Our friend Scott, Chief Operations Officer over at Hanging Hills Breweryin Hartford, asked us about electricity choice in Connecticut:
CT energy costs lack transparency. Why are CT energy costs some of the highest in the nation?
As you might remember from Part One, the answer’s complicated — which is why costs are clear as mud. In the last installment, we looked at CT’s generation options and fuel options. In this installment, we’ll look at what goes into pricing and how that can affect your electricity bill.
Pricing
The Independent System Operator-New England (ISO-NE) oversees the New England grid’s operation and the wholesale electricity marketplace. Auctions for the lowest bid price to meet the following day’s hour-to-hour demand are held until all the expected demand is met. All of the winning bidders are paid the price charged by the highest selected bidder. During high demand days, like summer heat waves, prices steadily climb with natural gas peaking plants able to hold off bidding until the price gets high enough. Once settled, all the generators, including the low cost nuke plant, gets paid the same price.
Different costs all contribute to the price of energy before it finally bundled together and sold as electricity supply. These include:
- Energy generation costs— the cost of fuel (such as natural gas) to generate energy as well as costs associated with running a powerplant.
- Capacity — this is generated energy held in reserve (such as peaker plants and their costs to provide reliable supplies of energy. For example, an energy supply company may actually put out 600 MW on a daily basis but is required to have capacity to produce 700 MW if needed.
- Ancillary charges— This is power that must be generated to maintain frequency and provide emergency back-up. The energy company mentioned above has an obligation to meet the contracted demand. If one of it’s plants goes off-line suddenly, it still needs to meet that contracted 700 MW capacity.
- Line losses from transmitting bulk power over transmission lines—It takes electricity to send electricity. Because long power lines resist the transmission of electricity, it takes extra power to send electricity down a transmission line. For example, because of electrical resistance in the power line’s metal, it will take 105 MW of power to send 100 MW to its destination 500 miles away. The electrical resistance will use up 5MW and produce heat. Because of resistance, power lines are rated to only transmitted a certain amount of energy. If too much power is sent over a power line, the cable will get hotter and hotter and start to sag. Eventually, it will sag until it touches a tree or it breaks. Depending on the size of the transmission line, a break can cause a wide spread outage.
- Transmission congestion— Line congestion occurs when there is too much demand for power and not enough lines to send it. The problem is that electricity must be used right away. Generator companies must then wait to send their energy, which increases their costs. Utility scale batteries will reduce this cost in the future.
- Distribution— The other half of your bill. Once the electricity gets to Eversource or UI, they still need to send it over their poles and wires to your home or business. They face costs of operating and maintaining their energy distribution system, including repairs from storm damage and upgrades to existing lines. These costs are overseen and approved by the PUCT.
Known Price Issues
As of last year, electricity prices in CT had two main influences. First was the fluctuation in natural gas prices due to pipeline capacity. Second has been high prices for energy transmission all over New England. Transmission costs have come to make up nearly 60% of the average electric bill in New England, which was the reason behind the Federal Energy Regulatory Commission (FERC) starting an investigation into ISO-NE transmission rates last January. FERC found that ISO-NE’s “Transmission, Markets, and Services Tariff (ISO-NE Tariff) is unjust, unreasonable, and unduly discriminatory or preferential.” ISO-NE has agreed to making changes in its Forward Capacity Market (FCM).
Whether these changes will actually be reflected in low rates this coming year is not yet precisely known.
In times of uncertainty in the electricity market, the best way to stay in front of rising prices is to explore the information, ratings, and rankings of Connecticut electricity suppliers at CT Energy Ratings. CT Energy Ratings is the only place on the web that lets you get all the information you need to shop, compare, and sign up for electricity plans that fit your family’s needs.