Why are electricity prices spiking this winter?
Baker administration report blames last winter
RETAIL ELECTRICITY PRICES are going up this winter in eastern Massachusetts because of the price spike that occurred during an extreme cold spell last winter.
The explanation for the rising price of electricity – it will be at its highest level since 2015 – was contained in an energy plan released on Wednesday by the Baker administration. The plan, a massive 167-page document complete with appendices, focused on how best to reduce emissions across the electric, heating, and transportation sectors through 2030. The preferred approach centered on reducing overall energy consumption, boosting the amount of renewable energy used to produce electricity, and using more and more of that clean electricity to heat homes and power vehicles.
Under every scenario the state examined, the report said, there is sufficient electricity generation capacity to meet demand. But the report said the state and the region will remain vulnerable to steep electricity price spikes and emission increases during periods of extreme cold, when natural gas is diverted to heat homes and the region’s power generators have to rely more on expensive imported liquefied natural gas and oil.
The price spikes aren’t felt immediately at the retail level because most customers lock in their rates in advance. But the Baker administration report said “the added costs from a winter event increase retail rates in subsequent years across all classes of ratepayers.”
Dan Dolan, president of the New England Power Generators Association, confirmed a cold weather event during one winter increases the likelihood that it will happen again, so generators typically hike their prices to reflect the added risk.One way of dealing with the problem would be to build another natural gas pipeline into the region, but political opposition to new pipeline infrastructure is strong. So the Baker administration, backed by the governors in the other five New England states, is urging Congress to grant the region an exemption from federal law so cheap natural gas produced here in the United States could be delivered by ship into New England.
The Merchant Marine Act of 1920, also known as the Jones Act, requires goods shipped between US ports to travel on ships built, owned, and operated by US citizens. There are no carriers capable of carrying liquefied natural gas that comply with the Jones Act, so Massachusetts has to import more expensive LNG from foreign countries, typically Trinidad and Tobago, while cheap US gas is shipped abroad.