You are about to experience what is known in the trade as “rate shock.”
Translation: Your electric and natural gas bills are about to go up, substantially, and you are not going to be happy about it.
Exhibit A is the filing made by Unitil with the Public Utilities Commission (PUC) on Friday, October 1. The company, which serves electric customers on the seacoast and in greater Concord, is due to adjust its default energy service rate on December 1.
In case you need a bit of a refresher, “default energy service” is for people who have not exercised their right to choose an unregulated, non-utility supplier of electricity. Ratepayers earned that right by paying hundreds of millions of dollars in stranded cost payments to electric utilities, which were forced by the state’s Electric Industry Restructuring Act of 1996.
It’s been a fabulous deal for New Hampshire’s commercial and industrial electric customers, most of which have migrated to the so-called competitive electric suppliers. Those customers are generally paying less for electricity than they would have if forced to stick with their utility.
Residential customers have not seen such benefits. The non-utility suppliers of electricity have generally either been not interested in the residential sector, which they deem too expensive to serve, or have preyed upon the unwary by offering them cheap “teaser” rates and hoping they won’t notice when the rates go up later to levels higher than what the utility is offering via its default energy service.
All three of our investor-owned electric utilities – Eversource, Liberty, and Unitil – get their default energy service the same way. Every six months, they conduct a solicitation and accept power supply bids from companies in the wholesale electric business. They declare a winner, generally by picking the low bidder. Then they add in the cost of complying with the state’s Renewable Portfolio Standard (RPS) and adjust their default energy service rates accordingly. With the permission of the PUC, of course.
Well, as to Unitil, the bids for this coming winter are in and the results are not pretty.
Unitil chose NextEra Energy Marketing – the wholesale marketing arm of the Florida-based electricity conglomerate that owns the Seabrook nuclear power plant, among other generators – as the winner. And the resulting wholesale power supply costs are going up by 172 percent compared to their current levels.
That means trouble at retail. The price of Unitil’s default energy service for residential customers is more than doubling. In real numbers, were’ talking about a new price of 17.5 cents per kilowatt-hour versus a current price of just under 7.1 cents.
If you are an electric industry insider, you are about to point out that the comparison is unfair. The cost of producing electricity always increases in winter as heating season commences and demand for energy likewise goes up.
Okay, let’s compare Unitil’s proposed 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 apples-to-apples basis, the cost of default energy service in the Unitil territory isn’t doubling It’s just almost doubling.
As you let the rate shock sink in, keep in mind that if you are a residential customer of Unitil your total bill is not about to double. That’s because you also pay a fixed monthly charge of $16.22 along with charges per kilowatt-hour for distribution, transmission, and system benefits (i.e., energy efficiency and low-income assistance). Unitil wants to increase most of those charges as well, but the rate case they filed earlier this year with the PUC, seeking to hike those charges, is still ongoing.
Still, the fact that all of the components of your electric bill generally don’t increase at the same time should not obscure the dismal reality of doubling the price of default energy service. How could this happen?
Here’s the official explanation, from the written testimony of Jeffrey Pentz, a senior energy analyst with Unitil. “The increase in pricing compared to the previous periods [is] directly attributed to significant increases in forward natural gas prices, which have a direct effect on power futures.”
Translation: In New England, most of our electricity is produced by burning natural gas. For example, on the Friday afternoon that Unitil make its filing, 56 percent of the electricity in New England was being produced by natural gas generators. So when the price of natural gas goes up, our electricity rates increase as well.
The references in the Pentz testimony to “forward natural gas prices” and “power futures” relate to the fact that when NextEra Energy Marketing and its competitors prepare their fixed price wholesale bids to serve residential customers of our utilities, they have to base their bids on projections on what wholesale prices will look like over the coming winter. Those projections are ugly.
Written testimony recently filed at the PUC by Deborah Gilbertson, senior energy procurement manager at Liberty Utilities, offers a slightly more detailed take on what’s going on with natural gas at wholesale.
“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, NYMEX on average is currently trading at approximately 30 percent higher than this time last year.”
But why? According to Gilbertson, “this is largely related to fears regarding national storage levels for the coming winter. Hot summer temperatures across the nation have stymied consistent, larger injections relative to the five-year average, with last year being particularly impacted.”
Injections? She’s not talking about COVID 19 vaccines but, rather, natural gas inserted into storage facilities during the low-demand summer months.
“Additionally,” Gilbertson continued, “demand for U.S. LNG exports to international markets are robust, which reduces supply availability to U.S. markets.” LNG is liquefied natural gas, the form in which the stuff is sent by boat to distant continents. As a big producer of natural gas, the U.S. is fueling the world these days.
“The consensus is that until storage across the country returns to normal levels and LNG exports level off, the higher domestic prices are likely to persist,” Gilbertson concluded. Ultimate translation: After a long period of historically low wholesale prices for natural gas, our reliance on this source of energy is finally catching up with us.
Oh, and in case you are wondering, the reason for Gilbertson’s testimony is that Liberty is seeking an analogous rate hike. If you are a natural gas customer, the relevant charge is called “cost of gas.” Both Liberty and Unitil – the state’s natural gas utilities – are seeking substantial increases to their cost-of-gas charges as we move into the winter.
Are you an Eversource customer, feeling smug after having read the above? Don’t feel smug. Eversource makes its next default energy service filing with the PUC in early December, for effect on February 1. Ditto for Granite State Electric, Liberty’s electric subsidiary. Will there be whopping big increases to the default energy service charges for those companies? You can count on it.
What can we do about these dismal developments? That’s the subject of a future column but – spoiler alert – there are no easy answers and those who peddle such answers are mistaken. In the meantime, sorry to be the bearer of bad news.
