National Grid customers in Mass. will see a big electric rate decrease
Update: On March 21, the Department of Public Utilities approved National Grid's proposed rate change. The new basic service rates will go into effect on May 1.
After a winter of sky-high electricity prices, National Grid announced that it’s seeking a big rate decrease for its Massachusetts customers.
In a March 16 filing with the Department of Public Utilities, the company proposed decreasing the basic supply rate — the raw cost of the electricity you use — by 58% beginning May 1.
With the change, the average consumer who uses 600 kilowatt-hours of energy per month would see their bill decrease by about $115, the company says.
"We're pleased that these new electric rates will provide some relief for customers," said National Grid spokesperson Bob Kievra. "We certainly recognize that high energy costs have posed a real challenge for many of our customers this winter."
Massachusetts ratepayers who are on the basic supply rate with utilities like National Grid and Eversource see the the cost of electricity change twice a year. To calculate rates, utilities estimate how much power they’ll need for the next six month period, and then sign contracts with various suppliers.
Utilities do not make a profit on the electricity they provide you, so the price they pay in the market is passed on directly to you. They make their money by building poles and wires, and delivering electricity to your home.
"Last fall, when we did our last round of six month rates, our electricity prices rose to a historic high," Kievra said.
As WBUR has previously reported, fossil fuel prices rose in 2021 as the global economy began to recover from COVID and demand for energy grew. They spiked again in early 2022 after Russia invaded Ukraine and sent energy markets into a frenzy.
New England has been particularly susceptible to these price changes because more than half of the electricity produced in the region comes from burning natural gas. As gas rates ballooned, so did electric bills.
The newly proposed rates are significantly lower because of the cost of natural gas has fallen. (If approved, customers would see the price of electricity drop from $0.33 per kilowatt hour to $0.14 per kilowatt hour.)
Dennis Wamsted, an analyst at the Institute for Energy Economics and Financial Analysis, said part of the reason for the decrease in price is that much of the East Coast had a warmer-than-normal winter.
"This has pushed heating and electricity demand — both key markets for gas — down and led to abnormally high inventory levels for this time of the year," he said. "That, in turn, sets the stage for continued low prices for the rest of the year, unless of course there is another unforeseeable market upset."
An extremely hot summer that causes people to crank the AC could drive up the price of electricity, he added, "but I don't think we will return to last year's extremely high levels."
"Energy markets can be volatile," Kievra said. "We want people to understand that just as prices have dropped considerably this year, the fundamental situation for our region really hasn't. We remain tied very much to global energy markets."
Environmentalists often point out that powering the grid with renewables is not just important for reducing planet-warming emissions, but also creates more price stability; the less fossil fuel we use, the less fettered we are to inherently volatile commodities like gas and oil.
There are about 1 million residential customers in Massachusetts who pay the basic supply rate with National Grid, Eversource and Unitil. Another 964,000 customers are enrolled in a municipal aggregation program, which means their city or town procures electricity on their behalf instead of a utility. These power contracts tend to be longer term, so many customers with municipal aggregation did not see the same supply rate spikes over the winter as those on basic supply.
In Boston, for example, the standard supply rate was $0.11 per kilowatt hour. Those in the city enrolled in Eversource's basic supply rate paid between $0.18 and $0.26 this winter.
Eversource customers will see their basic supply rate change on July 1.
This article was originally published on March 16, 2023.