3 Things No One is Telling You About Rising Energy Costs

Shanna Cleveland

Rahm Emanuel, President Obama’s first White House chief of staff, was once quoted as saying “You never want to let a serious crisis go to waste,” referring to the opportunities to pass sweeping bills in the wake of the 2008 financial meltdown. Over the past weeks, we’ve seen that sentiment put into practice by some of New England’s major energy industry players. They’ve been fanning the flames of fear over expected winter price spikes to support their continued push for building massive new gas pipelines, even though new pipelines have no chance of helping to address the risk of price spikes for this winter.

Here are 3 things you’re not being told about what’s really responsible for the increased rates and how to deal with rising energy costs now:

  1. New pipelines can’t and won’t address the rising rates for this winter (or the next three winters).
    • Even under the most optimistic scenarios, new natural gas pipelines of the scale that were being considered as part of the now-stalled New England Governors’ initiative could not be permitted and built earlier than November 2018. Even if they lived up to the Governors’ promises after that, they would do nothing for consumers this winter and the next three winters.
    • New England isn’t the only region of the country that experienced price spikes this past winter. New York, an area that had just expanded its pipeline capacity still experienced higher prices last winter, and the regional electric grid known as PJM (because it covers, in part, Pennsylvania, New Jersey and Maryland) also experienced price spikes even though it is located in the epicenter of abundant Marcellus shale gas supplies.
  2. The real problem isn’t a major deficit of pipeline capacity, but a failure to deal adequately with the increased use of natural gas for power generation.
    • We now use a lot of natural gas for power generation in New England, which helped modernize the system by moving us away from old, polluting, and inefficient sources like coal and oil. Because of this, and the way the regional grid’s electric market works, natural gas prices now generally set the price for electricity in New England.
    • Unlike natural gas utilities that supply homes and businesses with gas for heating, which buy gas on long-term “firm” contracts that guarantee access to gas, the companies that own natural gas power plants typically buy cheaper “interruptible” contracts because there isn’t currently a mechanism that allows them to pass-through the additional costs of buying firm supply.
    • In the winter time, people are often turning on the heat at the same time that they are turning on the lights, so the system experiences high demands on gas for both uses in the mornings and afternoons. These “coincident” demands led to price spikes between 10-42 days in each of the last winters, and retail electric prices are now catching up as the market is expecting a repeat of last winter’s high prices.
    • Now that natural gas makes up so much of the electricity we use, the volatility of gas prices has a bigger impact on electric prices and leads to higher rates. We have been far too slow in deploying demand-reducing energy efficiency measures in homes and businesses and in increasing the amounts of local renewable energy on the system, both of which would help reduce market prices for electricity and protect us from volatile gas prices.
    • The increased use of liquefied natural gas (LNG) imports should help to moderate the price spikes to some extent this year, but more can be done through market reforms without risking overbuilding gas capacity.
  3. Energy efficiency is the best way to reduce your bills and stay warm this winter.
    • Even though rates are going up, you can still lower your total bill by lowering your demand. Massachusetts has some of the best energy efficiency programs in the country which means that you can apply for rebates, incentives, and assistance to help you install efficient measures. Other New England states have programs as well.
    • If you don’t own your home or apartment, there are still some inexpensive steps you can take to cut your bills. There are many ways to conserve energy for a very small investment of time or money. Check back in for a look at how Senior Attorney Shanna Cleveland is getting her apartment ready for the winter.

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5 Responses to “3 Things No One is Telling You About Rising Energy Costs”

  1. Jennifer Markens

    Thank you for all the great work you do. It shouldn’t be surprising that gas prices are volatile. A read of Jim Powers “Cold, Hungry, and in the Dark” can give everyone an idea of why this volatility is occurring: it has happened before. And there are no guarantees that pipeline capacity will give any relief, since the pipeline itself will be used to justify additional fees to ratepayers. New England can make some exciting choices in the years ahead. In fact, in our area, more and more homeowners are using solar to lower their energy bills, and it is absolutely amazing to see what has transpired in solar energy for homeowners, and how inexpensive it is. It is well worth looking into for folks everywhere. As I drive around the cities in Massachusetts I am so often struck by all of the places where solar could be installed and save us all from this roller-coaster of rate increases. And this would help us, as a nation, and region, to increase energy independence.

  2. Russ Gaulin

    P.S. Wanted to add that I use a “masonry heater” for the rest of my heat (on top of passive solar baseline). I want more people to be aware of this ancient and very efficient wood-burning technology. I use far less wood, much more safely, and the emissions beat any EPA rated wood stove. No creosote so no chimney fires, the ashes fall into a pit in the basement (no shovelling it out or hot embers that could a fire.) The fire burns for about an hour so we never leave the house with a fire going. The heat is even and constant, not hot & cold. The fuel is free from my woodlot (and saves me a gym membership). It is recent, not fossil carbon. No, I do not sell these, but…

    I REALLY want more country folk to know about this option because it is by far the best way to use biomass for home heating that I can think of. Best for new construction but can be retrofit in the right situations. I know this could make a dent in propane / natural gas demand in the right place. Thanks for listening!

    • Ellen Anderson

      I have one (contraflow masonry stove) as well. I cashed in my small IRA to pay for it. Best use of money ever as it has heated the house 100% for most of the past winters and I can bake/roast in it. It also supported a local stone mason to install it.
      There is no federal or state support for such devices.
      I am much too reliant upon grid tied electricity. I use too much. I have an old but very well made refrigerator and I have looked into buying a new efficient one. From the reviews I read it seems that, unless I pay thousands of dollars, I will be buying a very poorly made replacement.
      I think it is important for there to be more emphasis on community based or even neighborhood based electricity that does not put additional strain on the grid. I also think that there should be community based food storage.
      The solar “solutions” that are being proposed are very timid and all of them are designed so that they make money for large corporations instead of for local business.

  3. Jeff Singleton

    Thanks to Shanna Cleveland and CLF for not only this blog but the fantastic work they have done on this complex issue.

    Shanna’s central argument seems to be that new pipeline capacity 1) will not address the winter price spike problem over the next four years and 2) the problem is not entirely or mostly due to the lack of natural gas. This is well argued but the evidence that the lack of more delivery capacity will in fact cause higher prices in the medium term seems pretty strong to me.

    But is that really so bad? Don’t we need higher prices to encourage much more aggressive programs to promote efficiency and renewables. Yes higher prices have negative economic impacts on business and low income individuals but we still need to do it to save the planet (and us).

    I am not convinced that energy prices should be kept low, although of course I am not running for state office.
    .

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