Solar panels planned for convention center

PJM Capacity Auction Price Drop signals PJM Interconnection capacity market shifts, with $50/MW-day clearing, higher renewables and nuclear participation, declining coal, natural gas pressure, and zone impacts in ComEd and EMAAC, amid 21% reserve margins.

Key Points

A decline to $50 per MW-day in PJM capacity prices, shifting resource mix, zonal rates, and reserve margins.

✅ Clearing price fell to $50/MW-day from $140 in 2018

✅ Renewables and nuclear up; coal units down across PJM

✅ Zonal prices: ComEd $68.96, EMAAC $97.86; 21% reserves

Power-plant owners serving the biggest U.S. grid will be paid 64% less next year for being on standby to keep the lights on from New Jersey to Illinois.

Suppliers to PJM Interconnection LLC’s grid, which serves more than 65 million people, will get $50 a megawatt-day to provide capacity for the the year starting June 2022, according to the results of an auction released Wednesday. That’s down sharply from $140 in the previous auction, held in 2018. Analysts had expected the price would fall to about $85.

“Renewables, nuclear and new natural gas generators saw the greatest increases in cleared capacity, while coal units saw the largest decrease,” PJM said in a statement.

The PJM auction is the single most important event for power generators across the eastern U.S., including Calpine Corp., NRG Energy Inc. and Exelon Corp., because it dictates a big chunk of their future revenue. It also plays a pivotal role in shaping the region’s electricity mix, determining how much the region is willing to stick with coal and natural gas plants or replace them with wind and solar even as the aging grid complicates progress nationwide.

The results showed that the capacity price for the Chicago-area zone, known as ComEd, was $68.96 compared with $195.55 in the last auction. The price for the Pennsylvania and New Jersey zone, known as EMAAC, fell to $97.86 percent, from $165.73. All told, 144,477 megawatts cleared, representing a reserve margin of 21%.

Exelon shares fell 0.4% after the results were released. Vistra fell 1.5%. NRG was unchanged.

Blackouts triggered by extreme weather in Texas and California over the last year have reignited a debate over whether other regions should institute capacity systems similar to the one used by PJM, and whether to adopt measures like emergency fuel stock programs in New England as well. The market, which pays generators to be on standby in case extra power is needed, has long been a source of controversy. While it makes the grid more reliable, the system drives up costs for consumers. In the area around Chicago, for instance, these charges total more than $1.7 billion per year, accounting for 20% of customer bills, according to the Illinois Clean Jobs Coalition.

In the 2018 auction, PJM contracted supplies that were about 22% in excess of the peak demand projection at the time. This year, the grid is projected to start summer with a reserve margin of about 26%, as COVID-19 demand shifts persist, according to the market monitor -- far higher than the 16% most engineers say is needed to prevent major outages.

“This certainly doesn’t seem fair to ratepayers,” said Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative.

Fossil-Fuel Advantage
Heading into the auction, analysts expected coal and gas plants to have the advantage. Nuclear reactors and renewables, they said, were poised to struggle amid coal and nuclear disruptions nationwide.

That’s because this is the first PJM auction run under a major pricing change imposed by federal regulators during the Trump administration. The new structure creates a price floor for some bidders, effectively hobbling nuclear and renewables that receive state subsidies while making it easier for fossil fuels to compete.

Those rules triggered contentious wrangling between power providers, PJM and federal regulators, delaying the auction for two years. The new system, however, may be short lived. The Biden administration is moving to overhaul the rules in time for the next auction in December.

Also See: Biden Climate Goals to Take Backseat in Biggest U.S. Power Grid

Dominion Energy Inc., one of the biggest U.S. utility owners, pulled out of the market over the rules. The Virginia-based company, which has a goal to have net-zero carbon emissions by 2050, said the new PJM format will “make renewables more expensive” than delivering clean energy through alternative markets.

Illinois, New Jersey and Maryland have also threatened to leave the capacity market unless the new price floor is eliminated, and Connecticut is leading a market overhaul in New England as well. PJM has already launched a process to do it.

