Massachusetts Set For Another Increase in Utility Costs
Electricity rates have increased nationally over the past six year, with Hawaii remaining the most expensive state in union to power your home or business. Surprisingly, after Hawaii, Massachusetts residential and commercial customers have experienced the second fastest rate increase over that time.
The map included with this post demonstrates the state by state rankings for electricity costs across the United States. Currently, only three states have electricity rates higher than Massachusetts – namely Hawaii, Alaska and Connecticut are the most expensive.
The new Con Edison electricity rates, which were announced November 1, will deliver residential energy clients a 30% increase in rates, from 10.407 cents per kWh to 13.596 cents per kWh. Commercial energy clients will be seeing a 26% increase in electricity rates going from 9.469 cents per kWh to 12.007 cents per kWh, with the average increase per bill being over $250 a month.
In short, the cause of this spike in prices is supply and demand. Cold winter weather in the northeast United States increases the demand for natural gas and electricity – mostly for heating. Massachusetts gets roughly 40% of its energy from natural gas. In order to keep up with customer demand for heating, the utilities are forced to purchase large amounts of natural gas and electricity, thereby driving up the prices for both commodities. Additionally, the costs to maintain and upgrade the electric and natural gas grids increase as stresses on the transmission infrastructure intensify. These maintenance costs are passed through to the end-user.
How can large energy users protect themselves from these increases?
In 17 states across the US (including Massachusetts), the electricity markets are deregulated. This means that energy users can shop their respective load on the open market. Deregulation allows energy users to choose where they purchase their energy and allows them to choose plans that are best suited for their operation. In addition, deregulation promotes competition among energy firms, and motivates providers to offer excellent service to their customers.
As you develop an energy procurement strategy for your firm, it’s critical that you have a thorough understanding of your facility’s energy profile and usage patterns, which will help you maximize efficiencies and eliminate waste as much as possible. Additionally, it’s vital to maintain a comprehensive understanding of the forward energy markets and externalities that effect energy pricing. Timing is key for energy procurement – being nimble will empower your firm to react at the right time, and lock in the best possible price. Lastly, structuring your procurement contract (the game is won or lost in the Terms and Conditions) so that the various contractual components (fixed vs load-following block and index, capacity pass-thru, ancillaries, etc.) are properly aligned to maximize savings.
In lock step with a smart supply-side strategy, Massachusetts energy customers should evaluate on-site generation (CHP, Fuel cell, micro grid, solar+ battery, etc) to offset some of the electricity spend from the grid (remember the rise in electricity costs?), maximize the value of each kW and therm used at their facility, and provide resiliency and business continuity in case of a grid outage.
Looking at the energy profile of your facility, from both sides of the meter (supply and demand) is critical to the long-term viability of your company. This is especially true in a state like Massachusetts that is experiencing ever-increasing utility costs.