The global energy crunch has come home to roost along the Seacoast as commercial and residential consumers experienced sticker shock when they opened their latest utility and heating bills. Some people are opening their bills to find they have doubled.
Last fall local utilities and news outlets warned energy prices were on the rise. But from the many calls to utilities and state agencies and postings on social media, consumers may not have realized the degree to which a perfect storm of variables would combine to impact their wallets.
From electric bills to natural gas, liquid natural gas, propane, and heating oil, across the board, across the nation and around the world consumers haven’t seen prices like these in years.
Utility company rates customarily change twice a year with the heating seasons. Unitil’s rates changed in December, with Eversource winter rates going into effect Feb. 1.
Between them, these utilities deliver electric power to most homes and businesses along the Seacoast of New Hampshire, with Unitil also offering natural gas in some communities.
What’s behind the hike?
Although there are many factors affecting the recent price hikes in energy, for New Hampshire and New England in particular, the cost of energy is being driven by the soaring price of natural gas, according to Tom Frantz, the director of the Division of Regulatory Affairs at the NH Department of Energy. That’s because most large power plants generating electricity to the grid are fueled by natural gas, he said.
“For the past three, four, five, six years natural gas prices have been very low,” Frantz said. “But natural gas prices are now much higher. In New England, they’re always higher in the winter, but they’re 100% higher now, not just a little higher.”
According to William Hinkle, spokesman for Eversource, the year 2020 hit “a 10-year low in the cost of natural gas,” at a supply cost of about 6.5 cents per kilowatt-hour. But starting Feb. 1, that cost rose. A normal family can consume about 600 kilowatts per month, he said, but that can go up or down depending on outside temperatures, indoor thermostat settings, amounts of insulation, as well as appliance use and conservation techniques.
To indicate the degree to which the price of natural gas impacts power cost in the region, Frantz points to the website of Independent System Operator (ISO) New England. The ISO is a nonprofit organization overseeing the operation of New England’s bulk electric power system and transmission lines, both generated and transmitted by member utilities.
ISO New England’s numbers fluctuate not only from day to day but hour by hour, according to Frantz.
For example, a snapshot of energy use in New England as or 11 a.m. on Tuesday, Feb. 1, showed at that moment 51% was generated from natural gas; 25% by nuclear energy; 14% by oil; 7% by renewable energies like wood, refuse, solar and wind; 3% from hydroelectric power; and 1% each from coal and other sources.
“The third use of oil tells you it’s winter and it’s cold,” Frantz said.
On Monday night, Jan. 31, when the region was experiencing frigid temperatures, the wholesale cost of a megawatt of power was $255, or $25.5 per kilowatt, Frantz said.
“That’s about four times higher than in a non-pandemic year,” he said. “This winter is colder than last year; it got colder earlier and has stayed cold longer.”
Specific to New England in winter are the demands on its natural gas infrastructure, which does double duty providing heating fuel and fuel that generates power to the electric grid, Frantz said. By regulation, he said, natural gas intended for heating is split off from the pipeline first, leaving less for electricity generation during winter than the rest of the year.
By the rule of supply and demand, this all means higher prices, which is why costs for energy in the winter are higher than in the warmer months, he said.
Impact on Unitil and Eversource rates
The rates charged by utilities are government regulated and change twice a year around winter and summer. Unitil and Eversource do not generate the power they distribute to their customer. They must buy the energy they distribute from other sources, Frantz said. They get bids twice a year from energy producers and use those prices in their supply rates for winter and summer distribution, he said.
By regulation, the price utilities pay to buy power must be passed on to consumers with no mark-up, Frantz said.
From what Frantz sees in the energy marketplace, he believes the high supply costs consumers are paying this winter are an accurate reflection of the nation’s current energy economy and price structure, he said.
Rates charged to consumers by utilities include two factors: the cost of buying energy from generators or the supply rate, and the cost of delivering that energy to their customers or the delivery rate, according to Eversource’s Hinkle and Unitil spokesman Alec O’Meara.
Oddly, Eversource’s delivery rate actually decreased this winter, Hinkle said, but consumers probably won’t notice because energy use rose, as did the supply rate.
A global energy crunch
As for what’s behind soaring natural gas and other energy prices, O’Meara calls it “a confluence of events,” that includes a number of things that happened simultaneously to produce the energy crunch, including Mother Nature.
“Hurricane Ida impacted the natural gas generation along the Gulf Coast last August just like Hurricane Katrina did back in 2005,” O’Meara said.
But there’s more, according to O’Meara, Hinkle and Frantz, and none of it’s comforting.
For example, demand grew faster than production as the economy roared back to life following shutdowns caused by COVID-19, offering one reason why United States natural gas prices climbed to their highest price since 2014, up roughly 90% over last year. Plus, the amount of natural gas in storage inventories is relatively low, according to Barclays analyst Amarpreet Singh, which left little cushion heading into the winter heating season.
The wholesale price of heating oil also more than doubled. Heating oil prices are closely tied to the price of crude oil, which climbed more than 60% last year. Homes affected by these increases are primarily in the Northeast.
To show how the global economy is affecting the United States, another reason for the rise in fuel costs here is coming from across the Atlantic. In Europe, strong demand and limited supplies sent natural gas prices up more than 350%. That’s pushed some natural gas produced in the United States to ships bound for other countries, adding pressure on domestic prices.
Frantz said to find the most lucrative deals for their products, some ships loaded with liquid natural gas check the going price for LNG at different European countries while ships were still in transport, sometimes diverting to the ports offering the highest price.
Utility companies: We’re here to help
Although no one interviewed is pleased about the situation, they agree it’s the reality at present. And no one interviewed was willing to predict how long the situation will last. That’s why both Hinkle and O’Meara encourage anyone struggling with their bills to contact their respective customer service offices to see what can be done.
Both companies have payment plans for which customers can sign up that might take the sting out of higher winter rates.
And both said their customer service representative can “help connect” consumers to programs that may provide financial assistance.
For example, according to Hinkle, residents may be able to access assistance to pay energy bills through the Low-Income Home Energy Assistance Program. The New Hampshire Emergency Rental Assistance Program also covers past-due and future rent payments, utility and heating costs, according to Hinkle.
Customers who meet income guidelines may qualify for discounts on their monthly electric bills through New Hampshire Electric Assistance, according to Hinkle, and those who don’t qualify for federally funded assistance but who are experiencing a temporary crisis may qualify for help from Neighbor Helping Neighbor at NHNfund.org.
Financial assistance for utility bills, fuel assistance, rent, housing and emergency food is also available to residents through regional Community Action Partnership agencies. At the website for Community Action Partnership of New Hampshire, or CAPNH.org, residents can learn the appropriate local agency to contact for their community.
According to both O’Meara and Hinkle, service representatives from Unitil and Eversource can also offer contact information for their customers to put them in touch with the correct agency.
What you can do to lower bills
Other remedies to trim utility and heating costs are energy conservation, according to O’Meara and Hinkle. Being aware of energy usage, shutting off lights and appliances when not in use, changing to more energy-efficient light bulbs, checking around doors and windows for air leaks that let in the cold or adding insulation to areas like attics, where heated air can escape.
Lifestyle changes may also help, they said. Turning down the thermostat a bit during night hours while people sleep or when the family is not at home is one way to reduce costs.
The Associated Press contributed to this story.