Electricity prices fall

But many homeowners stuck paying higher rates

IT’S STILL EARLY in the season, but electricity prices so far haven’t lived up to the hype that this winter will be one of the most expensive ever.

ISO New England, which operates the regional power grid, said preliminary numbers for December indicate the wholesale price of electricity and natural gas were both down more than 50 percent compared to the same month a year ago. Total electricity usage across New England in December was down about 5 percent compared to a year ago, the grid operator said.

Most Massachusetts homeowners have not been able to take advantage of the lower electricity prices because they are locked into basic services rates negotiated by their local utilities last year. When the utilities negotiated the basic service rates and won approval for them from state regulators, expectations were running high that this winter would be a repeat of last year, when temperatures were unusually low and supplies of natural gas were extremely tight. The utilities locked in prices for this winter that were dramatically higher, boosting electric bills by as much as 37 percent.

But so far this winter temperatures have not been that cold (the average temperature in December 2014 was 35 degrees, compared to 30 degrees in December 2013) and natural gas has remained plentiful. As a result, spot prices for electricity are down sharply from where they were a year ago and many homeowners now find themselves stuck with high-priced electricity contracts.

Marcia Blomberg, a spokeswoman for ISO New England, said a combination of variables, all difficult to predict, contribute to electricity pricing.  “Milder weather translates into lower demand for power and for natural gas,” she said. “Lower demand for natural gas would tend to result in lower prices for the fuel. Lower demand would also tend to moderate the pipeline constraints we’ve seen in recent winters that have driven prices up.”

Officials at National Grid and Northeast Utilities confirmed electricity prices so far this winter have fallen and not increased as expected. But they cautioned that winter is not over yet. They also said it’s difficult to predict the weather and the course of energy markets.

“We sometimes talk about buying 100 percent of the electricity in advance like an insurance policy,” said Jake Navarro, a spokesman for National Grid. “The rules are there to protect consumers against price spikes, but, like any insurance policy, it’s easy to look back in hindsight and think it seems expensive if the market volatility stays low.

The milder weather and absence of natural gas supply disruptions has attracted the notice of opponents of expanding natural gas pipeline capacity into the region. They said a recent study commissioned by the Patrick administration, which concluded the region needs more pipeline capacity, assumed natural gas prices would be high this winter and pipeline capacity would be strained. Neither has happened yet, even as temperatures turned much colder in January.

Rich Cowan of the Dracut Pipeline Awareness Group said electricity demand has not risen to the levels forecast by many energy analysts, which may suggest the additional pipeline capacity is unneeded. He noted temperatures plummeted to minus-1 degree Fahrenheit on Jan. 8 in Boston, yet power demand did not soar and natural gas continued to provide the bulk of the region’s electricity. Blomberg said peak power demand on Jan. 8 occurred between 5 and 6 p.m., but was still below forecasted levels. She noted, however, the average temperature between 5 and 6 p.m. was 19.5 degrees Fahrenheit, not minus-1 degree.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Navarro of National Grid said pipeline capacity remains a long-term issue for the region. “While spot prices may have decreased since we went out to bid for our electricity this year, the natural gas pipeline capacity issue will continue to lead to generally high power supply prices over time,” he said. “The fact that other public utilities saw significant increases in their power supply costs as well [while purchasing at different times] helps illustrate that the big picture of this issue isn’t market timing.”