Coming soon: drastic price increases for electricity and natural gas

Power to the People is a column by Donald M. Kreis, Consumer Advocate of New Hampshire. Kreis and his team of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.

By DONALD M. KREIS, Power to the People

You are about to experience what in trade is called a “rate shock”.

Translation: Your electricity and natural gas bills are about to increase dramatically, and you’re not going to be happy with them.

Exhibit A is the filing that Unitil filed with the Public Utilities Commission (PUC) on Friday, October 1. The company, which serves electric customers on the coast and in the Grand Concord, must adjust its default energy service tariff on December 1.

In case you need a little reminder, “Default Energy Service” is for people who haven’t exercised their right to choose an unregulated, non-public electricity supplier. Taxpayers obtained this right by paying hundreds of millions of dollars in stranded cost payments to electric utilities, which were forced by the Electricity Industry Restructuring Act 1996.

This has been a fabulous deal for commercial and industrial electrical customers in New Hampshire, most of whom have migrated to so-called competing electrical suppliers. These customers generally pay less for electricity than they would have if they were forced to stick to their utility.

Residential customers have not seen such benefits. Non-public electricity providers were generally not interested in the residential sector, which they considered too expensive to serve, or attacked the unwary by offering them cheap “teaser” tariffs and hoping that they would not. ” will not notice when the tariffs rise later to levels higher than what the utility offers through its energy service by default.

Our three investor-owned electric utilities – Eversource, Liberty and Unitil – get their energy service by default in the same way. Every six months, they call for tenders and accept electricity supply offers from wholesale electricity companies. They declare a winner, usually by choosing the lowest bidder. Then, they add the cost of complying with the state’s Renewable Energy Portfolio (RPS) standard and adjust their default energy service rates accordingly. Courtesy of the PUC, of ​​course.

Well, as far as Unitil is concerned, the bidding for the coming winter has fallen and the results are not pretty.

Unitil chose NextEra Energy Marketing – the wholesale arm of the Florida-based power conglomerate that owns the Seabrook nuclear power plant, among other generators – as the winner. And the resulting wholesale electricity supply costs are up 172% from their current levels.

It means retail issues. Unitil’s default energy service price for residential customers has more than doubled. In real terms, we were talking about a new price of 17.5 cents per kilowatt hour against a current price of just under 7.1 cents.

If you are an electrical industry insider, you are about to point out that the comparison is unfair. The cost of producing electricity always increases in winter at the start of the heating season, and the demand for energy also increases.

Okay, let’s compare Unitil’s default energy service price for this winter to what was approved a year ago. Last winter, the price for residential customers was 9.3 cents. So, on an apple-to-apple basis, the cost of the energy service by default in Unitil’s territory does not double, it is just almost doubling.

As you allow the price shock to set in, keep in mind that if you are a residential Unitil customer, your total invoice is not about to double. This is because you also pay a flat monthly fee of $ 16.22 as well as a per kilowatt hour charge for distribution, transmission, and system benefits (i.e. energy efficiency and low-income support). returned). Unitil also wants to increase most of those fees, but the tariff case they filed with the PUC earlier this year, seeking to increase those fees, is still ongoing.

However, the fact that all the components of your electricity bill generally do not increase at the same time should not obscure the sad reality of the doubling of the price of the energy service by default. How could this happen?

Here’s the official explanation, taken from the written testimony of Jeffrey Pentz, Senior Energy Analyst at Unitil. “The increase in prices compared to previous periods [is] directly attributable to significant increases in natural gas futures prices, which have a direct effect on electricity futures contracts.

Translation: In New England, most of our electricity is produced by burning natural gas. For example, on the Friday afternoon Unitil filed its case, 56% of the electricity in New England was produced by natural gas generators. So when the price of natural gas goes up, our electricity rates also go up.

References in Pentz’s testimony to “natural gas futures” and “electricity futures” relate to the fact that when NextEra Energy Marketing and its competitors prepare their fixed-price wholesale offerings to serve residential customers of our utilities, they must base their offers on projections of what wholesale prices will look like over the coming winter. These projections are ugly.

A written testimony recently filed with the PUC by Deborah Gilbertson, senior director of energy purchasing at Liberty Utilities, offers a slightly more detailed look at what’s going on with wholesale natural gas.

“NYMEX natural gas futures continue to trade at their highest summer levels in seven years,” Gilbertson told the PUC on September 1, referring to a widely cited benchmark price. “Compared to last year, for example, the NYMEX is currently trading on average about 30% more than around the same time last year.”

But why? According to Gilbertson, “Much of this has to do with fears about national storage levels for the coming winter. Warm summer temperatures across the country hampered consistent and larger injections than the five-year average, with last year being particularly hard hit. “

Injections? She is not talking about COVID 19 vaccines but rather natural gas inserted into storage facilities during the low demand summer months.

“Further,” Gilbertson continued, “demand for US LNG exports to international markets is robust, reducing the availability of supply in US markets.” LNG is liquefied natural gas, the form in which the substance is shipped by ship to distant continents. As a major producer of natural gas, the United States powers the world these days.

“The consensus is that until storage across the country returns to normal levels and LNG exports stabilize, higher domestic prices should persist,” Gilbertson concluded. The bottom line: after a long period of historically low wholesale prices for natural gas, our dependence on this energy source is finally catching up with us.

Oh, and in case you’re wondering, the reason for Gilbertson’s testimony is that Liberty is looking for a similar rate hike. If you are a natural gas customer, the corresponding charge is called the “cost of gas”. Liberty and Unitil – the state’s natural gas utilities – are looking to substantially increase their gas costs as winter approaches.

Are you an Eversource customer feeling smug after reading the above? Don’t feel satisfied. Eversource files its next default energy service case with the PUC in early December, with effect from February 1. Ditto for Granite State Electric, the electric subsidiary of Liberty. Will there be huge increases in the default energy service charges for these companies? You can count on it.

What can we do about these dismal developments? This is the subject of a future column, but – spoiler alert – there are no easy answers and those who peddle such answers are wrong. In the meantime, sorry to be the bearer of bad news.

About Timothy Cheatham

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