Saturday, September 27, 2014

Electricity Prices Soar in New England. And Soon in Vermont.

 Neighboring States

Yesterday and today, two New England electricity distribution companies announced the rate increases that they require for winter.  Vermont can expect similar price rises.  Let's start with the neighboring states.

Massachusetts 37%: National Grid says that its customers in western Massachusetts can expect a 37% rate hike on November first, due to the retirement of Vermont Yankee nuclear plant and Salem coal plants. Other factors were also cited, including the fact that there are no new gas pipelines, expensive replacement fuels are used in winter, and natural gas prices are rising.  The higher electricity prices in Massachusetts will be in effect until April.  The video clip about the price rise finishes with a recommendation: people should think about replacing their older energy-hog refrigerators with a newer model.

New Hampshire 50%: Meanwhile, in New Hampshire, a small utility expects to double the "energy charge" portion of customer's bills in November.  The company, Liberty Utilities, explains that this will lead to an increase of about 50% in the customer's bills. A spokesman for Liberty Utilities explains that when demand for natural gas exceeds the supply, electric generators must use more expensive fuels to generate electricity, therefore driving up prices for the whole electricity market. This utility is located very close to my home in Vermont.

Is Vermont Different?  Well, no.

The latest we heard, the major Vermont utility, Gaz Metro (aka Green Mountain Power) was lowering rates by 2.5%, largely due to revenue sharing from Vermont Yankee.   Maybe we're good, here in Vermont? Too bad about the other states, but we're good?

Vermont: Yeah, we have grid power.  Nope.  Not really.  We're not good. None of our major utilities agreed to buy power from Vermont Yankee after the 2012 end of the plant's NRC license. Instead of buying Vermont Yankee power, they basically bought grid power. They bought one million megawatt-hours more grid power per year than they had purchased when they had contracts with Vermont Yankee.  Guy Page of Vermont Energy Partnership wrote Vermont Electricity At A Glance in March 2013, showing how much grid power Vermont utilities now purchase.

The Vermont Yankee license was renewed for another 20 years, but still, our utilities shunned  the plant.  They buy a lot of grid power, and  they are partially vulnerable to the same wholesale electricity market prices that affect the utilities in New Hampshire and Massachusetts.

Vermont: Yeah, we have Hydro Quebec Power. Partially vulnerable?  Did I say partially vulnerable? I meant mostly vulnerable!

Spillway in Hydro Quebec system
The jewel-in-the-crown of Vermont power purchases are the utility contracts with Hydro-Quebec.  See, it's not all grid power in this state.

But...those contracts don't matter.  As I wrote in two posts in 2010 (March 2010 and   December 2010) Vermont contracts with Hydro Quebec are market-follow contracts.  If the grid price goes up, the rate that Hydro Quebec charges Vermont also goes up. As I wrote in the December post, A Bad Deal with Hydro-Quebec,  these contracts will NOT protect us against major rises in grid prices.  The contracts have a little price-smoothing. Prices will not bounce around with the daily market changes. But those 35-50% price rises in other states aren't because of the volatility of the grid prices.  The price rises in other states are because of the total electricity cost raises on the grid.

I expect a similar price rise for Vermont.

Watch for it.

I suspect, however, that Green Mountain Power will probably not announce the price rise until after the election in November.


DV8 2XL said...

Just so you don't think you are the only ones being shafted by these open contracts, Hydro Quebec is demanding a domestic rate increase here (in Quebec)as well citing the rise in export prices!

Rod Adams said...

No business likes selling a cheap product when they can see a way to force customers to accept higher prices.

The actions taken to shutdown both nuclear and coal in New England during the past three decades has some obvious winners - gas interests, hydro interests, and unreliables interests.

Meredith Angwin said...

DV8 2XL Wow. You actually shocked me here. HQs power is mostly hydro power, and the cost of producing it doesn't depend on grid prices. I thought HQ would just smile and lick its chops on the wallets of Vermont consumers (terrible metaphor, I know) and be nice to the people in Quebec. Apparently not! Amazing!

Rod. Yes. Yes. Yes. And yet, who reads our blogs? The people who already understand this stuff.

I am thinking of officially changing my name to Cassandra. I feel very similar to her (except for the war-prize-concubine thing, of course).