Wednesday, January 21, 2015

Why is my National Grid bill skyrocketing and what can I do about it?

From Brett Feldman:

Why is my National Grid bill skyrocketing and what can I do about it?

I've heard from a lot of people who have opened their winter National Grid bills and got extreme sticker shock. They are wondering what happened and how they can address it. I'm sorry I didn't write this sooner in the season when it could have been more helpful for this winter, but hopefully I can provide some short-term help, prevent people from making reactionary mistakes, and give some suggestions to better manage your energy costs in the long term.

A little history and background. National Grid is a regulated monopoly utility. The Massachusetts Department of Public Utilities controls how National Grid can charge its customers. Because energy is a volatile commodity, the DPU requires National Grid to procure electricity for its customers on a relatively long-term basis to reduce risk. Electricity prices actually change on a hourly basis, but National Grid purchases 6-month blocks at a fixed price. Sometimes this price might end up higher than the actual prices over that term, and sometimes it might be lower, but the idea is to lower the risk to the consumers. National Grid makes NO profit on this function.

New England relies greatly on natural gas to fuel its power plants these days. We don't have any native sources of natural gas here, so we have to get it here by pipelines, and we are at the end of the pipeline. Pipelines have limited capacity, so if there is excessive demand due to cold weather, there can be a shortage and prices will spike. So even if natural gas prices in general are low, local congestion costs can increase our price. It's similar to gasoline prices being cheaper in Oklahoma and Texas than here because we need to transport it here, which adds costs.

This winter, electricity prices in New England were expected to increase dramatically based on the Polar Vortex last winter. Last winter, there was extremely cost weather, and real-time electricity prices spiked very high. So energy traders were concerned about a repeat this winter, and that risk premium was built in when National Grid bought its winter supply last fall. In reality, the weather hasn't been nearly as bad this winter and prices have not been as high. But last winter, National Grid locked in ahead of time at lower rates than what actually transpired, so we consumers actually saved money whether we realized it or not.

I hope that helps explain how we got here, and didn't just confuse you more.

In any case, what can you do now to deal with the high rates? I'll give you a few options.

1. Alternative Suppliers

Similar to how the airline and telecommunication industries were deregulated in the 1980s and 1990s, the energy industry has been deregulated as well. You will always have National Grid providing the physical delivery of electricity, but you can choose the financial supplier of your electricity. There are a number of suppliers listed on National Grid's website

Unfortunately there is no comparison site like Orbitz, so you have to check each one individually. They are not regulated by the DPU, so they can offer a range of options, from monthly pricing to long-term fixed price contracts.

Because I knew what was going to happen with the National Grid rates back in October, I locked in for the 6-month winter season for 7 cents with Provider Power. At this point, you won't find anything that low. I would advise against locking in for more than a few months now, because the National Grid rates almost always go down in the summer. 

See the history here

And next winter likely won't be as high as this winter since we are having a mild season and gas storage should be ok.

You can't just focus on the price, you also have to think about quantity. Most people use about twice as much electricity during summer months than winter due to air conditioning. So you don't want to lock in a higher rate in the summer, because it will cost you a lot more than the winter due to the higher volume.

2. Energy Efficiency

The cheapest energy is what you don't use, so energy efficiency is the best way to cut your bills. Get a free energy audit from National Grid  
Mass save
Mass save

They will give you CFL or LED lightbulbs and other tips like more insulation or more efficient heating and air conditioning equipment. Also, think about turning off lights and electronics when not in use, getting smart power strips that save energy, and turning down thermostats when possible. My house uses about half the electricity of a normal house our size because I have trained my kids to be light police.

3. Produce your own energy, like Solar

These days, you can take matters into your own hands as well by generating your own energy. The Franklin Solar Challenge is currently underway to offer residents a vetted vendor and the best group pricing possible. The more homeowners and business that sign-up, the better price everyone gets. Plus, if we get a certain level of participation, our vendor will donate a solar array to a local non-profit or affordable housing unit. Everyone wins.
Franklin Solar Challenge

If you have good solar access on your roof, you can expect a 4-5 year payback. Otherwise, it may be 7-8 years. If that is too long or you don't have good solar access, you can still invest in Community Solar, which allows you to buy a piece of a solar array somewhere else but get the same financial benefit.

So don't feel helpless; there are actions you can take. I am happy to talk with anyone about more details. I have nothing to gain professionally, I just want to help my fellow residents (although maybe I could make a business out of it!).

Brett Feldman
Franklin Town Council
Navigant Consulting

17-year energy industry veteran

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