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Customers Feel the Jolt of New England’s High Winter Electric Rates

December 16, 2014

Utility companies have warned customers in New England of high electric prices for the winter, but electric bills are already hitting customers harder than expected before winter begins. In New England, electricity prices are driven in part by natural gas prices and transportation costs. Because New England relies heavily on natural gas and because there is very limited transportation to bring natural gas to the area, electric prices have been high in past winters. It is the same story this winter (with rates based on last year’s winter), although rates are astronomically high in parts of New England.

For example, NSTAR (MA) rates are set to climb as high as $0.23500 per kWh (the variable rate for January for Industrial customers in SEMA) and NGRID rates in MA are set to reach as high as $0.24994 per kWh (the variable rate for January for Industrial customers in NEMA). Although these two examples are from utilities in Massachusetts, all of New England has been hit hard (and will be hit harder in the coming winter months) due to the over-reliance on gas and lack of transportation (i.e. pipeline constraint) of gas because all six states (CT, MA, ME, NH, RI, VT) share an integrated electric grid, ISO-NE. Pipeline constraint has caused concern as to whether ISO-NE can meet winter demand, and these worries have led to further increases in winter rates. The closing of the Vermont Yankee Nuclear Power Station in Vernon, Vermont may only make matters worse.

New England has been hit hard prior to this winter, too. The Energy Information Administration (EIA) has released a summary of rates for September 2014, in which it detailed New England’s high rates across all sectors. Residential customers in New England paid an average of $0.1767 per kWh in September 2014, up from $0.1618 per kWh in September 2013. The U.S. averaged $0.1294 per kWh and $0.1249 per kWh for September 2014 and 2013, respectively. Commercial rates rose from $0.1384 per kWh on average to $0.1433 per kWh on average from September 2013 to September 2014, significantly higher than the country’s averages ($0.1056 per kWh in September 2013; $0.1110 per kWh in September 2014). New England rates were high in the Industrial sector as well, averaging $0.1120 per kWh in September 2014 (dwarfing the national average of $0.0722 per kWh) and $0.1237 in September 2013 (which, again, is much higher than the average in the U.S. of $0.0714 per kWh).

Despite the fact that the Federal Energy Commission approved a pipeline project that will bring natural gas from Pennsylvania to New York and New England will help winter rates for next year, New England still requires additional pipeline capacity to substantially reduce the blow of winter rates in future years. Work to bring Canadian hydroelectricity to Massachusetts could help, and Kinder Morgan’s pipeline expansion plan could improve rates, but both projects have faced stiff opposition, and Kinder Morgan recently proposed to reroute the pipeline, which would reduce the amount of pipeline used in Massachusetts from 127 miles to 64 miles. Regardless of whether the project goes through, it would not yield immediate benefits. Kinder Morgan is hoping to begin construction for the project in 2017 and hopes to have the pipeline operational by late 2018. If more immediate action isn’t taken, rates are likely to remain high for New England customers in the near future.