BGE says energy prices will rise for electricity customers

Baltimore Gas and Electric Co. said Thursday that electricity prices will rise for customers who don’t use an outside power supplier, the first jump in energy prices in four years.

That rise in costs, running from June through next May, 2014, comes on top of a distribution-rate increase approved in February.

BGE attributed the electricity price increase to rising natural-gas prices, among other factors.

“We fully understand that cost increases are never welcomed,” said Robert L. Gould, a BGE spokesman. “But we really encourage our customers to help offset the increase.”

One strategy: Shop for another energy supplier.

BGE said nearly 40 percent of its electric customers use third-party companies for their power supply.

The price of natural gas, one of the fuels used to create electricity, plunged in recent years but is on the rise. It cost electric utilities about 16 percent more for natural gas in February than it did the previous year, according to the most recent data from the U.S. Energy Information Administration. The industry’s cost for coal and petroleum dropped modestly during that period.

BGE said customers’ energy costs will be nearly 8 percent lower from June through next May than they were in the 2009-2010 period, thanks to drops in the intervening years. The new price is 14.6 cents per kilowatt hour, compared with 15.8 cents four years earlier.

Natural Gas and Electricity Prices Are Trending Upward

Natural gas prices have very quietly trended up over the past three months pulling power prices along for the ride.  With NYMEX prompt month gas just above $3 as this article was being written, many seem to be putting the value in historical perspective. But relative to recent prices, $3 represents a substantial move.  During this stretch, September natural gas prices have risen over 36% and one year forward, beginning September, have increased over 17%.  For a commodity that has seen its value plummet so dramatically and for such a prolonged period, this 3-month gain represents a stark change and one that should have garnered more attention than it actually has.

Storage has helped fuel this run as many of the recent summer injection levels are down from previous year, week-in-kind volumes.  Despite the lower build, end of injection season levels are still forecaste to be at all-time highs.  Rig counts continue to fall and over the past nine months, they have decreased by nearly 50% -contributing to the smaller storage builds and price increases.  As prices rise and as we near the winter season, the rig decline could reverse course.   The approximate 10% year-over-year contango in the forward market displays the general market consensus that the future will hold higher prices, but a similar or stronger contango has existed over the past several years throughout a majority of the price decline.