WAPA Propane Conversation To Save Money-Natural Gas Prices Expected To Continue To Rise

This is Virgin Island related, article on VI Source, WAPA claims rates to go down to .38 cent due to conversation to propane. In RI, rate increase of almost 23% due to rising cost of natural gas------------------and rate increase is also based on future cost of natural gas............which is expected to continue to rise

We will see a rate decrease, hopefully to .38, but....................................for how long and expect the rate to continue to go back up..........as natural gas is expected to continue to rise.

By ALEX KUFFNER

Journal Staff Writer

akuffner@providencejournal.com

Related

• Utilities panel approves 12.1 percent rate hike for National Grid electricity
• R.I. PUC delays action on plan to revamp regulation of winter utility shutoffs
• For many Rhode Islanders, bigger heating bills this winter

WARWICK — As part of the state Public Utilities Commission’s recent decision to approve higher electric rates for most Rhode Islanders, many businesses will see their bills increase substantially in the new year.

Under National Grid’s pricing plan that was approved by the commission on Friday, the rate paid by commercial customers will climb 23.2 percent, from 6.95 cents per kilowatt hour to 8.56 cents on average for the six-month period from Jan. 1 to June 30. After that date, the commission will review another rate plan.

The rate, known as the standard offer, covers only the cost of power itself, not the costs for transmission, transition or distribution. Those latter costs will not change under the new pricing plan. After including costs for energy efficiency and renewable energy, the bill impact for many commercial electric users will be an increase of between 9 and 11 percent, according to filings with the commission.

The rate increases are driven almost entirely by the rising wholesale price of electricity — largely due to higher demand for natural gas, the main fuel for electric generation in New England. By law, National Grid is not allowed to mark up the price of power. The company purchases power for its customers and passes those costs on directly.

Natural gas prices drive electricity prices and forward-looking natural gas prices are forecasted to be higher for the foreseeable future,” the company said in a statement.

National Grid supplies nearly all of Rhode Island with electricity. Block Island and two villages in Burrillville have alternative suppliers. Some individual users also opt to buy their power from other companies.

National Grid divides its 480,000 or so customers in Rhode Island into three rate classes: residential, commercial and industrial. The pricing plan approved last week affects only the residential and commercial classes. Rates for industrial customers are considered on a different schedule as part of a separate docket.

Residential customers will also see a hefty rate increase. The standard offer rate will rise by 35 percent, from 6.35 cents per kilowatt hour to 8.55 cents. When other costs are factored in, the typical household that uses 500 kilowatt hours a month will pay $88.47, compared with the current $78.91 — a 12.1 percent increase.

The current rate hikes come after several years in which rates have either fallen or held steady. Over the past decade, advances in drilling technology have freed natural gas reserves that were previously hard, if not impossible, to reach. The spread of hydraulic fracturing, or fracking, flooded the country with cheap shale gas.

With supplies high, the price of natural gas reached historic lows and power plants increasingly came to rely on the fuel to maintain the nation’s electric load. In the six New England states, natural gas-fired facilities supplied 52 percent of electricity in 2012, according to Independent System Operator New England, which manages the region’s power grid.

But that reliance has created problems. New England’s pipeline capacity is limited. In the winter, when natural gas is needed for heating, the pipeline system at times cannot supply enough of the fuel to the region to generate electricity. To make up for the shortfall, more expensive fuels are burned for electric generation.

An added effect of the supply crunch has been an increase in the price of natural gas that has hit New England especially hard. The spot market price of natural gas was as low as $1.87 per million British thermal units in April 2012, according to the U.S. Energy Information Administration. It was selling for $4.31 per million British thermal units a week ago. In the past six weeks alone, the price has climbed by a quarter.

The majority of electric supply in Rhode Island is purchased far ahead of the time it’s needed. Only a small portion is bought on the spot market. That purchasing plan, which was designed to lessen the effects of price volatility, helped insulate ratepayers from increases in the price of natural gas. Even after an increase last February, the rate for most Rhode Islanders was close to what it was in 2008.

But after a spike in the price of natural gas last winter, and with demand continuing to increase this winter, Rhode Islanders are starting to see the effect on their bills. The increases in the six-month period covered by the new pricing plan are especially pronounced in January and February, the height of the heating season