Electricity rates skyrocket

B y Derek Liebig and Jaime Thomas

The effect of this winter’s bone chilling weather goes beyond frost bite and cabin fever. It’s also driving up the price of electricity.

Electricity prices jumped 50 percent in January and were expected to increase another 30 percent in February.

The hikes are blamed on cold weather and increased demand for natural gas.

According to Clay Ellis, manager of corporate communications for New York State Electric and Gas (NYSEG), the price of electricity is based primarily on two factors: the cost of delivery and the commodity or wholesale cost.

Delivery rates, which are used by companies such as NYSEG and National Grid to maintain the equipment that carries power into homes, have not changed.

“Delivery costs last increased in September 2012 and will remain steady at least steady through the end of 2014,” Ellis said.

The other half of an electric bill is determined by the market. Providers, like National Grid and NYSEG purchase electricity as a commodity and pass it down to their customers without markup. So while delivery rates have remained steady, the prices National Grid and NYSEG have paid for electricity have increased.

“It comes down to supply and demand,” Ellis said. “It’s just like any commodity, like gold or silver.”

When supply costs increase because of greater demand, bills also go up.

“People are using more electricity,” Ellis said. A lot more electricity.

Last month, the New York Independent System Operator (NYISO), a non-profit organization responsible for operating and overseeing the state’s electricity grid, set a winter-time demand for electricity.

But perhaps the biggest single factor affecting supply costs is this winter’s frigid temperatures, particularly in December and January.

“Because it’s been so cold, demand is up and the price goes up,” Ellis said.

While New York’s power generators rely on a variety of fuels to produce electricity, natural gas remains the fuel of choice for many electricity generating stations making the price of the latter very sensitive to the price of the former. From November to December, the whole price of electricity in New York increased 53 percent while the price of natural gas increased nearly 47 percent.

In 2013, there was a 54 percent increase in the average cost of natural gas compared to 2012. During that same time the wholesale cost of electricity increased 30 percent.

The increases are a one-two punch for consumers who are paying more for their monthly utility bill, a troubling trend for local families and businesses which are already stretched thin. Even local municipalities are feeling the affect.
The town of Whitehall’s electric bill increased more than 9 percent from December to January and Ellis said most consumers can expect to see an increase of nearly 9 percent on their bills.

National Grid was so concerned its costumers wouldn’t be able to handle another month of increases to their electric bills, they deferred February’s increases to next month, saving local costumers an average $30.

The savings, however, will only be temporary. National grid plans to recoup the money at another time.

Representatives from both companies urged customers to enroll in balanced billing options, which spreads out payments over the year so that winter and summer spikes are paid for throughout the year.

Ellis also stressed the importance of being more energy efficient.

“We encourage people to do anything they can to save energy,” he said.

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