The massive milling machines and grinders used to make Hindley Manufacturing Co.’s signature wire hardware are power hungry, so it’s no surprise that President Charles Hindley is worried that his company’s hefty energy bills are going to grow much bigger soon.
The manufacturer was temporarily spared from the hikes in winter electric rates that were approved for Rhode Island Energy customers in October. Hindley is locked into a different price through a contract with a third-party broker. But that contract runs out next year, and the company is bracing for the worst.
“We’re already paying $40,000 a year in electric bills, and it might be going up 400%,” Hindley said. “That’s just insane. I’ve never seen anything like it.”
Hindley’s predictions are based on current market prices. Industry forecasts indicate he might be underestimating just how bad it could get.
In its December forecast, the U.S. Energy Information Administration warned of rising and volatile electricity prices in 2023 due to war in Eastern Europe and increasing demand. The outlook looks particularly bad for New England, where a limited capacity to pipe in natural gas requires electricity providers to import liquified natural gas or oil, often competing against “the entire world” for LNG, according to Chris Higginbotham, an EIA spokesman.
After a 9.3% spike in New England electricity prices in the first quarter of 2023 compared with the prior quarter, the EIA expects to see prices tick up again in the last quarter of the year, although not as sharply, according to agency forecasts.
The federal agency does not forecast prices for Rhode Island, but preliminary predictions from Rhode Island Energy suggest similar price hikes are coming. The utility company declined to comment for the story, but filings submitted to the R.I. Public Utilities Commission show the state’s primary electric and gas operator expects rates may exceed 21 cents per kilowatt-hour in the fall of 2023 for both residential and commercial customers – a 20% hike over the rates in place for this winter.
The forecast is based on current prices and is by no means final, says Thomas Kogut, an associate administrator for the R.I. Division of Public Utilities and Carriers.
Higginbotham also stresses that the EIA’s forecasts are also subject to change based on weather, market demand and other “huge wrenches” such as international conflicts.
“When you look at our December 2021 forecasts, we had no idea Russia was going to invade Ukraine,” he said.
Even in a best-case scenario in which the war in Ukraine ends, Ronald Gerwatowski, chairman of the R.I. Public Utilities Commission, believes price hikes are on the horizon.
“Unfortunately, high winter prices are not a one-time temporary effect,” Gerwatowski said in an email message. “It is likely to be an annual summer-to-winter pricing challenge for several years to come.”
And temporary discounts can only go so far.
The rate hikes approved this fall were not as steep as first proposed due to bill credits and fee suspensions. The money for the discounts included a portion of the settlement reached when Rhode Island Energy parent company PPL Corp. bought the gas and electric business from National Grid. The state also used some of its gas cap-and-trade revenue to help low-income customers with their bills.
Gov. Daniel J. McKee also says he plans to introduce legislation to suspend the 4% gross tax receipt on electric bills.
Several of these discounts were given to low-income residents only. Businesses, particularly manufacturers, saw little to no relief on their monthly energy bills.
David M. Chenevert, executive director for the Rhode Island Manufacturers Association, feared the state’s manufacturing sector, which is performing well right now, could be weakened by energy price increases.
“A major concern is to make sure we keep our manufacturers alive and well,” Chenevert said. “Some of these companies are going to start considering, ‘Why are we staying here with these outrageous electricity rates?’ when they could go somewhere else like North Carolina.”
Chenevert was still mulling options for how to keep manufacturers in the state. One idea: partner with offshore wind developer Orsted A/S to set aside electricity from wind farms for manufacturers. He also suggested getting rid of the energy efficiency cost that Rhode Island Energy charges to pay for its energy savings programs because he doesn’t think the program really helps manufacturers.
One silver lining of the ominous forecast for rising power costs is the motivation it might give residents and companies to switch to renewable energy sources, according to Peter Kaczmarek, president of Mearthane Products Corp. Indeed, the Cranston manufacturer of polyurethane components will add rooftop solar panels to its three buildings this year.
At $1.5 million, the investment is not cheap but with standard electricity prices on the rise, Kaczmarek expects to recoup the cost in three to four years, based on savings from generating his own electricity.
Of the rising electricity prices, he said, “it definitely spurs us to do more on the energy conservation side, too.”
Hindley is less enthusiastic about going solar. A few rooftop panels would hardly power the 600-watt machines that fill the factory floor. Moving is also out of the question since he couldn’t afford to lose his 60 workers by uprooting his Cumberland operation.
Instead, Hindley says he’d be forced to pass at least some of the cost increases to customers, which he says would make his company less competitive.
“It also takes away money we’d rather spend on wages,” he said. “The whole thing is really unfortunate.”
