Prepare now: Electricity will be much more expensive in RI next winter

Alex Kuffner

The Providence Journal

PROVIDENCE — Electric rates in Rhode Island are expected to spike next winter, reaching their highest point in at least two decades on the back of higher energy demand and market turmoil caused by the war in Ukraine.


Come Oct. 1, the rate for most Rhode Islanders could reach 15.6 cents a kilowatt hour, according to estimates made by National Grid, the state’s dominant energy utility.

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If that happens, the rate for many of the company’s roughly 500,000 electric customers in Rhode Island would be nearly double what was just approved by state regulators for the summer billing period that ends Sept. 30. As a result, the monthly bill for a typical residential customer, after delivery and other fees are factored in, would jump from about $111 to more than $150.

National Grid buys nearly all of its electric supplies for Rhode Island before they’re needed, staggering procurements as a hedge against price volatility. With three contracts signed for next winter and two more to go, the prospects aren’t looking good for ratepayers.

“These are the highest futures prices that I recall in my 10-plus years doing this,” James Ruebenacker, manager of wholesale electric supply for National Grid in New England, recently told the state Public Utilities Commission.

Electric prices rising nationwide

Electric rates across the nation were already going up coming into this year as the economy started recovering from the COVID pandemic.

The average electric price nationwide last year rose at its fastest pace since 2008, according to the U.S. Energy Information Administration. The surge came as the price of natural gas, a major fuel for electric generation, more than doubled. The trend is expected to continue this year.

Here in New England, wholesale electric prices this past January hit their highest point in eight years, according to the nonprofit corporation that manages the region’s power grid. Real-time and day-ahead power prices more than tripled compared to January 2021, said Independent System Operator New England in a recent analysis.

The effects are already being felt by consumers in the region. In Connecticut, customers of Eversource saw rates climb 21% in January. The company’s customers in Massachusetts experienced a 25% rate hike. And last November, National Grid customers in the Bay State saw a similar increase, with the residential rate hitting 14.8 cents a kilowatt hour.

Rhode Islanders saw a smaller increase this past winter because the Public Utilities Commission requires National Grid to tie up some of its electric supplies more than a year and a half in advance, much further out than in Massachusetts or New Hampshire.

But whatever cushion Rhode Island  has will largely be lost next winter, when ratepayers will feel more of the effects of the overheated energy market.

Rate hike tied to price of natural gas

The last time electric rates approached what’s being projected was in the winter of 2015.

Billing cycles were different then and for the period starting that January, National Grid proposed raising the residential rate to 12.2 cents a kilowatt hour. Amid an outcry from consumer advocates and elected officials over burdening customers with an extreme rate hike, the Public Utilities Commission took the unusual step of spreading out the increase over the entire year rather than the normal six-month period.

Before that year, you’d have to go back to 2008 to find a similar spike in the price of power. Amid a global surge in oil and natural gas prices, the winter rate hit 12.4 cents a kilowatt hour.

Both previous price hikes came in large part from an increasing reliance in New England on natural gas for power generation. With more residents and businesses in the region depending on the fuel source for their electricity, power suppliers have been thrown into competition with the home-heating market to get gas through the region’s constrained pipelines.

The result has been a pattern of peaks and valleys in electric prices, with increases in the winter when gas needs are high and decreases in the summer when demand ebbs.

The pattern has only grown more dramatic in recent years. These days, despite continuing investments in renewables, New England still gets half of its electric generation from natural gas, according to ISO-NE.

War in Ukraine also pushing up energy prices

The war in Ukraine is only adding to the upward pressure. European countries are looking for alternatives to Russia for sources of natural gas, meaning that already-high prices to ship liquefied supplies of the fuel are climbing even more.

Because of its limited pipeline capacity, New England gets as much as a third of its natural gas through LNG shipments, mainly to the Everett terminal near Boston. The shipments are crucial to the region’s energy systems, especially on the coldest winter days.

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The region also still relies on oil-fired power generators to help the power grid get through those very cold days. Within the next few years, offshore wind is expected to help fill that load, but at certain points this past winter New England was getting as much as 20% of its power from oil-burning plants.

The electricity from those plants is expensive and is expected to become more costly with global oil prices nearly double what they were a year ago.

When compared to data going back to 2000, the projected 15.6-cent rate would be the highest on record in Rhode Island. Even in an apples-to-apples comparison of winter rates only, it still stands out, at nearly 50% higher than other recent peaks.

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Rhode Island procurements staggered to shield ratepayers

The rate increase next winter would only cover the cost of power, which National Grid is not allowed to profit from under state law. Power costs make up about half of a customer’s bill. The other half covers delivery charges, which National Grid is allowed to profit from. The company is not proposing any increases in that part of the bill.

National Grid buys electric supplies for Rhode Island in five staggered blocks, three comprising 20% of load and two of 15%. The remaining 10% of supplies are bought in real time on the wholesale market.

Contracts are laddered over time to ease impacts on ratepayers. Energy prices tend to fluctuate, so customers may get hit with a price increase in one contract and benefit from a dip when another contract goes out to bid.

For next winter, the first contract was signed in January 2021 and National Grid paid 5.5 cents a kilowatt hour, according to Ruebenacker’s testimony at a Public Utilities Commission meeting on March 23. For the second contract last July, the price was 7 cents. The price locked in for the third contract this past January was 11.5 cents.

Two more procurements are scheduled, one two weeks from now and the other in July.

By next winter, the price is projected to reach 14.5 cents, said Ruebenacker.

“It is a reflection of global energy markets,” he said.

If Rhode Island hadn’t purchased so much power in advance, the projected winter rate would be closer to 20 cents.

It may be cold comfort to Rhode Islanders, but, when questioned by utilities commission Chairman Ronald Gerwatowski, Ruebenacker said he expects prices in Massachusetts next winter to be even higher than those in the Ocean State.

Regulators urge Rhode Islanders to prepare for rate hike

If there’s some solace for Rhode Island, it’s that the Public Utilities Commission on Tuesday approved sizeable decreases in electric rates for the warm-weather period that starts Friday.

The residential rate is dropping from 10.9 cents per kilowatt hour to 7.8 cents. And the typical bill is going down by 10%.

But at Tuesday’s meeting, commission members urged Rhode Islanders to start preparing for the winter price rise.

“Understanding why price increases happen is helpful,” commissioner Abigail Anthony said. “But it doesn’t help pay the bills.”

National Grid, she said, can help customers reduce usage through the state’s energy efficiency program, which is among the top-rated in the nation. Electric rates could also be cheaper from other power providers on the competitive-supply market.

“So the good news is, we have a lower summer rate,” Gerwatowski said. “The bad news is we’re in for a challenging winter.”