While most Mainers heat their homes with oil, they will still feel the effect of skyrocketing natural gas prices in the form of higher electric bills come March.
Maine relies on natural gas, as does the rest of the country, to power more than one-third of its electric-generating plants. New plants were built to be gas-powered instead of using more traditional fuels like coal. And, in Maine’s case, natural gas took up the void left when the nuclear-powered Maine Yankee shut down.
While natural gas prices, like home heating oil, have been going up for several years, Hurricanes Katrina and Rita caused both to spike, and there’s no clear end in sight.
Oil prices remained at an all-time high this week – $2.56 per gallon as of Monday – and so did natural gas in New England. It hit $14 per million BTUs this past week – doubling its price in less than a year.
That means electric rates are going to go up. “We expect the increase to be substantial,” said Kurt Adams, the new chairman of the Maine Public Utilities Commission. “We’re anticipating an increase,” he said. “The question is only how much.”
Most residential and small business customers in the state get a rate negotiated by the commission under an arrangement known as the standard offer. The rate was just renegotiated starting in March of this year and the price of electricity went up 40 percent. People saw, on average, only a 14 to 17 percent increase in their overall bills because other costs, including transmission charges, went down.
That rate will be adjusted in early 2006 because the PUC decided to do a blended rate over the next three years, meaning a portion of the contract expires this coming March.
Commercial and industrial customers also are likely to see a rate hike regardless of whether they let the commission do their negotiating or make deals on their own. Many business contracts are up for renewal in March, and even if the spike in natural gas prices evens out, it is still expected to be higher than last year.
The other worry is actually running short of natural gas for electric generation and home heating in other parts of the country. In Massachusetts, for example, more homes are heated with natural gas than oil.
Adams said a situation could occur in the residential market here where people will rely on electricity to heat their homes versus oil because the electric company can’t turn off customers for non-payment in the winter months. That’s also true of natural gas – another utility regulated by the state.
“Folks that are on margin and having a hard time economically, know they cannot be shut off,” for overdue electric and natural gas bills, he said. The fear is there will be fuel-switching here and across the Northeast that could exacerbate the current shortage of natural gas, he said.
A report is due out later this week that will give a clearer view of the natural gas supply as New England heads into the heating season.
“Our current view is we are facing the tightest fossil fuel supplies in the history of our country going into this winter,” Adams said. “Natural gas supplies are the tightest.”
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