If there’s any good news about the electricity rate shock that starts next week, it’s that the jolt might not be quite as bad as the headlines would appear.
Scant comfort, I know. As of Jan. 1, most of us will have to pay a lot more for at least the next six months to keep the lights on, the milk cold and our dawn-to-dusk electronics humming.
Exactly how much more? We designed a calculator so you can type in either your monthly kilowatt hour draw or your monthly payments, to see your monthly payment and the amount of the increase, starting when you shout “Happy New Year” (or maybe “Go Ohio State!”).
By now you’ve learned that generation rates for customers of both Connecticut utilities, Eversource and United Illuminating, will double starting Jan. 1. You might have heard that the average customer will have to pay an extra $85 per month for Eversource power or $76 per month for UI.
It’s bad, but it’s not quite that bad. The median household for electricity use – the point where half are higher and half are lower – will pay an extra $55.50 each month for Eversource service, which amounts to a 41 percent hike. UI customers at the midpoint will face an extra charge of $44.50 a month, or 36 percent.
And if this helps, based on what we’re seeing in neighboring states and in global energy markets, the new prices for juice were more or less unavoidable.
Whatever extra you pay, it’s the result of energy prices skyrocketing in 2021 especially for natural gas in New England, the main fuel for electric generation plants. And it’s also the result of a issue known as congestion charges that worked against us. It’s not related to higher costs and expenses at the utility companies such as executive pay, because those sorts of things are not part of generation rates.
But you probably care more about your bill than about the complex reasons behind it. The calculator works for customers who use Eversource and UI as their default generation supplier in addition to paying the utilities to deliver the wattage to our homes. If you use an alternative power supplier, your rates will be different.
The upshot: Just about everyone who uses Eversource power will see a hike ranging from 35 percent to 43 percent. And just about everyone at United Illuminating will see a jump of 28 percent to 38 percent for United Illuminating.
The more you use, the higher your percent increase because we all pay a flat monthly rate in addition to a per-kilowatt-hour rate, and the flat rate isn’t changing.
Some relief from the shock
We’re not seeing a doubling of the rates for two reasons: First, even though generation rates are doubling, that only accounts for part of your bill. The rest if the delivery charge per kilowatt-hour and the flat rate per month. And second, the delivery charge is actually dropping as of Jan. 1 at both Eversource and UI.
That’s because utility regulators, Gov. Ned Lamont and the state consumer counsel (the advocate for utility customers) got together and rushed through a credit related to nuclear power that we were going to see later in 2023. For most customers, that credit amounts to between $3 and $15 for Eversource, or $4 to $20 for UI, depending on how much juice you consume.
Some slightly good news, according to Claire Coleman, the state consumer counsel, is that these higher generation rates will probably last only through the end of June. And based on what we’re seeing in the energy markets, she told me, “We expect they are going to come down.”
How far down? No one can say, just like no one can predict gasoline prices. The war in Ukraine and the pandemic recovery have both strained global supplies.
“We recognize that the high supply prices are really tough for customers to swallow and we work every day to try to deliver the most affordable rates for ratepayers,” Coleman added.
Part of that is relief for people who can’t pay. There are several forms of relief for families based on income, some of which, like the credits for all customers, were rushed into play as Eversource and UI announced the new generation rates. Some of that help will be paid for later by ratepayers.
One other detail: The “average” monthly bills that you see reported are significantly higher than the median, or typical, household’s bill. That’s because some customers use huge amounts — think heated pools and central air for a 7-bedroom house — and that raises the average above the level most of us use. The average is 700 kilowatt hours and the median is closer to about 500 or 550, Coleman’s office told me.
More good news: You can run a house on a lot less than 500 kilowatt hours a month if you’re careful. You might even pay less in 2023, not more.
Have the utilities done enough?
There’s a lot of debate about whether the price hikes were avoidable, and by how much. Since 2000, with an industry reform, the utility companies don’t make or lose money on generation. They buy power contracts through a supposedly open market of companies that make and sell electricity. They pass along the cost to us.
Does that give them enough of an incentive to do the right thing and secure the best prices? Coleman says yes, it does, especially with experts in her office and in the Public Utilities Regulatory Authority, or PURA, who look over the shoulders of the power buyers at Eversource and UI.
“If supply prices are up and customers are upset and feeling like their bill is too high, then there’s less willingness to pay for investments to utilities do want to make,” Coleman said.
Those other investments, such as so-called system hardening to assure reliability — and, yes, excessive executive pay — are on the delivery portion of our bills, which does affect the utilities’ profits. Those charges are set based on separate hearings unrelated to generation costs.
“So they do have an incentive to make the supply prices as low as possible,” Coleman said.
That doesn’t stop elected officials from demanding answers. In a sharply worded letter soon after the new rates came out, state Senate Democrats asked the state’s top utility regulator, Marissa Gillett, the PURA chair, to hold multi-state hearings for Connecticut, Massachusetts and New Hampshire, where Eversource has service.
“Connecticut needs to further tie Eversource’s executive compensation to performance,” the letter, signed by 20 Senate Democrats, said. “Shareholders should not receive record dividends when customers are seeing more than 100 percent increases in the generation rates. Shareholders, executives and regulators need to come together to provide relief for ratepayers and restore confidence in the management of Eversource.”
Gillett said Tuesday that hearing will happen at 10 a.m. Tuesday. Eversource and UI continue to say the generation rates are based solely on market conditions – as the law requires.
dhaar@hearstmediact.com
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