Electricity Price Spike Expected
High Fuel Costs Affecting Rates
Prices for electricity will rise this summer, Central Hudson Gas & Electric is warning customers.
Expect the power supply part of the bill to go up 10 to 15 percent, they say, and that's if nothing bad happens.
How come? Prices for power bought in the free market by Central Hudson and sold to its customers will likely rise because of high prices for fuels used in generating -- especially natural gas -- the Poughkeepsie-based utility said.
Pressure on natural gas prices is widespread, far beyond Central Hudson's domain, and can affect a large part of power generation, especially in hot spells when power use peaks and gas-run ''peaking units'' are fired up.
Wholesale gas costs are up about 85 percent since last June on a national basis.
Summer is when power consumption goes up, and with prices going up at the same time, consumers may get hit with a double whammy. So Central Hudson's John Checklick, vice president of customer services, is advising customers to prepare for it.
Warning promised
''If we become aware that electricity prices are expected to rise to higher levels than our current projections, we will alert our customers so that they may take further steps,'' Checklick said in a statement issued this week.
Summer is not usually the time when natural gas gets costly -- that's winter. But this year is different. ''The low level of underground storage is the principal reason for these unseasonably high prices,'' the U.S. Department of Energy said in its current bulletin. Stocks are down by 38 percent versus a year ago.
But one economist who consults for the energy industry offered a rosier view of summer's gas prices.
James Williams of WTRG Economics in London, Ark., said, ''I expect some softening in the price of gas over the next three months.''
That's because drilling activity for natural gas has been on the rise all year, with about 900 active rigs at last count. And the storage deficit is easing too, he said.
In the old days before deregulation, utilities like Central Hudson had fixed rates that provided consumers with stability. They generated their own power and absorbed any volatility in the price of fuels.
''With deregulation, prices for electricity and other fuels are determined in the energy marketplace, and are driven by the forces of supply and demand,'' Checklick said.
That's not good enough for some. Senior citizens on fixed incomes are squeezed. One, Patricia Paulin of Beacon, was troubled by the news of higher rates.
''What happened to the deregulation and the price going down? Ask them that. It should be going down, not up,'' Paulin said.
Central Hudson doesn't generate much of its power any longer, having been forced to sell off its plants. But it knows the sources of the power it buys for customers, and natural gas is a rising component.
In the period July 2001 to June 2002, about 26 percent of the power distributed came from gas generation, said John Maserjian, a Central Hudson spokesman.
That was a big jump from a similar report on calendar year 2001, when only 16 percent came from gas. Gas is a cleaner fuel and most generators favor it as a way to meet tougher environmental rules.
Checklick said Central Hudson uses several ways to control prices. It has fixed-price contracts to buy power from new owners of its former plants and uses financial hedging techniques. It is also advocating that more transmission lines be built to access lower-cost suppliers upstate and in Canada.
Federal Reserve Board Chairman Alan Greenspan on June 10 told Congress part of the solution is to diversify America's supplies of natural gas by building more port terminals for liquefied natural gas that can be imported, the same way oil is.
Closer to home, more power plants could be built and a more tolerant attitude toward gas pipelines could be adopted, said Michael DiTullo, president of Mid-Hudson Pattern for Progress.
Maserjian said customers who use gas for appliances aren't likely to be hit directly. ''Prices for natural gas since spring have actually fallen for our customers and they're expected to stay steady at least through the end of July,'' he said.
Williams at WTRG offered a further-out forecast on gas prices for when they really count for the Northeast, the winter heating season.
''Prices will come down probably 30 percent from where they are today by late fall or early winter,'' he said. ''The high gas prices have made drilling more attractive for producers. ... There's going to be enough drilling activity between now and December to take care of you guys in January.''
Relevant Web link: U.S. Department of Energy fact sheets on cooling your home, conserving energy and heating your pool: www.eere.energy.gov/consumerinfo/factsheet.html <http://www.eere.energy.gov/consumerinfo/factsheet.html>
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