PJM is already one of the most fossil-fuel intensive grids, with 60% of its electricity coming from coal and gas. Power plants that bid into the auction rely on it for the bulk of their revenue. That means plants that win contracts have an incentive to continue operating for as long as they can, even amid a supply-chain crisis this summer.

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U.S. Natural Gas Power Demand is surging for electricity generation amid summer heat, with ERCOT, Texas grid reserves tight, EIA reporting coal and nuclear retirements, renewables intermittency, and pipeline expansions supporting combined-cycle capacity and prices.

Key Points

It is rising use of natural gas for power, driven by summer heat, plant retirements, and new combined-cycle capacity.

✅ ERCOT reserve margin 9%, below 14% target in Texas

✅ Gas share of U.S. power near 40-43% this summer

✅ Coal and nuclear retirements shift capacity to combined cycle

As the hot months linger, it will be natural gas that is leaned on most to supply the electricity that we need to run our air conditioning loads on the grid and keep us cool.

And this is surely a great and important thing: "Heat causes most weather-related deaths, National Weather Service says."

Generally, U.S. gas demand for power in summer is 35-40% higher than what it was five years ago, with so much more coming (see Figure).

The good news is regions across the country are expected to have plenty of reserves to keep up with power demand.

The only exception is ERCOT, covering 90% of the electric load in Texas, where a 9% reserve margin is expected, below the desired 14%.

Last summer, however, ERCOT’s reserve margin also was below the desired level, yet the grid operator maintained system reliability with no load curtailments.

Simply put, other states are very lucky that Texas has been able to maintain gas at 50% of its generation, despite being more than justified to drastically increase that.

At about 1,600 Bcf per year, the flatness of gas for power demand in Texas since 2000 has been truly remarkable, especially since Lone Star State production is up 50% since then.

Increasingly, other U.S. states (and even countries) are wanting to import huge amounts of gas from Texas, a state that yields over 25% of all U.S. output.

Yet if Texas justifiably ever wants to utilize more of its own gas, others would be significantly impacted.

At ~480 TWh per year, if Texas was a country, it would be 9th globally for power use, even ahead of Brazil, a fast growing economy with 212 million people, and France, a developed economy with 68 million people.

In the near-term, this explains why a sweltering prolonged heat wave in July in Texas, with a hot Houston summer setting new electricity records, is the critical factor that could push up still very low gas prices.

But for California, our second highest gas using state, above-average snowpack should provide a stronger hydropower for this summer season relative to 2018.

Combined, Texas and California consume about 25% of U.S. gas, with Texas' use double that of California.

Across the U.S., gas could supply a record 40-43% of U.S. electricity this summer even as the EIA expects solar and wind to be larger sources of generation across the mix

Our gas used for power has increased 35-40% over the past five years, and January power generation also jumped on the year, highlighting broad momentum.

Our gas used for power has increased 35-40% over the past five years. DATA SOURCE: EIA; JTC

Indeed, U.S. natural gas for electricity has continued to soar, even as overall electricity consumption has trended lower in some years, at nearly 10,700 Bcf last year, a 16% rise from 2017 and easily the highest ever.

Gas is expected to supply 37% of U.S. power this year, even as coal-fired generation saw a brief uptick in 2021 in EIA data, versus 27% just five years ago (see Figure).

Capacity wise, gas is sure to continue to surge its share 45% share of the U.S. power system.

"More than 60% of electric generating capacity installed in 2018 was fueled by natural gas."

We know that natural gas will continue to be the go-to power source: coal and nuclear plants are retiring, and while growing, wind and solar are too intermittent, geography limited, and transmission short to compensate like natural gas can.

"U.S. coal power capacity has fallen by a third since 2010," and last year "16 gigawatts (16,000 MW) of U.S. coal-fired power plants retired."

This year, some 2,000 MW of coal was retired in February alone, with 7,420 MW expected to be closed in 2019.

Ditto for nuclear.

Nuclear retirements this year include Pilgrim, Massachusetts’s only nuclear plant, and Three Mile Island in Pennsylvania.

This will take a combined ~1,600 MW of nuclear capacity offline.

Another 2,500 MW and 4,300 MW of nuclear are expected to be leaving the U.S. power system in 2020 and 2021, respectively.

