Gas And Electricity Tariffs In Boston: Understanding Pricing Structures

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If you’re one of the lucky people in MA served by a natural gas company, you probably saved a ton this winter compared to your neighbors who burn oil, propane, or the truly unlucky ones who heat with electric heaters. If you’re like most people, you get your bill, it sits in a pile for a week or two, and then you pay it without looking at it. If you’re paying online, you’re almost certainly not reading your bill. You may not be aware, but if you heat with natural gas, you are participating in a deregulated market. Let’s go through a residential NStar gas bill and see what all those things on the bill really mean. NStar changed the bill format about two years ago to make it easier for laymen to read the bill. Fortunately, they also kept the old bill format, which is now printed on the other side. I’ve included a slightly redacted version of my gas bill below.

Gas And Electricity Tariffs In Boston: Understanding Pricing Structures

Gas And Electricity Tariffs In Boston: Understanding Pricing Structures

For those who crave data, page 1 may leave you wanting more, but there are some great nuggets here. Pay attention to the “Account Analysis” section in the middle left. It lists the number of days, average daily gas consumption and average daily temperature for the current, previous and annual billing cycle. Many people compare usage month to month or year to year without looking at the number of days in the billing period. If there is a difference in billing cycle length, then you really can’t make an accurate comparison unless you normalize the data to usage/day.

Pg&e Bill Comparison By Month Or Year

Natural gas is charged to customers in thermal baths. Therm is 100,000 BTU and is a measure of heat content. For reference, one gallon of gasoline contains approximately 125,000 BTU or 1.25 therma. The utility meter does not read thermals, but measures the amount of natural gas that passes through the meter each month. This volume is usually measured in hundreds of cubic feet, or CCF, but must be converted to therms for billing purposes because customers are purchasing energy (therms), not volume (CCF). The second page of the bill is nice because it shows you how this conversion is done each month.

As you can see, the other side of the bill has all the fun stuff. In the middle left, you will see your tariff code which you can cross with the NStar tariff here. Below that you will see your meter number. If you go outside and look at the number on your gas meter, the numbers will match. Your gas meter probably has dials on it, and the reading shown on your bill reflects the position of the dial at the start and end of the billing cycle. The difference reflects the amount of natural gas you used, in CCF. Volume must be converted to thermal, which is done by multiplying the CCF reading by the heat factor. Your natural gas company is constantly testing the quality of your natural gas because things like moisture and impurities can affect the amount of energy it contains. The heat factor reflects the amount of energy contained in the gas delivered by the company in a given month. It varies from month to month, but not by much because your utility company has to adhere to strict gas quality standards.

On the right side of the bill, you will see the billing items. Regardless of whether you don’t use gas or use it a lot, you will always pay a user fee. Distribution charges reflect the company’s base rate and change based on season (summer vs. winter). It’s not like distribution fees go down when you use more than 50 terms. The distribution adjustment also changes every few months and includes a bunch of items that the utility must recoup from ratepayers. This includes costs for everything from legacy environmental cleanup costs, pension liabilities, separation allowances, low income rebates and energy efficiency programs.

The last part of the bill and potentially the most interesting part of the offer. This fee changes about four times a year and is based roughly on the wholesale market price of natural gas with a delay of several months. If you don’t like the utility’s gas price, you can negotiate with a third party to get a long-term fixed price or an alternative pricing arrangement that might beat the utility. This is the essence of deregulation, that is, customer choice, at the consumer level. It is similar to the telecom deregulation of the late 90s in that Baby Bell provides a monopoly local service, but long distance service could be provided by another company. As for gas, the gas company owns and maintains the pipes in the country, which is a natural monopoly, but other companies can supply gas to consumers in the system and the company will transport the gas the “last mile” to the customer’s meter. Below I have included a graph of NStar’s default natural gas supply price for the last ~8 years.

Why Electricity Prices Are Rising Unevenly Across New England

The far right part of the historical gas price chart is the most important. While debate rages among politicians about “stimulus vs. austerity” and Keynesian spending to cure our current economic malaise, few people realize that the biggest economic stimulus has been delivered to the eastern US and Canada through lower natural gas prices. For the average consumer heating their home with natural gas, the annual savings from the Shale Gas Revolution is approximately $400 per household. If you look at the period from 2005 to 2008, the average winter gas price was approximately $1.20/therm. From 2009 to the present, the average winter gas price has been $0.80/therm or lower. For a household using 1,000 therma in a heating season, this savings of approximately $0.40/therm translates to about $400 in reduced expenses. Last winter, the savings were even greater as the price of gas remained below $0.60/therm. While there are certainly issues with hydraulic fracturing and ETE believes fracking should be regulated, consumers should be grateful for the ~$1,600 fracking has saved them over the last four heating seasons ($400 per year x 4 = $1,600) Prices Energy is regularly in the news due to the rate increases experienced by many people and businesses. You may be wondering why electricity is so expensive and why electricity prices are rising. To answer both questions, it helps to know how the price of electricity works.

The price of fuel is one of the main influences on energy prices and household electricity prices. Natural gas is one of the most commonly used fuels for power plants. The laws of supply and demand, along with regional factors, affect the price of natural gas and other fuels. When natural gas prices go up, you’ll likely see an increase in the price of electricity as well.

As the demand for a commodity like natural gas increases, so does the price. Similarly, when demand declines, prices may fall. The amount of inventory available can also affect your prices. If there is a surplus, prices may be reduced; and when supplies run out, energy prices often rise. These are the biggest factors that explain why your energy bill is so high.

Gas And Electricity Tariffs In Boston: Understanding Pricing Structures

In addition to supply and demand, energy prices are influenced by other factors. These factors can lead to an increase in the price of energy and explain why electricity is so expensive today:

Keeping Cool In Hot Weather

Although the national grid is robust, if several variables combine, energy prices can rise rapidly. We’ve seen many of these happen over the past two years, and the resulting electricity price hikes continue. A fixed rate energy plan can help you deal with the risk of market volatility so you can lock in your electricity price. You can also change your energy usage patterns to use energy-hungry appliances when electricity prices are at their lowest.

How do natural gas prices affect electricity prices? For many hours of the year, power plants that set energy prices run on natural gas, and the cost of fuel is the largest component of the total cost of operating those plants. As more coal-fired power plants close or switch to natural gas, the number of hours that gas plants set energy prices has increased in many regions of the US.

Energy choices have upended many once-regulated markets in more than half of the United States. What is Energy Choice? It is a market structure that gives you the ability to choose your own energy supplier from among several competitors. You may be able to lower your electricity bill by switching energy suppliers.

When suppliers like , compete to become your energy supplier, they must offer competitive prices, a variety of electricity plans and customer-friendly options. Examples of these include fixed rate plans that lock in your electricity price, protecting you from potential future energy price increases.

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