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Warmest winter means lower electric rates for NH consumers

New Hampshire Union Leader

March 09. 2016 7:28PM

The warmest winter on record is about to go into the history books, setting the stage for some of the lowest electricity prices for New Hampshire consumers since 2012.

Mild temperatures for most of the winter suppressed demand for natural gas needed for home heating and left plenty of room in the pipelines to fuel power plants.

On the few very cold days, when pipeline capacity might have been a problem, a “reliability program” managed by the operator of the regional power grid kicked in, enabling the gas-fired power plants to get their fuel from other sources.

The result was wholesale electricity prices on the spot market in 2015 that were 30 percent lower than the same 12 months in 2014.

“We saw six of the lowest wholesale electricity months since 2003 last year,” said Dan Dolan, president of the New England Power Generators Association, a trade organization for power plant owners.

Big energy customers like manufacturers and hospitals enjoyed the effect of those lower wholesale prices throughout 2015 because many of them use energy brokers and consultants to buy on the spot market and take advantage of fluctuating prices when they are low.

Residential customers who pay retail will have to wait until the utilities announce their summer and fall rates before seeing the savings on their electric bills. Those retail rates are based on long-term contracts at guaranteed prices that are, in large part, based on the previous year’s experience.

Many of those contracts are being negotiated by utilities right now, to determine their retail charges in the warmer months ahead. None of the utility representatives would guess at the new rates, but most agreed they are likely to be lower than the summer rates of the past two years.

‘Nice drop’ expected

“The folks served by Liberty, the New Hampshire Electric Co-op and Unitil should see some nice drops in their upcoming rate cycle,” said Bart Fromuth, managing director of resident power, an independent retail energy supplier headquartered in Auburn.

The price drop will not be as large for Eversource, the state’s biggest utility, because its six-month pricing period, from July to December, picks up a portion of the winter months.

Eversource, which serves 70 percent of the state’s retail electricity customers, also has the cost of operating its coal-fired power plants built in to its energy supply rates.

“We do anticipate a reduction in the energy charge on July 1,” said Eversource spokesman Martin Murray, “based on a reconciliation of costs from previous months and on the current phenomenon of price volatility between winter and summer.”

The four utilities in the state are on different six-month pricing cycles. The New Hampshire Electric Co-op starts its summer cycle on May 1; Unitil on June 1; Eversource on July 1; and Liberty on Aug. 1. Energy supply charges for all four have gone down in each of the past two years, in a trend that’s likely to continue this summer.

Eversource’s July-December charge in 2015 was 8.98 cents/kwh, down from 9.87 cents/kwh the year before. Liberty’s summer rate was 7 cents per kilowatt hour in 2015, down from 7.73 cents the year before.

“We hope pricing will go down (again), but we’ll have to wait to see what the market looks like at that time,” said John Shore, spokesman for Liberty, which serves approximately 6 percent of the state’s retail customers.

Early price signals

The New Hampshire Electric Co-op, which provides electric service to about 11 percent of retail customers throughout the central part of New Hampshire, saw its summer energy supply rate go down from 7.46 cents/kwh in 2014 to 6.49 cents in 2015.

Energy supply with Unitil, which serves approximately 11 percent of New Hampshire’s retail customers in both the Seacoast and Capital areas, went from 8.4 cents in 2014 to 6.9 cents in 2015.

The New Hampshire Electric Co-op will be first out of the gate with their summer rate, after a board of directors vote on March 29, followed by Unitil, which is usually filed with the PUC in early April.

Those two will be an early indication of things to come.

The independent grid operator for New England, ISO-NE, released an analysis of the link between wholesale costs and retail rates on Tuesday, which showed that lower wholesale rates translate into lower retail rates but with inconsistent results.

Analysis warning

The ISO-NE analysis came with a warning that the pattern varies from state to state and from utility to utility within each state.

“Wholesale markets reflect the short-term spot market for electric energy, whereas retail rates reflect longer-term, fixed-price contracts,” according to the analysis. “The relationship between wholesale costs and retail rates will also vary with the retail power procurement policies of each utility and state.”

The lower prices in the wholesale market also mean more competitive offers from independent, unregulated energy suppliers like Resident Power, North American and ENH Power. Resident is currently offering a 12-month fixed rate of 7.69 cents.

Rates like that could look attractive to Eversource customers who are paying almost 10 cents, the company’s current rate, until July 1. But Eversource spokesman Murray urged caution.

“All customers in New Hampshire have the right to choose to purchase energy from an independent energy supplier,” he said. “As customers consider offers from suppliers, we remind them to carefully read and consider the fine print, which may lock them into long-term commitments and contain financial penalties if a contract is broken.”

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