Winter utility bills worse than expected amid record inflation, cold temps
A view of the PSEG Power New York plant on Monday, Feb. 14, 2022, in Glenmont, N.Y. On Jan. 27, wholesale prices of domestic natural gas traded on the New York Mercantile Exchange spiked 65 percent – the biggest jump ever recorded. That event is having an outsized impact on gas and electric utility bills this month.
Paul Buckowski/Times Union
ALBANY – On Jan. 27, wholesale prices of domestic natural gas traded on the New York Mercantile Exchange spiked 65 percent – the biggest jump ever recorded.
While the exact reasons why that massive increase occurred are not yet fully understood, the event is having an outsized impact on gas and electric utility bills this month.
That's because in New York state, natural gas is the most popular fuel used in power plants that generate electricity. And Jan. 27 just happened to be the date that National Grid, the dominant utility in the Capital Region set the price of electricity supply in its bills.
Although the number gets reconciled in later bills to reflect the true cost of electricity over the entire billing period, it means that those February bills come with quite a shocker.
"High natural gas prices are continuing to impact everyone this winter both nationally and globally," National Grid spokesman Patrick Stella said. "While we can’t control national gas supply prices, our hedging practices are used to mitigate market price volatility for our customers."
It doesn't help either that the cold winter weather has forced many utility customers to turn up the heat in their homes and apartments, which also contributes to higher utility bills.
The shock may also have to do with COVID-19. For the past two years, with government mandates that shut down businesses and destroyed the travel industry, demand for gas and oil plummeted, forcing down the cost of everything from gas at the pump to electricity.
Now, with the economy surging back to life faster than companies can produce products and raw materials consumers need again, prices are surging because supply cannot keep up with demand.
Tack on record inflation, and you have a recipe for really high utility bills that are more than 30 percent higher than last year, and much higher if you only get electricity.
To provide an example, the Times Union examined the February National Grid bill of one of its reporters who has a family of four. The bill was $337 compared to $257 last February, an increase of 31 percent. A small percentage of that increase is due to increased electric and gas usage, most is due to rising energy costs.
Stella, the National Grid spokesman, says that last winter was relatively mild from a historical perspective, which has only magnified the issue, especially since wholesale electricity prices are 200 percent higher today compared to November 2021.
"With our current hedging strategy, this will result in an increase of about 6 to 12 percent on the total electricity bill over the five-month winter heating season, or between $32 and $57.
Still, home heating bills are going to be even higher than National Grid projected back in October. Back then, the estimate was that home heating bills would increase about 32 percent this winter.
Now, with all that is going on in the wholesale natural gas markets, the increase is expected to be 37 percent over the five months that make up winter in upstate New York.
"Energy prices can be volatile and are affected by factors such as weather, demand and economic trends," Stella said. "Natural gas supply prices have risen sharply around the globe this winter heating season. In the US, prices have surged to multi-year highs."
National Grid is not the only utility that is sending out higher bills this winter.
The utility serving hundreds of thousands of customers in the Hudson Valley and Catskills announced Thursday that electricity bills will rise 46 percent and natural gas bills will rise 19 percent.
In the announcement, Central Hudson blamed several factors for the rise, including a cold winter, increased demand and constrained pipeline capacity.
“Locally, this January featured sustained temperatures that were 11 percent colder than average and 16 percent colder than January 2021," according to Anthony Campagiorni, Central Hudson senior vice president of customer services and gas operations. "This contributed to driving gas usage up more than 13 percent and electric usage up nearly 6 percent over January 2021.”
The bill volatility that utility customers are experiencing has very little to do with the utilities themselves. which have little control over the real-time costs of gas and electricity supply. Those supplies are produced by large energy companies that drill for oil and gas and operate power plants.
Utilities under the modern deregulated energy market system make their profits on delivering gas and electricity to homes and businesses. While National Grid was recently allowed to raise these delivery rates slightly by state regulators, that increase is only contributing slightly to the increase in this year’s winter utility bills.