Rhode Island electricity users who will see their rates remain about the same compared with last winter's rates might be looking with envy into Massachusetts, where rates for some are expected to drop by as much as 46% on Nov. 1.
But things might not be as rosy as they seem in the Bay State, and it illustrates the differences in the way utility companies such as Rhode Island Energy in Rhode Island and National Grid in Massachusetts purchase power.
On Sept. 26, the R.I. Public Utilities Commission approved a winter rate of 17.74 cents per kilowatt hour for customers using Rhode Island Energy's default service, or "last resort service," starting Oct. 1 – a 24% hike over summer rates. But at the same time, that new rate is slightly lower than the electricity rate of 17.79 cents last winter.
By comparison, National Grid, which has about 1.4 million residential customers in Massachusetts, has informed the Mass. Department of Public Utilities that it projects a fixed-price rate of 18.213 cents per kilowatt hour from Nov. 1 until July 31, 2024, 29% higher than the summer rate of 14.115 cents but 46% lower than the exorbitant 33.891 per kilowatt hour National Grid charged last winter.
Why the big fluctuation in energy prices between neighboring states?
After all, the six New England states are part of the same electricity grid, where natural gas accounts for about 53% of the region’s electricity, well above the 38% national average. And while the energy sources have continued to diversify, the largest suppliers are still natural gas generators.
Industry observers say what customers in New England states are charged depends greatly on when the procurements of power by utility companies take place. Even those in states with more than one utility can be subjected to a vastly different rate depending on their supplier.
The Ocean State's dominant utility company, Rhode Island Energy, is a relatively new player in the region, born from Pennsylvania-based PPL Corp.'s purchase of National Grid's Rhode Island electricity and gas business in May 2022.
Rhode Island Energy spokesperson Ted Kresse says the utility uses quarterly competitive auctions after their procurement plan with wholesale suppliers is approved by the PUC. The auction dates, products being procured and the amount of supply are set every six months at the time the new "last resort service" plan is approved.
Each auction secures between 15% and 20% of supply and aims over the course of nearly 1½ years, according to Kresse.
It's meant “to create both a layered and laddered product mix," he said.
RIPUC chief economic and policy analyst, Todd Bianco, said the utility is bound to the wholesale market and under statute is entitled to recoup the costs as long as they stick to the approved procurement plan. Spacing out auctions “is designed to flatten out volatility. But there is still some guesswork involved,” Bianco said. “Should you buy Google today or tomorrow? You know the price of Google will likely go up.”
Kresse says Rhode Island Energy's procurement method differs from other states in both frequency and quantity.
"In the previous winter, this procurement approach benefited Rhode Island customers on [last resort service] because we were able to secure a greater quantity of energy before natural gas prices hit their peak," he said.
As a result, Rhode Island Energy says its customers were paying some of the lowest rates available in New England last winter – 17.79 cents per kilowatt hour for the last resort service.
Massachusetts wasn't so lucky. Under regulations in that state, utilities are only allowed to purchase power for basic service for six-month periods and only at specific times, which can limit the ability to get the best price, industry observers say.
When Massachusetts utilities were looking to procure electricity through a competitive bidding process last year, prices were very high for natural gas, leading to a rate of 33.891 a kilowatt hour for National Grid customers in the winter.
