In Business : Cape Light Compact electric prices up, no wind in sight
Photo by Ralph Stewart
Cape Light Compact (CLC) recently announced new electricity supply prices for residential, commercial, and industrial customers, effective with meter read dates in January 2012 through July. The rates reflect a slight increase over prices in effect since July 2011.
The new basic electric price for residential customers is 7.899 cents per kilowatt-hour (kWh), an increase of about six-tenths of a cent or .09 percent, from the previous six-0month rate of 7.244 cents per kWh.
"For a typical 550 kilowatt-hour a month residential customer, it's about $3.28 more," CLC senior power supply planner Joe Soares told The Times in a telephone conversation Tuesday.
When the electrical industry was deregulated, power companies had to choose whether to be in the distribution or supply business. CLC is a public regional energy services organization created in 1997 to work with the combined buying power of the region's 200,000 electric consumers to negotiate for low-cost electricity and other public benefits related to energy.
CLC is authorized by the 21 towns on the Cape and Martha's Vineyard and Barnstable and Dukes counties to choose the electric supplier for their residents and businesses. The Compact buys its electricity from supplier ConEdison Solutions, based in White Plains, N.Y.
NSTAR provides the delivery of power, maintains the wires and poles, reads meters, sends bills, and restores electricity during outages.
Why the price change?
When asked why CLC's electric prices rates went up, Mr. Soares said natural gas delivery prices are to blame. As he explained, since a significant portion of electricity in the Northeast is generated by natural gas, the electricity price in New England is driven by natural gas prices.
A prime example occurred when the disruption caused by Hurricane Katrina in 2005 in the oil and natural gas supply drove fuel prices up. As a result, in January 2006, residential rates for CLC customers jumped by about 36 percent, the lowest price among three companies with which CLC negotiated, offered by ConEdison Solutions.
Mr. Soares said that although the commodity price of natural gas has dropped from about $13 per million British thermal units (BTU) in 2008 to about $3 now, the basis (delivery) price has gone up.
"It's one thing to have a nice, cheap natural gas price, but you've also got to get it delivered from the Gulf [of Mexico], which is the Henry Hub, where all commodity for natural gas is priced, so you've got to now get it delivered to New England," Mr. Soares said.
The Henry Hub is a point on the natural gas pipeline system in Erath, Louisiana, owned by Sabine Pipe Line. It interconnects with nine interstate and four intrastate pipelines, according to Wikipedia.
"And as I understand it, there have been some issues with some pipelines delivering to the Northeast and the basis has been very high," Mr. Soares said. "So while the price of the commodity has been low, the delivery piece has been high."
NSTAR and National Grid also supply power to Nantucket and other Massachusetts areas.
Mr. Soares said the first indication he had of a price increase was when National Grid announced new rates in October. While CLC and NSTAR set prices in January and July, National Grid is on an October and May schedule.
"I was talking to one supplier and he was telling me that as a result of the pipeline issues, the off-peak electricity prices for the winter, the January-February 2011 timeframe, were actually higher than the on-peak prices from last summer," Mr. Soares said. "So that's what has brought it up, the basis or the delivery piece. Now, hopefully in the second half of 2012, it could go down again. And I think maybe part of the pipeline delivery problem is you're starting to see the demand pick up not only for electricity but also for heating during the winter months."
Mr. Soares said after learning of National Grid's rate increase and also NSTAR's, he talked to ConEdison personnel, who confirmed what the supplier told him about the delivery piece.
In other rate changes for CLC, commercial customers will pay 7.980 cents per kWh, an increase of about four-tenths of a cent or .06 percent, from the previous rate of 7.524 cents per kWh. Industrial customers will pay 8.4 cents per kWh for meter read dates in January 2012 through April, an increase of 1 cent or .13 percent, from the rate of 7.4 cents per kWh for meter reads in July through October 2011.
By comparison, residential and commercial customers who have opted out of the CLC and use NSTAR as their electric supplier will pay 7.928 cents per kWh and 7.995 cents per kWh respectively, for January through June 2012 meter read dates. Industrial customers will pay 8.207 cents per kWh for the January 1 through March 31, 2012, time period.
As for how electric prices on Martha's Vineyard and in Massachusetts compare to other places, Massachusetts ranked the fourth highest with an average retail price of 15.45 cents/kWh, for supply and delivery, according to the most current state electricity profiles based on data from 2009 from the U.S. Energy Information Agency.
A critical component in differences in state electricity prices is how power is generated — for example, whether a state taps sources such as hydro- or wind energy, or uses coal-fired versus natural gas-fired plants.
Average retail prices range from a high of 21.21 cents/kWh for Hawaii to a low of 6.08 cents/kWh for Wyoming. Five of the six New England states are in the top ten in the country and Vermont is number 13.
The average retail price for the U.S. as a whole is listed at 9.82 cents/kWh.
Going green without Cape Wind
The compact also offers Cape Light Compact Green prices to customers who agree to pay more for a percentage of their electricity that is generated with renewable energy sources. The program includes renewable energy from photovoltaic systems on rooftops across Cape Cod, small hydro facilities from across New England, and landfill gas from a closed landfill in Chicopee, according to the CLC website.
The compact will not be negotiating a contract to sell renewable energy to its customers generated by the Cape Wind project proposed for Horseshoe Shoal in Nantucket Sound, however.
"The Green Communities Act recognized that renewable energy contracts may be above market, and designed a process to address this issue while fostering renewable energy projects," the CLC website states under a "FAQ" section. "The Green Communities Act establishes a role for the distribution company, not municipal aggregators like the Cape Light Compact or retail suppliers."
National Grid filed an application with the Department of the Public Utilities to purchase half of the Cape Wind's power at an above-market price, which state regulators approved. The state's Supreme Judicial Court recently upheld the decision on the contract, which had been challenged by Cape Wind opponents as being too expensive.
"Cape Light Compact is a retail supplier and cannot enter into long-term wholesale contracts with Cape Wind without pledging the full faith and credit of all member Towns and Counties," the CLC website explains. "This pledge of taxpayer support would also require 20 separate town meeting approvals."
Since CLC is a municipal aggregator and not a distribution company, it cannot apportion the above-market costs of the renewable energy supply to the distribution rates of all customers, its website said.