Electricity bills increase sharply
Spike of 109% in natural gas prices blamed
CAPITAL REGION Now more than ever, it’s a good idea to hit the light switch after leaving the room.
Rising natural gas prices have caused a spike in the cost of electricity, leaving many utility customers with bills that are significantly higher than they were at the beginning of the winter. The wholesale price of electricity rose from $44.68 per megawatt hour in December to $82.18 in January, or by 83.9 percent in one month, according to figures provided by the New York Independent System Operator, the utility-owned nonprofit agency managing the state’s power grid.
Corresponding with this spike was a 109 percent increase in the cost of natural gas — the commodity used to generate more than a third of the state’s electricity. Gas rose from December’s relatively low price of $4.77 per million British thermal units — the unit used to sell natural gas — to an average of $9.98 in January, spiking briefly to $37 at one point.
“This thing came on very suddenly,” said Gordon Boyd, president of EnergyNext, the Saratoga Springs-based consulting firm that handles energy contracts for chambers of commerce and other organizations around the Capital Region. “And by suddenly, I mean within a month.”
The abrupt jump has naturally caused some surprise among some of Boyd’s customers, such as the Chamber of Schenectady County. The chamber oversees an energy consortium that includes Schenectady County, which saw a marked increase in its cost of electricity this month.
Spokesman Joe McQueen couldn’t quantify the boost in the county’s electricity bill, except that it was significant.
He said county officials were alerted of the increase earlier this month and are keeping close watch on what happens in the near future.
“No one has been able to tell us if this will be a long-term increase, a sustained increase or if it’s a seasonal spike,” he said. “Right now, it’s something we can adjust to, but it depends on what happens moving forward.”
Because the cost is associated with the price of commodities, it’s not one controlled by utility companies like National Grid.
National Grid spokesman Steve Brady said his company is paying about 22 percent more for electricity. He said the average residential customer in New York — one using about 600 kilowatt hours per month — will see a 14 percent increase in their electricity bill this month when compared with February 2012.
“Yes, there’s been a spike,” he said.
The direct cause of the increase is largely related to heightened demand for natural gas, said David Flanigan, a spokesman for NYISO.
Consumer demand for natural gas increases whenever there’s a cold snap, meaning those who are using the commodity for heating purposes are in competition with large companies utilizing it for electricity generation.
“What you have is competing demands for natural gas,” he said.
Demand for natural gas is also bringing the commodity back up to normal price levels after a prolonged period when it was relatively cheap.
After reaching a peak in 2008, the cost of natural gas plunged in 2009 and remained plateaued until the recent spike.
“It’s the way the market worked,” he said. “We were benefiting last year from record low [natural] gas prices, which gave us the benefit of really low wholesale electricity prices.”
Another factor is the weather this winter.
January brought a brutal cold snap and this month saw one of the worst blizzards to hit the Northeast in years.
“It’s a factor,” Flanigan said of the weather. “There’s no doubt about it.”
In terms of historical averages, the winter hasn’t been particularly cold.
Temperatures were slightly above average in January and slightly below average so far this month, according to figures from the National Weather Service in Albany.
The jump in electricity prices, however, is anything but normal, Boyd insists. While used to seeing some seasonal fluctuations, he said the sudden jump in electricity is anomalous.
“Usually, there’s a symmetry of how these things occur,” he said. “Let’s hope the symmetry is that this goes down as fast as it came up.”