As more nuclear plants close, EIA projects that net electricity generation from U.S. nuclear power reactors will fall by 17% by 2025.

From 2019-2025 alone, EIA expects U.S. coal capacity to plummet nearly 25% to 176,000 MW, with nuclear falling 15% to 83,000 MW.

In contrast, new combined cycle gas plants will grow capacity almost 30% to around 310,000 MW.

Lower and lower projected commodity prices for gas encourage this immense gas build-out, not to mention non-stop increases in efficiency for gas-based units.

Remember that these are official U.S. Department of Energy estimates, not coming from the industry itself.

In other words, our Department of Energy concludes that gas is the future.

Our hotter and hotter summers are therefore more and more becoming: "summers for natural gas"

Ultimately, this shows why the anti-pipeline movement is so dangerous.

"Affordable Energy Coalition Highlights Ripple Effect of Natural Gas Moratorium."

In April, President Trump signed two executive orders to promote energy infrastructure by directing federal agencies to remove bottlenecks for gas transport into the Northeast in particular, where New England oil-fired generation has spiked, and to streamline federal reviews of border-crossing pipelines and other infrastructure.

Builders, however, are not relying on outside help: all they know is that more U.S. gas demand is a constant, so more infrastructure is mandatory.

They are moving forward diligently: for example, there are now some 27 pipelines worth $33 billion already in the works in Appalachia.

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COVID-19 Energy Burden drives higher electricity bills as income falls, intensifying energy poverty, utility shut-offs, and affordability risks for low-income households; policy moratoriums, bill relief, and efficiency upgrades are vital responses.

Key Points

The COVID-19 energy burden is the rising share of income spent on energy as bills increase and earnings decline.

✅ Rising home demand and lost wages increase energy cost share.

✅ Mandated shut-off moratoriums and reconnections protect health.

✅ Fund assistance, efficiency, and solar for LMI households.

I have asthma. It’s a private piece of medical information that I don’t normally share with people, but it makes the potential risks associated with exposure to the coronavirus all the more dangerous for me. But I’m not alone. 107 million people in the U.S. have pre-existing medical conditions like asthma and heart disease; the same pre-existing conditions that elevate their risk of facing a life-threatening situation were we to contract COVID-19. There are, however, tens of millions more house-bound Americans with a condition that is likely to be exacerbated by COVID-19: The energy burden.

The energy burden is a different kind of pre-existing condition:
In the last four weeks, 22 million people filed for unemployment. Millions of people will not have steady income (or the healthcare tied to it) to pay rent and utility bills for the foreseeable future which means that thousands, possibly millions of home-bound Americans will struggle to pay for energy.

Your energy burden is the amount of your monthly income that goes to paying for energy, like your monthly electric bill. So, when household energy use increases or income decreases, your energy burden rises. The energy burden is not a symptom of the pandemic and the economic downturn; it is more like a pre-existing condition for many Americans.

Before the coronavirus outbreak, I shared a few maps that showed how expensive electricity is for some. The energy burden in most pronounced in places already struggling economically, like in Appalachia, where residents in some counties must put more than 30 percent of their income toward their electric bills, and in the Midwest where states such as Michigan have some families spending more than 1/5 of their income on energy bills. The tragic facts are that US families living below the poverty line are far more likely to also be suffering from their energy burden.

But like other pre-existing conditions, the impacts of the coronavirus pandemic are exacerbating the underlying problems afflicting communities across the country.

Critical responses to minimize the spread of COVID-19 are social distancing, washing hands frequently, covering our faces with masks and staying at home. More time at home for most will drive up energy bills, and not by a little. Estimates on how much electricity demand during COVID-19 will increase vary but I’ve seen estimates as high as a 20% increase on average. For some families that’s a bag of groceries or a refill on prescription medication.

What happens when the power gets turned off?
Under normal conditions, if you cannot pay your electric bill your electricity can get turned off. This can have devastating consequences. Most states have protections for health and medical reasons and some states have protections during extreme heat or cold weather. But enforcement of those protections can vary by utility service area and place unnecessary burdens on the customer.

UCS
Only Florida has no protections of any kind against utility shut-offs when health or medical reasons would merit protection against it. However, when it comes to protection against extreme heat, only a few states have mandatory protections based on temperature thresholds.

