Monday, March 10, 2014
We just posted a wire story about how New England's wholesale electric prices are at their lowest levels in a decade — largely due to falling prices for natural gas, which is the dominant fuel source for the region's power plants. The price of gas has fallen 20% in the past year, according to ISO New England, the overseer of the region's high-voltage electric transmission lines and wholesale electricity markets.
But unless you're a huge paper mill or some other large consumer with bargaining power and access to the wholesale market, you probably haven't seen 20% reductions in your monthly electric bill.
So why, asks commenter Bob Harris, are Maine's retail electricity prices — the costs that most of us pay for our homes and small businesses — going up and up?
Press Herald reporter Tux Turkel addressed this question in an story from last July, when Central Maine Power and Bangor Hydro both introduced their first in a series of planned rate hikes.
Here's the short version: you're actually paying for two things on your electric bill: "electricity delivery" and "electricity supply" (look at your bill and you'll see the two costs on two separate lines).
Here's a chart from that July story that shows the breakdown (bear in mind that the "supply" portion of the bill has shrunk even more since then):
The "electricty supply" is essentially what you're paying to the power plants, and for most Mainers, it has indeed been going down in recent years. You've probably seen ads for some of the new companies entering the supply brokerage market, like Electricity Maine, Fairpoint Energy and others. Those firms may also be helping drive supply prices down further through competition.
But "electricity delivery" is another matter. There's no competition or choice in this market, because there's only one set of power lines. You either pay those costs to Central Maine Power or Bangor Hydro, and both companies are raising their rates substantially to pay for massive new power line construction projects.
As Tux wrote last July, we've only seen the first of several expected delivery rate hikes to help pay for CMP's $1.4 billion "Maine Power Reliability" project. So expect that part of your bill to keep going up — no matter what the price of natural gas might be.Tweet
Commercial Confidential tracks Maine's business leaders and economic indicators.
I'm an economics wonk and an online content producer for the Portland Press Herald.
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