National Grid has announced a 37 percent rate hike effective next month, and other electricity providers who have not yet set their rates have indicated that they, too, will increase prices. Bad news for those who use electric heat – which as many as one in 10 Massachusetts households do. Less bad, from a price standpoint, for those using natural gas for their homes or businesses – but at some point, the dislocation in the energy market will impact everyone.
The price of natural gas has declined due to the increased supply resulting from hydraulic fracturing, to the point where many drillers face cash flow problems. But in New England, the price is going up due to increased demand from thousands of households which have converted to natural gas over the last decade. Two-thirds of the electricity in Massachusetts now comes from natural gas, up from 40 percent six years ago, according to a report in The Boston Globe. In 2012, the state’s cost for natural gas was 4 percent above the national average, but in 2013 it rocketed to 32.7 percent, according to ISO New England.
Power plants can’t keep up with utilities’ demand for natural gas. The only natural gas pipeline bringing the fuel into New England comes up the eastern seaboard from the South. Construction of an east-west Massachusetts pipeline from Richmond to Dracut has met community opposition and has yet to receive federal approval. Even if it got that OK, it wouldn’t come online for years. Neither would new power plants.
Additionally, home-heating contracts for gas are arranged long in advance, but power plants are exposed to the fluctuations of the spot market. So regional power plants often have to pay more for the natural gas they get – and they pass that cost on to utilities.
There are less regional power plants left. Nuclear and fossil-fuel plants have shut down or will soon, while others have converted to from coal to natural gas, and after last winter’s polar vortex cold snap, some have arranged for backup supplies in case they ran out, adding pricing pressure.
In Western Massachusetts, Berkshire Gas Co. recently announced plans to stop signing up new residential and commercial customers in the Greenfield area, as well as turning down existing commercial and industrial customers seeking to expand, because it’s reaching the limits of its delivery capacity. Other Western Mass. providers indicate that they are considering similar measures.
Increasing reliance on renewable energy to cushion market shock has its own problems. Renewable energy would need new transmission lines, but those have met with opposition in Massachusetts. The six New England governors voiced support to finance a new pipeline through an electric ratepayer assessment, while also supporting transmission lines for renewables. However, that plan didn’t have provisions for gas and renewable use expanding in tandem.
So before saying, “We’re shocked – shocked!” and accusing utilities of price-gouging, we should best look at our priorities and how to meet them. Our economic well-being depends on our ability to reach consensus on a complex issue.