The NAACP has also pointed out that utilities have unceremoniously disconnected the power of millions of people, disproportionally African-American and Latinx households.

April tends to be a mild month for most of the country, but the South already had its first heat wave at the end of March. If this pandemic lasts into the summer, utility disconnects could become deadly, and efforts to prevent summer power outages will be even more critical to public health. In the summer, during extreme summer heat families can’t turn off the A/C and go to the movies if we are following public health measures and sheltering in place. Lots of families that don’t have or can’t afford to run A/C would otherwise gather at local community pools, beaches, or in cooling centers, but with parks, pools and community groups closed to prevent the virus’s spread, what will happen to these families in July or August?

But we won’t have to wait till the summer to see how families will be hard hit by falling behind on bills and losing power. Here are a few ways electricity disconnection policies cause people harm during the pandemic:

Loss of electricity during the COVID-19 pandemic means families will lose their ability to refrigerate essential food supplies.
Child abuse guidance discusses how unsanitary household conditions are a contributing factor to child protective services involvement. Unsanitary household conditions can include, for example, rotting food (which might happen if electricity is cut off).

HUD’s handbook on federally subsidized housing includes a chapter on termination, which says that lease agreements can be terminated for repeated minor infractions including failing to pay utilities.
Airway machines used to treat respiratory ailments—pre-existing conditions in this pandemic—will not work. Our elderly neighbors in particular might rely on medicine that requires refrigeration or medical equipment that requires electricity. They too have fallen victim to utility shut-offs even during the pandemic.

Empowering solutions are available today

Decisionmakers seeking solutions can look to implement utility shut off moratoriums as a good start. Good news is that many utilities have voluntarily taken action to that effect, and New Jersey and New York have suspended shut-offs, one of the best trackers on who is taking what action has been assembled by Energy Policy Institute.

But voluntary actions do not always provide comprehensive protection, and they certainly have not been universally adopted across the country. Some utilities are waiving fees as relief measures, and some moratoriums only apply to customers directly affected by COVID-19, which will place additional onerous red tape on households that are stricken and perhaps unable to access testing. Others might only be an extension of standard medical shut off protections. Moratoriums put in place by voluntary action can also be revoked or lifted by voluntary action, which does not provide any sense of certainty to people struggling to make ends meet.

This is why the US needs mandatory moratoriums on all utility disconnections. These normally would be rendered at the state level, either by a regulatory commission, legislative act, or even an emergency executive order. But the inconsistent leadership among states in response to the COVID-19 crisis suggests that Congressional action is needed to ensure that all vulnerable utility customers are protected. That’s exactly what a coalition of organizations, including UCS, is calling for in future federal aid legislation. UCS has called for a national moratorium on utility shut-offs.

And let’s be clear, preventing new shut-offs isn’t enough. Cutting power off at residence during a pandemic is not good public policy. People who are without electricity should have it restored so residents can safely shelter in place and help flatten the curve. So far, only Colorado and Wisconsin’s leadership has taken this option.

Addressing the root causes of energy poverty
Preventing shut-offs is a good first step, but the increased bill charges will nevertheless place greater economic pressure on an incalculable number of families. Addressing the root of the problem (energy affordability) must be prioritized when we begin to recover from the health and economic ramifications of the COVID-19 pandemic.

One way policymakers can do that is to forgive outstanding balances on utility bills, perhaps with an eligibility cap based on income. Additional funds could be made available to those who are still struggling to pay their bills via capping bills, waiving late payment fees, automating payment plans or other protective measures that rightfully place consumers (particularly vulnerable consumers) at the center of any energy-related COVID-19 response. Low-and-moderate-income energy efficiency and solar programs should be funded as much as practically possible.

New infrastructure, particularly new construction that is slated for public housing, subsidized housing, or housing specifically marketed for low- and moderate-income families, should include smart thermostats, better insulation, and energy-efficient appliances.

