NY Electricity Prices Skyrocket Due to Weather and Gas Prices

Cold and Electricity PricesNew Yorkers looking at their electricity bills across the state are going to be facing sticker shock. Electricity prices jumped last month by more than 50 percent on average statewide, fueled by cold winter weather and surging demand for natural gas, which is used to generate much of the state’s electricity as well as for heating.

And the electrical price spike came ahead of the dreaded polar vortex that put the state into a temporary deep freeze this month. So next month’s electric bills might also be high.

Electricity prices in the state track natural gas prices very closely.  Since electricity prices in New York change every month, customers without competitive fixed price supply contracts may wish that they had those contracts.

In New York, a megawatt-hour of electricity (enough to power 1,000 average homes for an hour), sold into the ISO for $66.39 in December, up 53 percent from the month before, when it sold for $43.27, according to NYISO. During that same period, the price of natural gas in the state spiked by 46 percent.

Such gas-driven spikes in electric rates during winter months are not unusual, according to a NYISO statement. “The markets experienced similar price increases in January 2011 and 2013. In contrast, the winter of 2012 was relatively mild, which eased the demand for natural gas and prices remained low,” according to the statement.

NY utilities now simply gets the power that they sell through NYISO, which itself operates a system where plant owners bid in the price of their power hourly, daily and in advance.  This is essentially the same as a customer that purchases an LMP index contract from a competitive supplier, which offers no price protection.

Utilities try to hedge against price spikes by buying access to some power in advance when prices are lower, but 90 percent of the electricity sold by utilities is obtained through short-term market run by NYISO.

During the winter, retail residential, commercial and industrial gas customers have priority on gas supplies to meet heating and commercial needs, according to NYISO. During cold spells, that demand competes with the growing demand for gas as a fuel for power plants, and pushes up the price.

December was a bit colder than average, according to the Albany office of the National Weather Service. The average temperature was 27.6 degrees, which was nearly a full degree below the average for the month.

But November was even cooler. The month averaged 37.2 degrees, about 2.5 degrees below normal.

This month, the state set a record for electricity usage on Jan. 7 during the vortex-induced cold snap, as the electricity demand reached 25,738 megawatts — breaking the previous peak winter demand record of 25,541 megawatts set Dec. 20, 2004, according to NYISO.

Nationally, natural gas prices rose 35 percent in 2013, and the federal Energy Information Administration had predicted home heating bills to increase 13 percent this winter for natural gas customers across the country, with users of home heating oil seeing a 2 percent decrease.

If you don’t have a fixed price electricity or gas contract for your business, maybe it’s time to think about that!