Winter Power Supply Costs

Pascoag Utility District reports that the power supply situation in New England during this extreme winter period has been very challenging and very costly.  Natural Gas costs are a main driver in electricity costs since most of the generation that has been added to the New England system over the past 15 years has been new natural gas fired generators.  Gas fired generators set the market price of electricity in New England most of the time, and this winter, due to a lack of adequate gas pipeline capacity to move economic shale gas from Pennsylvania to the New England region, costs for natural gas were often 10 times higher than normal during these cold weather months.  The electricity prices followed this trend.

Most of Pascoag Utility’s power requirements come from economic long term contracts from hydropower, wind, nuclear and fixed contracts, but a small percentage of our requirement comes from the short term spot electricity market, which has been extremely high.  Pascoag is currently working with the Rhode Island Public Utilities Commission to address the added costs, and we will likely file for a temporary Standard Offer Service rate increase to begin on July 1 to account for the additional costs we incurred.

The governors and utility commissions of the six New England states have gotten together and proposed mechanisms to provide for more gas pipeline capacity to be built into New England in order to alleviate the higher natural gas and electricity prices we saw this past winter.  Pascoag Utility considers that a very positive step to help New England become competitive with the rest of the country in regards to energy costs.

Pascoag Utility will do its best to manage our power supply to deliver the lowest cost possible for next winter, but we wanted to address the situation here to alert our customers that prices for the power component of our rates will likely rise for the July through December period of 2014.