National Grid is freezing electricity prices for its residential and small-business customers during February to spare them from a spike that would have driven up their power costs by as much as 19 percent in Western New York.
But the price relief is just temporary. National Grid will recover the higher costs that its customers normally would have paid during February over a period of several months, most likely during the summer.
National Grid requested the deferral – and the State Public Service Commission granted it this week – to ease the financial burden that spiking electricity costs are placing on the utility’s customers.
A typical residential customer’s bill already has jumped by as much as 50 percent since the beginning of November because the unusually cold weather had driven up the price of natural gas used to fuel many of the state’s power plants, while the colder temperatures also have prompted consumers to use more electricity.
“This year’s colder-than-normal temperatures have made this a particularly challenging winter season for our customers,” said Kenneth D. Daly, National Grid’s New York president. “The significant increase in electricity supply costs has made the situation even more critical.”
By freezing electricity supply prices at January’s already elevated level, National Grid estimates that a residential customer using 600 kilowatt-hours of electricity a month will avoid an increase that would have tacked $13.37, or more than 18 percent, onto their February bill.
Small commercial customers, using an average of 1,500 kilowatt-hours of power, will delay an increase that would have pushed up their February bill by $36.30, or nearly 19 percent, the utility said.
The price spikes that were expected in Western New York were less severe than those forecast for other parts of National Grid’s service territory. The projected increases approached 22 percent in the utility’s Syracuse service territory and 28 percent in the Albany region.
National Grid proposed that it start collecting the $32 million in customer money that is being deferred during February over a six-month period beginning in May. The PSC, in its order approving the deferral, said it would determine the length of the recovery period and when it would begin after considering public comments.
While all of New York’s utilities have been experiencing higher electricity prices this winter because of the cold and the increase in natural gas costs, the increases experienced by National Grid’s customers have been more extreme, which prompted the move to freeze supply prices during February.
PSC officials said the state agency will review the hedging strategies that National Grid uses to smooth out volatility in commodity prices, as well as its retail rate mechanisms to try to prevent similar spikes from occurring in the future. National Grid’s power costs jumped by 47 percent from November to December – an increase that consumers felt in their January bills, said Patrick D. Stella, a spokesman for the utility.
The freeze, which will show up as a credit on customers’ bills, affects only the commodity price of the electricity that National Grid’s customers use. Those prices fluctuate from month to month, based on variations in supply and demand in the state’s competitive wholesale power market. National Grid passes those electricity costs along to its customers at cost. The delivery rates that National Grid charges, which are regulated by the PSC, are not changing.
Demand for electricity has been high this winter because of the cold temperatures. The state set a winter record for peak electricity demand earlier this month, topping a record that had stood for more than nine years, according to the New York Independent System Operator, which manages the state’s power grid.