Implementing these solutions may seem daunting, let us not forget that one of the best ways to ease people’s energy burden is to keep a utility’s overall energy costs low. That means state utility commissions must be vigilant in utility rate cases and fuel recovery cost dockets to protect people facing unfathomable economic pressures. Unscrupulous utilities have been known to hide unnecessary costs in our energy bills. Commissions and their staff are overwhelmed at this time, but they should be applying extra scrutiny during proceedings when utilities are recovering costs associated with delivering energy.

What might a utility try to get past the commission?
Well, residential demand is up, so for many people, bills will increase. However, wholesale electricity rates are low right now, in some cases at all-time lows. Why? Because industrial and commercial demand reductions (from social distancing at home) have more than offset residential demand increases. Overall US electricity demand is flat or declining, and supply/demand economics predicts that when demand decreases, prices decrease.

At the same time, natural gas prices have set record lows each month of this year and that’s a trend that is expected to hold true for a while.

Low demand plus low gas prices mean wholesale market prices are incredibly low. Utilities should be taking advantage of low market prices to ensure that they deliver electricity to customers at as low a cost as possible. Utilities must also NOT over-run coal plants uneconomically or lean on aging capacity despite disruptions in coal and nuclear that can invite brownouts because that will not only needlessly cost customers more, but it will also increase air pollution which will exacerbate respiratory issues and susceptibility to COVID-19, according to a recent study published by Harvard.

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Duke Energy Net Metering Proposal updates rooftop solar compensation with time-of-use rates, lower grid credits, and a minimum charge, aligning payments with electricity demand in North Carolina pending regulators' approval.

Key Points

A plan to swap flat credits for time-of-use rates and a minimum charge for rooftop solar customers in North Carolina.

✅ Time-of-use credits vary by grid demand

✅ $10 minimum use charge plus $14 basic fee

✅ Aims to align solar payouts with actual electricity value

Duke Energy has proposed new rules for how owners of rooftop solar panels are paid for electricity they send to the electric grid. It could mean more complexity and lower payments, but the utility says rates would be fairer.

State legislators have called for changes in the payment rules — known as "net metering" policies that allow households to sell power back to energy firms.

Right now, solar panel owners who produce more electricity than they need get credits on their bills, equal to whatever they pay for electricity. Under the proposed changes, the credit would be lower and would vary according to electricity demand, said Duke spokesperson Randy Wheeless.

"So in a cold winter morning, like now, you would get more, but maybe in a mild spring day, you would get less," Wheeless said Tuesday. "So, it better reflects what the price of electricity is."

Besides setting rates by time of use, solar owners also would have to pay a minimum of $10 a month for electricity, even if they don't use any from the grid. That's on top of Duke's $14 basic charge. Duke said it needs the extra revenue to pay for grid infrastructure to serve solar customers.

The proposal is the result of an agreement between Duke and solar industry groups — the North Carolina Sustainable Energy Association; the Southern Environmental Law Center, which represented Vote Solar and the Southern Alliance for Clean Energy; solar panel maker Sunrun Inc.; and the Solar Energy Industries Association.

The deal is similar to one approved by regulators in South Carolina last year, while in Nova Scotia a solar charge was delayed after controversy.

Daniel Brookshire of the North Carolina Sustainable Energy Association said he hopes the agreement will help the solar industry.

"We reached an agreement here that we think will provide certainty over the next decade, at least, for those interested in pursuing solar for their homes, and for our members who are solar installers," Brookshire said.

But other environmental and consumer groups oppose the changes, amid debates over who pays for grid upgrades elsewhere. Jim Warren with NC WARN said the rules would slow the expansion of rooftop solar in North Carolina.

"It would make it even harder for ordinary people to go solar," Warren said. "This would make it more complicated and more expensive, even for wealthier homeowners."

State regulators still must approve the proposal, even as courts weigh aspects of the electricity monopoly in related solar cases. If state regulators approve it, rates for new net metering customers would take effect Jan. 1, 2023.

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Surkhan-Pul-e-Khumri Power Line links Uzbekistan and Afghanistan via a 260-kilometer transmission line, boosting electricity exports, grid reliability, and regional trade; ADB-backed financing could open Pakistan's energy market with 24 million kWh daily.

Key Points

A 260-km line to expand Uzbekistan power exports to Afghanistan, ADB-funded, with possible future links to Pakistan.

