National Grid in Massachusetts, one of the state's largest utilities, recently announced it is seeking a 37% rate hike starting November 1 to cover the cost of electricity for the coming winter. What does this mean for the average household? It would add about $41 to the monthly power bills, assuming average usage of about 630 kWh of electricity.
As this increased rate would continue for six months, now is the time for utility customers to investigate fixed-rate plans from competitive suppliers. The new National Grid rate would be 24.24¢/kWh; on SaveOnEnergy.com, residents can find a 1 Year Fixed Rate – 100% Green plan from Just Energy for 12.85¢/kWh. Not a National Grid customer? Other utilities in the state are expected to seek similar rate hikes, based on how expensive it is to buy electricity in New England when demand is so high.
“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 of the National Consumer Law Center, as reported in the Boston Globe.
Last winter's polar vortex highlighted the problem with the region's heavy reliance on natural gas for fueling power plants. First, there is limited pipeline capacity to bring natural gas to Northeastern states. When demand for electricity is high and natural gas volume is low, power plants quickly reach their limits and can create no more electricity. Utilities and suppliers then need to turn elsewhere to find electricity supply to meet demand. This emergency power supply can cost 10 times the norm, and utilities and suppliers often pass these costs on to customers.
This winter could bring a repeat of frigid weather and high electricity prices. The Old Farmer's Almanac has predicted another cold winter for the eastern two-thirds of the United States, with above average snowfall for the Northeast. Pipeline capacity has not improved (there is at least one proposal to build another line in the region, but it would take years to complete) and there is not a significant additional amount of renewable energy to make up the difference.
Residents with variable rates – either from a competitive supplier or a utility – were shocked last winter at how much their monthly bills went up during the record-breaking cold months. Some people paid hundreds of dollars more than expected because of the change in the supply rate. Variable rates change with the constantly moving market price of electricity, so when spot prices of electricity skyrocket, so do those customers' bills.
To avoid that situation this winter, consumers should make sure they are on a long-term, fixed-rate plan. These plans have fixed rates for the supply portion of the bill so a customer knows what to expect from one cold month to the next. Residents can also make sure their homes are as energy efficient as possible to avoid wasting energy.