Temperatures rise, energy costs follow
Electricity expected to be costlier this summer
out those T-shirts and shorts. Summer electricity prices (and air conditioning costs) are expected to rise 12 percent this summer, according to the state Public Service Commission.
“Overall, the statewide average residential full-service commodity rate is expected to be about 12 percent higher than last summer,” according to a statement from the PSC on Thursday.
Mostly, the increase stems from rising natural gas prices caused by POST-COVID economic growth and uncertainty over global fuel supplies in light of the Russian invasion of Ukraine.
“Because of an expected increase in generator fuel costs as well as the changes in capacity prices and obligations, residential and commercial customers may experience higher comget
modity bills this summer than last,” PSC Chairman Rory Christian said in a prepared statement Thursday about the expected increases.
This isn’t to say that power prices have been flat in recent years. The expected summer increases follow 11 percent price hikes each year during the last two summers. And this summer would mark a return to 2014 prices, which was followed by several years of falling natural gas prices.
And the statewide average of 12 percent may not be as bad as it sounds, when broken down into dollars and cents. National Grid, the utility that covers much of the Capital Region, says the average National Grid customer using 600 kilowatts per month should only pay about $20 more from June through September, according to the utility.
Much of that is due to National Grid’s hedging strategy in which they pre-purchase contracts for gas delivery ahead of time when prices are low, said company spokesman Patrick Stella.
“We are about 70 percent hedged on electric supply costs which is allowing National Grid to hopefully mitigate some of these supply cost increases,” Stella said in an email. He also stressed that utilities like National Grid simply deliver electricity over their power lines, while the actual energy comes from a constellation of power plants across the state and region.
Regardless of hedging strategies, natural gas prices have indeed risen sharply, as have gasoline and diesel prices. According to the federal Energy Information Administration, spot price for 1 million BTU, a heat measurement of natural gas, was $7.358 as of May 10. About a year ago, it was $2.969.
And the New York Independent System Operator, which administers the distribution of electricity on the grid, listed a megawatt/hour, a measure of power generation, at $56.78 as of March 22, according to a recent report. A year earlier, it was $28.59. That’s based on the “locational based marginal price,” which essentially reflects what power producers are paid. They in turn have to pay more for their fuel sources, such as natural gas.
There are lots of reasons for the higher price. The Russian invasion of Ukraine has led to volatility in markets, including futures markets. And gas drilling is arguably lagging behind the economic comeback that has occurred as coronavirus shutdowns have largely ended.
Opinions differ, however, on some of the factors driving up energy costs
“From where we sit it’s Economics 101. If there’s not enough supply, prices are going to go up,” said Michelle Hook, executive director of New Yorkers for Affordable Energy, which represents the natural gas industry.
She noted that New York officials over the past several years have said “no” or delayed three major proposed pipelines which had faced opposition by climate change activists. And with the Indian Point nuclear plant closing down in 2021, there’s been more reliance on natural gas. “The supply constraints are definitely increasing the cost of the commodity,” she said.
Amid those constraints, some power plants last winter turned to fuel oil rather than gas, which had grown costlier. Fuel oil, though, is dirtier and emits more greenhouse gases than natural gas.
In New England, which has even more limited pipeline access, prices are rising even higher. They are looking at a 15 percent cost increase this year, compared to 4 percent nationally, according to the EIA.
Here in New York about half of the energy comes from fossil fuels, much of it from so-called dual-fuel plants that can run on either natural gas or fuel oil. Another 22 percent comes from nuclear plants along Lake Ontario in northern New York, and 25 percent comes from hydroelectric plants in western and northern New York.
That means wind and solar, while growing, still make up a very small percentage of the power generated in New York.
While those in the gas industry say that underscores the need for more pipelines, environmentalists say it shows how important it is to speed development of renewables like wind and solar.
“This is a global issue right now,” said Connor Bambrick, Energy and Air Program Director at Environmental Advocates of New York, of rising natural gas prices.
“It’s not about access to supply. Industry is using it as an excuse to clamor for their wish list,” Bambrick added.
Moreover, climate change is making for hotter summers, which increases electricity use during that time of year, noted Hayley Carlock, director of Environmental Advocacy and Legal Affairs at Scenic Hudson Inc.
“Prices also always rise in the summer due to increased demand, and the more extreme heat expected as a result of climate change will only exacerbate this,” she said.
Either way, the higher prices come after winter costs were on the increase, too.
Power from natural gas heats homes in the winter and cools them in the summer. While natural gas systems are used to power boilers and furnaces in homes and buildings, they also generate the power to run air conditioners.
National Grid, a major utility serving much of upstate, predicted last fall that customers would face increases of about $36 per month in natural gas heating costs.
On the bright side, the actual electricity usage in the state is hitting lower peaks due to ongoing efficiency improvements.
New York in the summer of 2013 set a record peak load of 33,955 megawatts. Peak load this summer is forecast to be 31,765 MWS. And while the cost may go up, PSC analysts say the state has adequate power plant capacity to meet the demand, with a total of 41,166 MW worth of capacity.