High demand for natural gas during January’s deep freeze caused electricity and natural gas rates to skyrocket last month, leading to higher bills for customers, says Central Hudson.
The utility said rates for electricity and gas would be 38 percent and 25 percent higher than last year for the two-month billing period that includes January. Cold weather caused increased use of natural gas for home-heating and as fuel for power plants. (About 35 percent of New York State’s electrical power comes from natural gas.) So while statewide electricity use set a record high for winter, it was still 25 percent less than last July’s 33,956 megawatts.
The reason the electricity price is spiking now and not then is the bottleneck created by the simultaneous need for natural gas to heat homes and provide electricity. During the prolonged deep freeze, which affected the Midwest and South as well, reserves of natural gas meant to insulate against the volatility of the market were exhausted and utilities and their suppliers had to purchase it on the open market.
“Spot market prices were very high,” said John E. Maserjian, director of media relations for Central Hudson. “During the cold spike in January the prices for natural gas and electricity really sky-rocketed. It was a short period but long enough that it impacted bills for people across the country.”
The market price of natural gas was up 66 percent and electricity was up 88 percent over last year. Usage increased 25 percent and seven percent, respectively.
The electricity price should be a temporary spike while the cost of the increase for natural gas will be spread out over seven months, said Maserjian.
That’s cold comfort for people suffering from sticker shock after the first round of bills that included those January prices went out. John Maksuta of High Falls saw his bill increase 60 percent over last year and 120 percent over the previous billing period (while using 25 and 60 percent more electricity during those periods).
“I was definitely not expecting this high of an increase,” said Maksuta, who uses oil-filled electric space heaters. He said the $350 increase over the previous month will be a “hardship” for his household to pay and he will likely request to pay in increments. For him, the bill feels like the proverbial straw that broke the camel’s back. “With high rent rates and now this billing, compacted with minimal job opportunities in the area, I feel like Ulster County may not be a good place for me to live at all,” he said. “I love the area, but the cost is too high for what you get.”
If that’s the case, he should definitely avoid New York City: According to a recent article in the Daily News, Gotham paid Con Edison 20 percent more for electricity in January, with the average supply rate going from 12 cents per kilowatt/hour (kWh) to 23 cents. To put that in perspective, supply rates for Central Hudson customers just hit a six-year high in January at 12 cents per kWh, while the average last year was around half that. Our record-high is business as usual for city residents.
It should be pointed out that supply charges are just part of the bill – and lately, the lesser part. Electricity bills are divided into delivery and supply. The delivery portion is steady and strictly regulated by the state. The supply portion of the bill is subject to market rates for electricity Central Hudson purchases. This is also the rate customers use when comparing the default Central Hudson plan with other providers, often those advertising renewable energy. This is the part of the bill that will increase sharply for January. Customers who don’t have electric heat can estimate their increase by doubling the supply portion and keeping the delivery portion constant. So for example, someone who paid $200 last year paid about $125 in delivery and $75 in supply. This year, they’ll pay about $125 in delivery and $150 in supply, or $275– which accounts for the 38 percent overall increase. (And maybe a bit more due to more electricity usage on long nights spent indoors while the snow piled up and the subzero winds whipped.)
What about those who make use of the budget billing program, paying a flat rate every month? They’ll still have to make up the difference at the end of the 12-month period– Central Hudson doesn’t provide a heating oil-style pricing scheme you can “lock in” to, paying less in a cold winter or pay more in a warm one. Maserjian said the utility is contacting customers in this program to let them know they might want to consider increasing their monthly contribution now to prevent paying the lump sum at the end of their year.
Perhaps this is a good time to point out spring is just a month away?