✅ 260 km Surkhan-Pul-e-Khumri transmission link

✅ +70% electricity exports; up to 24M kWh daily

✅ ADB $70M co-financing; $32M from Uzbekistan

Senior officials with Uzbekistan’s state-run power company have said work has begun on building power cables to Afghanistan that will enable them to increase exports by 70 per cent, echoing regional trends like Ukraine resuming electricity exports after grid repairs.

Uzbekenergo chief executive Ulugbek Mustafayev said in a press conference on March 24 that construction of the Afghan section of the 260-kilometer Surkhan-Pul-e-Khumri line will start in June.

The Asian Development Bank has pledged $70 million toward the final expected $150 million bill of the project. Another $32 million will come from Uzbekistan.

Mustafayev said the transmission line would give Uzbekistan the option of exporting up to 24 million kilowatt hours to Afghanistan daily, similar to Ukraine's electricity export resumption amid shifting regional demand.

“We could potentially even reach Pakistan’s energy market,” he said, noting broader regional ambitions like Iran's bid to be a power hub linking regional grids.

#google#

This project was given fresh impetus by Afghan President Ashraf Ghani’s visit to Tashkent in December, mirroring cross-border energy cooperation such as Iran-Iraq energy talks in the region. His Uzbek counterpart, Shavkat Mirziyoyev, had announced at the time that work was set to begin imminently on the line, which will run from the village of Surkhan in Uzbekistan’s Surkhandarya region to Pul-e-Khumri, a town in Afghanistan just south of Kunduz.

In January, Mirziyoyev issued a decree ordering that the rate for electricity deliveries to Afghanistan be dropped from $0.076 to $0.05 per kilowatt.

Mustafayev said up to 6 billion kilowatt hours of electricity could eventually be sent through the power lines. More than 60 billion kilowatt hours of electricity was produced in Uzbekistan in 2017.

According to Tulabai Kurbonov, an Uzbek journalist specializing in energy issues, the power line will enable the electrification of the the Hairatan-Mazar-i-Sharif railroad joining the two countries. Trains currently run on diesel. Switching over to electricity will help reduce the cost of transporting cargo.

There is some unhappiness, however, over the fact that Uzbekistan plans to sell power to Afghanistan when it suffers from significant shortages domestically and wider Central Asia electricity shortages persist.

"In the villages of the Ferghana Valley, especially in winter, people are suffering from a shortage of electricity,” said Munavvar Ibragimova, a reporter based in the Ferghana Valley. “You should not be selling electricity abroad before you can provide for your own population. What we clearly see here is the favoring of the state’s interests over those of the people.”

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Pennsylvania Electric Rate Increases hit Peco, PPL, and Pike County, driven by natural gas costs and wholesale power markets; default rate changes, price to compare shifts, and time-of-use plans affect residential bills.

Key Points

Electric default rates are rising across Pennsylvania as natural gas costs climb, affecting Peco, PPL, and Pike customers.

✅ PPL, Peco, and Pike raising default rates Dec. 1

✅ Natural gas costs driving wholesale power prices

✅ Consider standard offer, TOU rates, and efficiency

Energy costs for electric customers are going up by as much as 50% across Pennsylvania next week, the latest manifestation of US electricity price increases impacting gasoline, heating oil, propane, and natural gas.

Eight Pennsylvania electric utilities are set to increase their energy prices on Dec. 1, reflecting the higher cost to produce electricity. Peco Energy, which serves Philadelphia and its suburbs, will boost its energy charge by 6.4% on Dec. 1, from 6.6 cents per kilowatt hour to about 7 cents per kWh. Energy charges account for about half of a residential bill.

PPL Electric Utilities, the Allentown company that serves a large swath of Pennsylvania including parts of Bucks, Montgomery, and Chester Counties, will impose a 26% increase on residential energy costs on Dec. 1, from about 7.5 cents per kWh to 9.5 cents per kWh. That’s an increase of $40 a month for an electric heating customer who uses 2,000 kWh a month.

Pike County Light & Power, which serves about 4,800 customers in Northeast Pennsylvania, will increase energy charges by 50%, according to the Pennsylvania Public Utility Commission.

