As the Russian invasion of Ukraine continues to upend global energy markets, New England customers are facing record high energy bills for gas and electricity
Across the U.S., households could pay 17 percent more to heat their homes this winter, according to a report by the National Energy Assistance Directors Association. The cost of natural gas in particular is expected to increase about 34 percent compared to last year, and 66 percent compared to the winter of 2020-2021, according to the report.
But those cost spikes will likely be even higher in New England, given that the region already walks a fine line each winter as demand from gas-fired power plants and gas-fired home heating strain the capacity of pipelines and force the region to import liquefied natural gas by tanker from abroad.
Most Connecticut homes use fossil fuels for heat in the winter – about 44 percent using heating oil and another 36 percent use natural gas, according to the U.S. Department of Energy.
In October, the rate for Eversource gas will actually decrease slightly, Eversource spokesman Mitch Gross said. But while gas is currently selling at about $9 per million Btu in U.S. wholesale markets, contracts for liquefied natural gas imports to New England this January are already selling at a record-high price of $40/MMBtu, according to an S&P Global Commodity Insights report cited yesterday by Northeast Gas Association President Charles Crews.
That price is nearly double the wholesale price of gas in January 2022, which was already a 300 percent increase over January 2021, according to ISO-New England. It’s difficult to pin down exactly what that means for monthly gas bills, but Crews said he expects that could mean combined energy bills of $1,000 for New England customers.
The picture for oil is more complicated, according to Connecticut Energy Marketers Association President Chris Herb.
The good news is that oil prices have dropped considerably since the shock of Russia invading Ukraine drove record high prices in May. The bad news is that the same volatility still exists.
“It’s impossible to predict what those prices will be as long as the war continues,” Herb said.
Northeast expecting major increases in cost of electricity
In Connecticut, electric supply rates are adjusted twice a year – on Jan. 1 and July 1.
Gross said Eversource usually doesn’t know until around November what the supply price for the first half of the next year will be – noting utilities can’t earn a profit on the cost of electricity, just charge customers what they pay generators.
But other utilities in the region have already applied for their winter supply rate increases, and they are dramatic.
National Grid warned its Massachusetts electric customers to expect a 64 percent increase in their monthly bills, from an average of $179 to $293. Con Edison warned its New York City customers to expect a 22 percent increase on their electric bills, and warned Westchester County customers they could face a 27 percent increase this winter, saying the rising cost of natural gas will drive up electricity prices.
The 780,000 customers of Rhode Island Power will see their rates more than double from a summer rate of $7.81 cents per kilowatt hour to a record-high 17.785 cents/kWh on Saturday, according to the Providence Journal – an increase of nearly 64 percent compared to the 10.8 cents/kWh Rhode Island Power charged last winter.
While it’s difficult to pinpoint exactly how much bills will increase in Connecticut until Eversource and United Illuminating file for their supply rate increases in November, New England Power Generators Association President Dan Dolan said it’s instructive to look at what’s happening in those surrounding states to get an idea.
“What we’re seeing overall is that, driven by the global energy supply tightness coming out of the Russian invasion of Ukraine, that for this coming winter, energy supply costs are increasing pretty significantly across the Northeast,” Dolan said.
“We’re really seeing it across the economy,” Dolan said. “The inflationary forces of everything, from the gas pump to the grocery store, is driven by this tightness that we’re seeing across the global markets.”
But Dolan and Crews both told CT Examiner that New England’s reliance on natural gas – especially imported natural gas – leaves the region especially vulnerable to the effects of the war in Ukraine.
Gas is the dominant fuel for producing electricity in New England, accounting for 53 percent of the power generated in the region in 2021, according to ISO-New England. It’s also used widely for home heating.
At the same time, the region has limited pipeline capacity to bring in gas produced in other parts of the U.S., and the geology of New England prevents underground gas storage like in New York and Pennsylvania, according to Crews.
The region walks a fine line every winter as gas-fired plants – meant to be the most reliable source of electricity – have limited access to fuel, so the region needs to import liquefied natural gas from other countries. New England is the only region in the continental U.S. that imports natural gas, and it can contribute up to 35 percent of the region’s gas supply on peak winter days, Crews said.
But with Europe cut off from Russian natural gas supplies, and competing for the same liquified natural gas imports, the global price is up and customers in the region will pay that price, Crews and Dolan said.