Story Produced by Business NH Magazine, a Member of
New Hampshire businesses and residents are used to expensive energy bills, but recent rate increases left even hardened Granite Staters breathless as some saw their bills double in August. Such dramatic increases only add to the burdens NH businesses face, including lingering supply chain issues, workforce shortages, rising interest rates and worries of a possible recession.
By now, it is widely understood that the high price of natural gas is driving the cost of electricity higher but many residential customers and even some small businesses might be scratching their heads, asking, “I don’t even use gas, why did it make my electric bill go up?”
The first thing to understand is that there are two major drivers to every electric bill: supply and distribution, says Unitil Media Relations Manager Alec O’Meara. “The distribution charge covers the trucks, the building, the folks working in the call center, and it covers all the work you see in the field like tree trimming,” he says, adding that distribution piece is regulated by the state and is generally stable. In other words, it is not driving the increases.
“What’s changing is what’s called the supply charge, an entirely separate part of the bill driven by the market rate of the actual cost of the electricity that’s being generated by the power plants. No utility in New Hampshire actually owns power plants. But we are required to go out at very specific regulated times to the generators and [negotiate] a contract. That rate becomes the supply part of the bill for that six-month period,” O’Meara says.
William Hinkle, Eversource media relations manager, says the supply price or default energy service charges are adjusted twice annually, on Feb. 1 and Aug. 1, which is when the charge increased from 10.669 cents per kWh to 22.566 cents per kWh for Eversource customers. Supply rates typically decrease in the summer, but 2022 saw an “unprecedented increase” in the supply portion of the bill.
While rates are generally locked in for a six-month period, Unitil made a special request to lock them in for eight months this winter with the hope of spreading the cost of the peak winter months over more time, says O’Meara. “Our current supply rate is 10.1 cents per kWh, and effective Dec. 1, the Unitil supply rate will go to 25.9 cents per kWh. That rate would be in place through July 31. Our winter rate is higher because it includes the entirety of the winter months as opposed to stopping at Feb. 1.”
Understanding Cost Drivers
While the NH Office of the Consumer Advocate is charged with representing the interests of residential customers, consumer advocate Don Kreis says more often than not the interests of consumers and businesses align, especially when it comes to higher electricity costs. Kreis says small businesses are the smallest energy users often consuming far less than a residential customer running a household.
Kreis explains that in 1996, the State Legislature opted to transition the state to accessing competitive markets to provide electricity rather than a system where there would only be a single supplier/distributor in the market. “So, there’s a competitive wholesale market and there is supposedly competitive retail market. Markets fluctuate and supply and demand fluctuate. Right now, we’re in a very high-demand period with prices driven by the high price of natural gas. The high default energy service prices have the effect, or should have the effect, of encouraging small customers to look elsewhere and I think many of them are doing this.”
The major driver of the price of energy supply in New Hampshire and New England is the unprecedented increase globally in the price of natural gas, says Hinkle. “New Hampshire is part of [ISO New England]. At any given time, natural gas makes up about 50%—sometimes more—of the energy used to fuel electric generation in the region. When we go out to purchase supply, that’s the mix we’re purchasing from,” says Hinkle.
Kreis agrees, saying ISO New England’s app that shows the energy mix going into the grid reports that natural gas is the largest contributor to the energy mix, approaching 70 percent at times. So, even if other sources that contribute to the mix are at a lower price point, such as nuclear or solar, natural gas, as the biggest component of NH’s energy mix, is setting the price.
And it is world events that are helping to drive those increases, says Christopher Ellms, deputy commissioner of the NH department of energy (DOE). The newly created DOE is the result of the legislature and the governor looking to have the Public Utilities Commission focus mostly on adjudicative responsibilities where the DOE would represent that state’s position.
The agency also has an enforcement division that handles utility safety issues, a policy division and represents the state before the PUC and energy savings programs.
“Energy markets are global. The higher prices that we’re seeing are part of an energy supply crunch brought on by a number of things,” says Ellms. “COVID was definitely impactful because demand for energy went down pretty significantly, and production also went down accordingly. As we’ve come out of the COVID economic crisis, demand has been very high, and production is not matching it. There’s national energy policy that plays into it, there’s some uncertainties around supply, but the ongoing war in Ukraine is one of the biggest drivers of the spikes we’re seeing in natural gas prices.”
Is it Time to Shop Around?
While many NH residents and businesses may think of Eversource as “the electric company,” the utility divested its generation facilities and doesn’t actually produce any of the supply. While your region determines your distributor, a supplier is a different matter.
“Customers have the option to take their energy supply from an alternative supplier and then it’s still our system and our transmission and distribution lines that are used to deliver the energy and the bill still comes from Eversource,” says Hinkle.
Both Eversource and Unitil offer guidance on their sites for customers considering an alternate supplier. Additional tips and the list of approved energy suppliers is available on the PUC website (puc.nh.gov). O’Meara says if a customer chooses to shop around they may be able to sign a contract that differs from the calendar that utilities are on that could result in savings.
“You could choose to sign a contract for a longer period of time and then you might have a different rate than what a utility is seeing because of market spikes at that exact moment,” says O’Meara. “The caveat there is that you should have exactly the same diligence as you would with any other long-term financial contract. Think about how long the contract is for, what options you have as a customer, and make sure you understand all the parameters.”
He says being your own energy broker, going outside of the standard schedule creates more options for customers and large businesses do this quite often.
Ellms says that commercial or industrial customers can find information on the DOE website when considering competitive suppliers. He says businesses might be motivated by things other than just the cost. “Folks have different priorities; some might want to have environmental considerations or other policy considerations. Some folks might appreciate a more stable rate but that might have some premiums built into it or there might be options that just make sense for people on a financial basis other than sort of the default service.”
For businesses it is a little harder to predict what the effect will be as the amount of energy use can vary widely. For large businesses such as the state’s largest employer BAE, Kreis says most have already gone to competitive markets for their supply. When it comes to large power users, they don’t even need to look as the companies that are offering competitive rates will usually try to court these big accounts.
Striving for Maximum Efficiency
Whether brokering for a better price or sticking with your current energy supplier, even small increases in energy efficiency can help chip away at those costs.
NH Saves, the state’s energy efficiency program, is managed by local utilities. Where you live or do business determines the utility you work with, but the program is uniform across the state and includes a number of cost-saving opportunities for both residents and businesses, says O’Meara.
“There could be a lot of really low-hanging fruit and then there’s rebates on top that can help save on the cost of the improvements,” he says. “NH Saves is a great tool in terms of efficiency. Not only does it allow you to save on energy but oftentimes the things that you’re putting in can have an improvement on the overall aesthetic of your business or give you a competitive advantage.”
Energy efficiency projects can be as simple as changing out all the bulbs in the building, installing a programmable thermostat or adding insulation. Replacing outdated appliances or older machinery will almost always be more energy efficient due to technology improvements, says O’Meara.
NH Saves offers rebates across a broad range of energy savings measures, including construction and retrofitting efforts.
These articles are being shared by partners in The Granite State News Collaborative. For more information visit collaborativenh.org.