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Suppliers see lower electric prices ahead

New Hampshire Union Leader

February 28. 2017 9:16PM
An electric meter in Goffstown. (DAVE SOLOMON/Union Leader file)

New Hampshire residents should start to see lower electricity costs as suppliers roll out new pricing in the year ahead, based on low wholesale prices from last year.

New England’s wholesale electricity prices in 2016 were the lowest in 13 years, due largely to low natural gas prices and mild weather, according to ISO New England, the operator of the region’s electric grid.

“The 2016 electricity and natural gas prices and the total market value were the lowest since 2003, when New England’s current competitive electricity markets were established,” according to an ISO spokesman.

The average annual wholesale power price in New England last year was $28.94 per megawatt-hour, compared to $41 in 2015, a 29.4 percent decline. In the past decade, prices have been as high as $80 per megawatt hour in 2008.

The average price of natural gas — which fuels nearly half of the power plants in the region — was $3.09 per million British thermal units in 2016, compared to $4.64 the year before. The average was $8.04 in 2014 in the wake of a fiercely cold winter.

Because fuel is generally the biggest cost for power plants, the price of natural gas is typically the major driver of wholesale electricity prices in New England.

In a cold winter, much of the natural gas is diverted for heating and unavailable for power plants; in a warm winter, gas flows abundantly to generate electricity.

Supporters of expanded natural gas pipeline capacity into the region argue that new pipelines or expansion of existing pipelines is necessary to keep prices low consistently, while opponents worry that new pipeline capacity will be overbuilt to deal with a few cold weeks in the worst winters.

Nationally, natural gas prices have been low for the past two years. The U.S. Energy Information Administration (EIA) reports that U.S. natural gas prices in 2016 were the lowest since 1999.

The transmission system in New England has been upgraded over the past 15 years to enable the grid operator to deploy the least expensive power plants to meet demand across the region, which also helps control cost.

That has come at a price, however, since New England ratepayers have invested $8 billion in transmission upgrades since 2002.

While the energy supply portion of the electric bill will decline with the drop in natural gas prices, transmission and distribution costs in New England remain high.

“Look at what competition will do for prices,” said Dan Dolan, president of the New England Power Generators Association, which represents power plant owners who compete with each other in the open market. “But consumers are having this masked by a five-fold increase in transmission.”

The chief executive officer of the New England grid suggests that prices will continue to vary wildly from one year to the next, depending on weather conditions, until pipeline constraints are addressed.

“When New England’s natural-gas power plants can access low-cost fuel, wholesale power prices tend to remain low,” said Gordon van Welie, president and CEO of ISO New England. “By comparison, extremely cold temperatures three winters ago resulted in pipeline constraints and caused natural gas — and wholesale electricity — prices to hit record highs. January and February 2014 still stand as the two highest-priced months for wholesale power in New England.”


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