As of Aug. 1, your electricity bills are going up yet again. Eversource is raising its rates nearly 24% to 14.009 cents per kilowatt-hour (kWh), and Community Power Coalition of New Hampshire (CPCNH) rates are going up about 2% to 14.949 cents per kWh. The reasons for the increases are the same whether a utility, CPCNH, or a third-party supplier provides your electricity: unpredictable weather, government policies and the way energy markets work.
Let’s start with the energy markets. Suppliers must predict how much electricity they will need for each six-month rate period. They then purchase that amount of electricity from a regional market at a locked-in rate. That contracted energy is allocated by hour in blocks of on-peak times when energy demand is high and off-peak periods when demand is low. If they use more electricity than allotted for a given period of time, suppliers must buy more electricity from what’s called the spot market. Energy prices on the spot market are at their highest during high-demand periods.
That’s exactly what happened this past winter. It was much colder than expected, and electricity usage was far higher than anticipated. Much of that extra cost is tied to the price of natural gas, which provides 40% to 50% of regional energy production.
Ratepayers ultimately pay for that cost overrun, but which ones? A state law enacted this year says that utilities must charge the customers who used the electricity. This was intended to prevent utilities from spreading out under-collection of electricity costs to all customers, even those who don’t buy electricity directly from the utility. (Utilities such as Eversource deliver electricity to all ratepayers regardless of who they buy electricity from.)
This partly explains why electricity rates have jumped significantly more for the utilities than for CPCNH. However, that increase for the utilities should have been much higher. The above-mentioned law also allows flexibility for when under-collection fees are added to your electricity bill. The utilities would have preferred higher rates to recover those costs more quickly, but the New Hampshire Public Utilities Commission (PUC) approved lower-than-requested rates for two of the state’s utilities, Unitil and Liberty. The PUC approved Eversource’s requested rate, but the utility is on record as saying it believed a higher rate wouldn’t be approved.
It’s understandable why the PUC wanted lower rates to help soften the short-term blow to ratepayers, but they will have to pay those costs eventually. In fact, kicking under-collection costs down the road will only make it harder to lower electricity rates in the future. You will be paying for electricity used in past rate periods in the next rate period, the one after that and probably beyond. In the meantime, the risk of adding to that under-collection amount is high.
Meeting the Challenge of Rising Electricity Rates
Data centers, electrification and greater summer cooling demands due to climate change will make it a challenge to lower electricity rates going forward, but infrastructure and regulatory changes can help manage electricity costs. That begins with making it easier for distributed energy projects, big and small, to come online.
Large-scale solar and onshore wind have the lowest operating costs of any energy source. Solar ranges from $28 to $117 per megawatt-hour (MWh) depending on available sunlight, and onshore wind ranges from $23 to $139 per MWh. Natural gas and nuclear are much higher at $77 to $130 per MWh and $141 to $221 per MWh, respectively.
What prevents the state from having more distributed energy projects is inadequate infrastructure and regulatory issues, especially around permitting. The cost of getting regulatory approval, connection permits to the grid and local buy-in often kills promising projects. A project might gain regulatory and local approval, but the electrical grid cannot handle the load from the project. The utility might then ask the developer to pay for upgrade costs to the grid even though everyone benefits from it.
Adding more large-scale battery systems to the grid will also bring down operating costs no matter what energy source is used. Solar, natural gas, nuclear, wind and hydropower all at times produce more energy than is needed. In the case of solar overproduction, the grid might simply shut off the system from the grid. Excess energy produced by traditional large plants is sold at a discount to regions in need, sometimes at a loss.
Not using or discounting unneeded energy is wasteful and unnecessary. Large-scale battery systems can store that excess energy for times when it is needed. This not only lowers the cost of providing electricity, but it also makes the grid more stable as batteries can provide power during disruptions.
Improving the grid will come at a cost, but so does not fixing it. Increasing grid capacity, consistency and reliability lowers overall operating costs and makes it easier for cheaper energy sources to come online.
This is not wishful thinking, as Australia has proven. The nation has aggressively deployed solar power and battery storage on its grid. Its government has implemented a Solar Sharer program that will eventually allow all ratepayers to have free electricity for at least three hours in the middle of the day. That’s an energy future worth investing in.
Michael Nadeau is a member of the Peterborough Community Power Committee, which administers the Peterborough Community Power Plan.