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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