Station and the planned shutdown of the Vermont Yankee nuclear plant, which will reduce the amount of electricity available to utilities this winter, said Dan Dolan, president of the New England Power Generators Association.
After several instances in which some power plants ran out of backup fuel during the deep cold spell last winter known as the polar vortex, many electric generators were making arrangements to have supplies of liquid gas and oil to tap in a crisis, Dolan said.
“A lot of this is a reaction to the fact that we had the polar vortex last winter,” Dolan said. “It was a really nasty, cold, long winter.”
The new rates for National Grid take effect in November. National Grid provides electricity to about 1.3 million residential and business customers in the state.
The average household in Massachusetts uses about 630 kilowatts of electricity a month, according to the most recent US government data. With National Grid’s new winter rate of 24.24 cents per kilowatt-hour, a typical monthly bill would run slightly more than $150.
A National Grid spokesman, Jake Navarro, said that two-thirds of the cost comes from the purchase of electricity from power plants, compared to just over half last winter.
Northeast Utilities, which owns the Commonwealth’s other major providers, NStar and Western Massachusetts Electric Co., said that it would not file its new electricity prices with state regulators until later this fall, as its winter season does not start until January.
However, Northeast spokesman Mike Durand said the generating companies that supply it with electricity are experiencing the same issues with high natural gas prices.
“We’re still in the process of gathering and evaluating bids from generating companies,” Durand said. “We anticipate [electricity prices] will go up, as well.”
Energy industry officials have been warning for several years that New England’s growing dependence on natural gas could result in price spikes if steps such as the expansion of the pipeline system are not taken. About two-thirds of the electricity used in Massachusetts is made with natural gas, up from about 40 percent just six years ago.
Meanwhile, many more consumers have switched from oil to gas to heat their homes.
Despite the alarms, the region’s reliance on the fuel has only grown. Power plants that formerly burned coal or oil have been overhauled to use natural gas as their primary fuel because it costs less and causes less pollution.
“Consumers are at the mercy of market forces,” said Oppenheim.
The supply issues should not have as much of an effect on heating bills for households that use natural gas.
National Grid, for example, estimated that natural gas heating costs for consumers would drop 1 to 3 percent. That’s because gas supplies for home heating are purchased under long-term contracts arranged far in advance, so utilities have the advantage of locking in lower rates. Power plants, on the other hand, often buy shorter-term and are more exposed to price movements in the spot markets.
“On a really cold day, which the market is predicting a few of this year, so much gas is going to people fueling their homes that there’s not really enough gas going to fuel generators,” Navarro said.
Moreover, this winter is projected to be milder than last season, so consumers should not need to crank up the heat as much.
Several projects have been proposed that would vastly increase the capacity of New England’s natural gas pipeline network. If approved, it would still take several years for any one of those projects to come on line.
There are also new power plants proposed for the region, but they are not scheduled in be in service in the near future, either.
ISO New England, which regulates the day-to-day operation of the region’s electric-power grid, had put in place a program to make sure generating plants do not run out of fuel again. Earlier this year, the regional authority said it would help power generators cover the cost of keeping backup fuel supplies on hand.
But there is little government officials can do in the face of high prices. Federal and state funding is available to help lower-income ratepayers. And Navarro, the National Grid spokesman, said customers could ask to have their bills spread over a longer period throughout the year.
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- On September 29, 2014