July 23, 2012

Electricity rates expected to climb – and climb

This month’s modest increase will be followed by more hikes over the next five years to pay for power grid upgrades.

By Tux Turkel tturkel@pressherald.com
Staff Writer

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But opponents continue to question whether all the infrastructure is necessary. Environment Northeast, which has an office in Maine, did a study last year showing that transmission spending was growing much faster in the region than in the rest of the country. It also argued that not enough attention is being paid to cheaper, non-transmission alternatives, such as energy efficiency and clean-power, small-scale generators.

As costs mount, regulators are taking a closer look at non-transmission alternatives. But this process won't blunt the impact of spending for projects that have already been approved.

A breakdown of CMP's home rates over the past decade shows what's happening:

Oil and natural gas prices rose after 2005, and electric rates followed. Record energy costs in 2008 propelled total home rates to 16 cents per kilowatt hour, a high for the decade.

The recession and the collapse of gas prices in 2009 sent overall prices tumbling to 14 cents/kwh earlier this year, nearly back to 2005 levels.

All the while, transmission rates hung at roughly 1.5 cents/kwh. Now they're inching up.

This month's transmission hike will increase rates roughly a half-penny, largely to begin paying for CMP's project. As the rest of the project, and other New England upgrades, are put into rates, the transmission portion of the bill will grow to roughly 4 cents/kwh.

For home customers, transmission costs coupled with an increase in energy prices could push total rates close to 20 cents/kwh later this decade, according to Richard Davies, the state's Public Advocate.

"I do think the pressures are going to be more upward than downward in the near future," he said.

For small businesses, the impact will depend on the role electricity plays in total expenses, according to David Clough, state director for the National Federation of Small Business.

"It will matter for some," he said. "It's a couple of cents multiplied by a large volume. It adds up."

For manufacturers, the costs could be substantial, according to Tony Buxton, who represents companies in the Industrial Energy Consumer Group.

A breakdown of CMP's commercial rates shows transmission stayed below 1 cent/kwh until 2009. With the new change, rates will nearly double from what they were three years ago. That will put them at a level near today's depressed prices for natural gas.

"It's crazy," Buxton said. "We're now paying as much to transport the electrons as to generate them."

Against this backdrop, the PUC is set to review the costs of various government programs that are funded through electric rates, and decide how to present that information to consumers. Programs include funding for the Regional Greenhouse Gas Initiative, renewable portfolio requirements, Efficiency Maine and low-income programs, as well as the Public Advocate's and PUC's offices.

Buxton and other experts say they don't expect all these programs to add up to 1 cent/kwh, but that it's worth calculating their total contribution.

"The bottom line is we should include every cost," Buxton said. "There are no silver bullets in this business. You're going after one-tenth of a cent at a time."

Staff Writer Tux Turkel can be contacted at 791-6462 or

tturkel@pressherald.com

 

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