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HomeenergyAs Winter Takes Hold, Plunging Temperatures Test Utilities

As Winter Takes Hold, Plunging Temperatures Test Utilities

The short-term price of natural gas in the Northeast eased on Wednesday after surging during the cold snap this week, but many consumers face the prospect of higher bills as utilities seek to pass along the added costs.

Already, several utilities, including Connecticut Light and Power as well as National Grid and NStar, which serve Massachusetts, have recently announced increases in their retail electricity rate as they struggle to meet peak periods of demand.

On Tuesday, for example, spot prices for a few large energy customers in the region spiked nearly 10 times higher than national prices as demand for electricity and heat soared and overwhelmed pipelines taking gas supplies to the region from the south and west.

(Read more: $125 billion: The cost of extreme weather in 2013)

Many power providers compensated by importing more gas from Canada through pipelines that have been mostly underused in recent years and through imports of liquefied gas supplies.

Utilities also bought more coal- and oil-fired power, which is normally priced higher than gas but has recently been lower because of constraints in gas pipelines.

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All the while, electricity grid operators pleaded with customers to conserve energy by lowering their thermostats, and they asked gas customers to switch to other fuel sources.

The frigid weather presented a big test for utilities, especially in the Northeast, which have switched from coal to gas power in the last decade as cheap natural gas from the Marcellus shale field became available.

"The power system in New England has performed as expected so we've been in good shape through this latest cold snap," said Marcia Blomberg, a spokeswoman for ISO New England, a big operator of the regional grid. "The system has held up." There were no serious interruptions of power reported and utilities were not forced to conduct rolling brownouts to prevent a blackout.

"The system is big, diverse and robust," said Michael Lynch, president of Strategic Energy and Economic Research, a consultancy based in Amherst, Mass. "Some of the utilities have to buy some coal power and small amounts of gas at high prices, but a lot of adjustments across the system are enough to cope."

Mr. Lynch said consumers would probably face higher electricity rates in coming months because "this winter has been colder than normal and because natural gas prices have recovered."

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The spike in prices on Tuesday was significant. On the wholesale market, a megawatt-hour of electricity, an amount of energy that would run a big suburban house for a month and which on normal days sells for $40 or $50 in many locations, was going for $500 to $1,000 in New Jersey, Delaware and big areas of Pennsylvania and Maryland.

In parts of New England, the prices were over $200. In New York City, wholesale prices were under $200, mostly because generators were burning oil, whose price does not spike seasonally as much as the price of natural gas does.

With prices falling on Wednesday, energy experts expected the trend to continue as temperatures climb through the rest of week.


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