While utilities have lots of charges for energy, transmission and other customer fees, a typical bill boils down to two main components – supply and delivery. Both are going up fast!
Yes, it’s true that electric bills have already been on a tear this year. New England utilities paid the highest wholesale electricity prices in the nation this summer, driven by their outsized dependance on natural gas to power the grid. This exposes New England ratepayers to huge price swings in global energy markets. Approved rate increases in some parts of New England have raised monthly utility bills by as much as 60% already this year, with more to come by this winter.
Last year, natural gas supplied 53% of grid-connected power in New England (compared to 38% nationwide) and more than half of the region’s home heating needs. But it came at a dear price! After Russia’s invasion of Ukraine in February, natural gas prices saw their biggest 30-day swing of the last two decades, setting the stage for huge utility rate increases this summer.
New England Now Competes with Europe for LNG
The biggest problem now facing New England’s grid is not only its overreliance on natural gas, but not enough pipelines to deliver it. With demand outstripping supply, more gas is now arriving by ship – in the form of liquefied natural gas (LNG) – with offloading at New England’s main LNG terminal in Everett, Massachusetts. Much of this imported LNG is burned at the nearby Mystic Generating Station owned by Constellation Energy, or stored for later use.
An LNG tanker offloads more than a billion cubic feet of liquefied natural gas at the Constellation Everett LNG Terminal in Everett, Mass.
During the pandemic winter of 2020-21, 12 LNG tankers offloaded 19.3 billion cubic feet (bcf) of natural gas at the Everett LNG Terminal. Total LNG shipments to New England have ranged between 20 bcf and 43 bcf over the last 10 years, with deliveries paced by utility demand for gas-fired electricity and weather-related heating and air conditioning loads.
This winter promises to be different, however, at least as far as LNG pricing is concerned. The war in Ukraine has turned LNG into one of the world’s hottest commodities, with spot rates on chartered tankers now surging across the globe. At Algonquin Citygates, the exchange that sets the benchmark price for natural gas in New England, futures prices for LNG have been trading up to $40/MMBtu for deliveries taken in January 2023. That‘s almost double the average spot price of $20.55 posted a year ago – which already marked the highest average selling price for LNG in nearly eight years.
Now, spot prices for next winter’s shipments to the Everett LNG Terminal compete with those bound for Europe. But this comes as no surprise to our region’s grid operator, ISO-New England. It warned consumers in its June 2022 regional electricity outlook that the pandemic and war in Ukraine “are quickly felt locally, exacerbating supply issues and increasing both supply risk and pricing uncertainty.”
Nationwide, electricity rates rose 15.8% in August, marking the biggest 12-month increase since 1981.
Here’s a state-by-state breakdown of recent utility rate increases in our region:
New Hampshire ratepayers have seen some of the biggest spikes in electricity rates over the last year; average retail rates now top 22.5¢/kWh. Utilities in New Hampshire hold just one annual price auction and do not blend their current electricity rates with past billing cycles. This led to 50% rate increases over the summer for customers of the state’s largest utility, Eversource, which conducted its 2022 power auction shortly after Russia’s invasion of Ukraine.
With many New Hampshire ratepayers now facing a $70 increase in their monthly electric bills, state legislators passed a bill this summer extending $100 in rate relief for nearly all New Hampshire ratepayers. This stipend will help cover about a quarter of the added costs that an average Eversource customer will pay over the rest of the year.
This relief package reserves additional funds for utility assistance programs serving lower-income residents through LIHEAP and the Electric Assistance Program. However, New Hampshire remains the only New England state that hasn’t adopted a formal carbon emissions reduction plan.
IN 2022, Vermont ratepayers have seen average retail rates rise above 20¢/kWh for the very first time. Vermont is the only New England state that does not have a deregulated electricity market. Since it has a mix of locally owned generating plants and long-term contracts to import the rest, its rates cannot be compared side by side with neighboring states. Each of Vermont’s 17 electric distribution utilities have power purchase agreements ranging from 2-10 years. Accordingly, they only seek rate approval from the Vermont Public Utility Commission when new contracts come on the docket.
This practice tends to insulate Vermont ratepayers from some of the biggest price shocks now facing New England’s broader power market. But Vermonters aren’t out of the woods just yet. They still rely heavily on electricity imports and get about 10% of their power from the regional grid. This means they can still expect to pay higher utility bills this winter – just not as much as other ratepayers in our region.
At 25.20¢/kWh, Massachusetts ratepayers now pay among the highest retail rates in our region. Massachusetts utilities are required to hold two competitive supply auctions each year, so that prices from earlier billing cycles are “blended” into new power purchase agreements to help smooth out utility rate increases.
Currently, natural gas provides more than two-thirds of Massachusetts’ electricity needs and about half of its home heating requirements. A state roadmap on getting to net-zero carbon emissions sees a path to cutting electric rates by 13% by 2050 through an ongoing switch to renewable fuels. But there’s still a lot of work to do. As of March, two-thirds of the state’s construction pipeline consisted mainly of offshore wind turbines, with battery storage and solar power accounting for most of the rest. Natural gas features in only 3% of the state’s current energy supply queue.
It’s Time to Make the Switch to Solar
No matter how New England goes about regulating utility prices in the future, there’s no end in sight for more big rate increases. The path to decarbonizing our generating fleet and modernizing the grid will drive utility rates still higher – and widen the price advantage for customers who are making the move to backyard solar.
In a future post, we’ll examine how new financial incentives in the just-passed Inflation Reduction Act are shrinking payback times for home solar and battery installations, and reducing purchasing costs for new and used electric vehicles, battery chargers, and air-sourced heat pumps. Thanks to this game-changing law, which includes more than $24,000 in home-electrification purchase incentives per household, those who invest in solar energy will be able to save up to $1,800 per year on their average electricity bills.
|Inflation Reduction Act||Financial Incentive|
|Residential solar installations||30% investment tax credit thru 2032|
|Residential battery storage installations||30% investment tax credit thru 2032|
|New electric vehicle||Up to $7,500|
|Used electric vehicle||Up to $4,000|
|Air-sourced heat pump||Up to $8,000|
|Heat pump water heater||Up to $1,750|
|Electric stove||Up to $840|
|Electric clothes dryer||Up to $840|
|Electrical upgrades (including circuit boxes)||Up to $1,200 per year|
Solaflect Energy is your home energy management partner. We help you install clean and affordable solar electricity and home battery systems for a more resilient and climate-friendly future. For more information email us or call (802) 649-3700.