Pinched delivery sparks electric rates

Hearing is today on 24% increase in standard offer rate

John Howell
Posted 12/16/14

As of yesterday at 10 a.m., natural gas-fired generators produced 43 percent of the electricity being used in the region.

Another 37 percent was produced by nuclear power with the balance of 8 …

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Pinched delivery sparks electric rates

Hearing is today on 24% increase in standard offer rate

Posted

As of yesterday at 10 a.m., natural gas-fired generators produced 43 percent of the electricity being used in the region.

Another 37 percent was produced by nuclear power with the balance of 8 percent from hydro, 4 percent from coal and 9 percent from renewals, according to ISO New England.

But as the temperature drops and there is greater demand for natural gas to heat residences and businesses, plants using it will be forced to switch to diesel and coal, which is more costly. Some plants will shut down. The reason: while there are adequate supplies of natural gas, the existing delivery system can’t handle the capacity. In laymen’s terms, the pipe isn’t big enough.

What this all adds up to is that National Grid, which buys electricity and passes that cost along to the customer in the form of the “standard rate offer,” is looking to increase electricity prices by more than 23 percent.

That’s too much, say a number of elected officials, who see the spike in rates dampening efforts to stimulate the economy, not to mention placing an added burden on homeowners.

Thomas F. Kogut of the Rhode Island Division of Public Utilities and Carriers expects to hear that argument when the Public Utilities Commission considers National Grid’s rate request today starting at 10 a.m. The hearing will be conducted at the PUC office located at 89 Jefferson Boulevard. And he imagines he might even hear the argument that the increase is not enough from those opposed to the use of fossil fuels. While cleaner than diesel or coal, natural gas also produces greenhouses gases, and there are those who would rather see an increase in power produced by wind, solar and other renewals.

According to the public hearing notice, the impact of the proposed rate change on a typical residential customer using 500 kilowatt-hours per month is an increase of $22.63, from $86.58 to $109.21, or approximately 26.1 percent.

Mayor Scott Avedisian feels that’s too big of a hit. He said yesterday he voiced his concerns to National Grid officials.

House Speaker Nicholas Mattiello has likewise been vocal on the proposed rate increased. In a letter to legislator and legislators-elect, he wrote, “I had met with National Grid a couple of months ago and told them that double-digit increases are unacceptable. While we are working hard to improve the economy and attract new businesses, the cost of energy puts our state at an economic disadvantage and is a tremendous hardship to many of our families. The problem is the Northeast has a lack of natural gas capacity. The state is actively looking at ways to increase natural gas supplies into Rhode Island, in partnership with other New England states that are experiencing similar electrical rate increases.”

Larry Berman, spokesman for Mattiello, said Friday that the speaker would meet with National Grid following today’s hearing. Berman said Mattiello is striving to reach a “long-term solution” to the issue of pipeline capacity.

“The General Assembly will be actively engaged in addressing this problem with the Office of Energy Resources and National Grid, and we will continue to work with our neighboring states to address this problem for the ratepayers of Rhode Island,” Mattiello writes.

Kogut anticipates the PUC will also consider a proposal to defer the rate increase, spreading it out over varying lengths of time to ease the impact. He also expects the PUC will hear from Lieutenant Governor-elect Daniel McKee, who is intervening on behalf of smaller businesses that he says are not represented.

In a memorandum from the division to the commission, Steve Scialabba writes, “As the Commission is undoubtedly aware, the New England electricity market is stressed, especially in the winter months, as a result of gas transmission pipeline constraints, natural gas heating requirements, increased reliance on natural gas as an electric generating fuel, winter reliability rules, and announced closing of non-gas generators such as Vermont Yankee (nuclear), Brayton Point (coal and oil) and Salem Harbor (coal and oil). Spot electricity prices spiked last winter, and wholesale suppliers are bidding in prices for the 2014-2015 winter period at levels much higher than seen historically.”

In a telephone interview yesterday, David Graves of National Grid said, “This is not unique to Rhode Island or National Grid.”

Graves doesn’t see an easy solution, as efforts to either expand existing supply lines or build additional ones are fraught with permitting and groups opposing the use of fossil fuels.

“It’s going to remain high for the foreseeable future,” he said of the winter cost of electricity.

Asked about spreading out the increase, Graves said National Grid has looked at that proposal from several perspectives. While that would have the effect of lowering the increase now, it would raise it during the summer when there isn’t a capacity issue with natural gas and electric rates drop.

The summer use of electricity is higher than in the winter, so, in the long run, residential users could end up paying even more.

“It’s still going to be painful to them,” he said. Graves said the current rate of 8.5 cents a kilowatt-hour needs to go to about 12 cents in order to meet the low bid National Grid accepted to provide the standard rate offer.

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