The operator of the regional power grid says wholesale electricity prices fell by 23 percent last year to their lowest level in nine years. The underlying reason for the price drop is supply-demand economics: a relatively new drilling technique called fracking is boosting production of natural gas in New York and Pennsylvania, driving down the price of the fuel and making it much cheaper to run power plants across the region.
The savings on a regional level are enormous. The six New England states paid a total of $5.2 billion for electricity last year, down from $6.7 billion in 2011 and $12.1 billion in 2008, according to power grid operator ISO New England.
The downturn in wholesale prices is also translating into lower electricity bills for residential and business customers across the region. In Boston, the power-supply portion of a typical NStar residential customer’s bill is now $33.50, the lowest it’s been since 2004. The overall electric bill, which includes charges for distribution, transmission, and customer service, has declined more slowly. The typical customer’s bill was $79.91 last May, down 2.8 percent from 2010 and 13 percent since 2007.
The region’s power grid operator says the drop in electricity prices corresponds primarily with a downturn in natural gas prices and a slight reduction in electricity consumption. The price of natural gas in 2012 was 19 percent lower than it was in 2011 and 59 percent below a 2008 peak. Compared to 2003, natural gas prices today are 32 percent less.
According to the power grid operator, demand for electricity in New England fell by nearly 1 percent in 2012 due to a sluggish economy and energy efficiency efforts in the states. Lower consumption generally means ISO New England doesn’t have to bring higher-cost power plants on line as much to cover peaking demand.
Environmentalists have raised concerns about the potential for fracking to contaminate groundwater supplies, but so far that concern hasn’t slowed the pace of drilling.