“All electric distribution companies face the same market forces as PPL Electric Utilities,” PPL said in a statement. Each Pennsylvania utility follows a different PUC-regulated plan for procuring energy from power generators, and those forces can include rising nuclear power costs in some regions, which explains why some customers are absorbing the hit sooner rather than later, it said.

There are ways customers can mitigate the impact. Utilities offer a host of programs and grants to support low-income customers, and some states are exploring income-based fixed charges to address affordability, and they encourage anyone struggling to pay their bills to call the utility for help. Customers can also control their costs by conserving energy. It may be time to put on a sweater and weatherize the house.

Peco recently introduced time-of-use rates — as seen when Ontario ended fixed pricing — that include steep discounts for customers who can shift electric usage to late night hours — that’s you, electric vehicle owners.

There’s also a clever opportunity available for many Pennsylvania customers called the “standard offer” that might save you some real money, but you need to act before the new charges take effect on Dec. 1 to lock in the best rates.

Why are the price hikes happening?
But first, how did we get here?

Energy charges are rising for a simple reason: Fuel prices for power generators are increasing, and that’s driven mostly by natural gas. It’s pushing up electricity prices in wholesale power markets and has lifted typical residential bills in recent years.

“It’s all market forces right now,” said Nils Hagen-Frederiksen, PUC spokesperson. Energy charges are strictly a pass-through cost for utilities. Utilities aren’t allowed to mark them up.

The increase in utility energy charges does not affect customers who buy their energy from competitive power suppliers in deregulated electricity markets. About 27% of Pennsylvania’s 5.9 million electric customers who shop for electricity from third-party suppliers either pay fixed rates, whose price remains stable, or are on a variable-rate plan tied to market prices. The variable-rate electric bills have probably already increased to reflect the higher cost of generating power.

Most New Jersey electric customers are shielded for now from rising energy costs. New Jersey sets annual energy prices for customers who don’t shop for power. Those rates go into effect on June 1 and stay in place for 12 months. The current energy market fluctuations will be reflected in new rates that take effect next summer, said Lauren Ugorji, a spokesperson for Public Service Electric & Gas Co., New Jersey’s largest utility.

For each utility, its own plan
Pennsylvania has a different system for setting utility energy charges, which are also known as the “default rate,” because that’s the price a customer gets by default if they don’t shop for power. The default rate is also the same thing as the “price to compare,” a term the PUC has adopted so consumers can make an apples-to-apples comparison between a utility’s energy charge and the price offered by a competitive supplier.

Each of the state’s 11 PUC-regulated electric utilities prepares its own “default service plan,” that governs the method by which they procure power on wholesale markets. Electric distribution companies like Peco are required to buy the lowest priced power. They typically buy power in blind auctions conducted by independent agents, so that there’s no favoritism for affiliated power generators

Some utilities adjust charges quarterly, and others do it semi-annually. “This means that each [utility’s] resulting price to compare will vary as the market changes, some taking longer to reflect price changes, both up and down,” PPL said in a statement. PPL conducted its semi-annual auction in October, when energy prices were rising sharply.

Most utilities buy power from suppliers under contracts of varying durations, both long-term and short-term. The contracts are staggered so market price fluctuations are smoothed out. One utility, Pike County Power & Light, buys all its power on the spot market, which explains why its energy charge will surge by 50% on Dec. 1. Pike County’s energy charge will also be quicker to decline when wholesale prices subside, as they are expected to next year.

Peco adjusts its energy charge quarterly, but it conducts power auctions semi-annually. It buys about 40% of its power in one-year contracts, and 60% in two-year contracts, and does not buy any power on spot markets, said Richard G. Webster Jr., Peco’s vice president of regulatory policy and strategy.

“At any given time, we’re replacing about a third of our supplied portfolio,” he said.

The utility’s energy charge affects only part of the monthly bill. For a Peco residential electric customer who uses 700 kWh per month, the Dec. 1 energy charge increase will boost monthly bills by $2.94 per month, or 2.9%. For an electric heating customer who uses about 2,000 kWh per month, the change will boost bills $8.40 a month, or about 3.5%, said Greg Smore, a Peco spokesperson.
 

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