Energy matters make consumers question costs
Corey Lang, an environmental economist and
professor in the University of Rhode Island’s College of the Environment and
Life Sciences, conducts research at the intersection of energy and residential
issues, focusing on ways energy issues interact with the public interest.
Lang says that many Rhode Islanders have experienced a large
increase in electricity bills in recent months, stemming from this winter’s
abnormally cold and windy weather leading to increased usage.
“Utilities are in the business of distribution,” says Lang.
“It costs a lot of money to build and repair the distribution network, keeping
electricity flowing efficiently and reliably.”
In URI’s College of Business, Douglas
Hales, professor of operations and supply chain management, is
focusing on global supply chain management.
Hales discussed the reasons for consumer price flux in
energy bills in an interview.
How does energy distribution work?
Energy comes from two primary distribution channels and six
energy generation methods.
Distribution can be local, coming from solar panels or fuel
powered generators onsite; or from a grid that delivers it from a remote
location, where the power is generated, to user location through wires running
overhead on power poles. Regardless of the method, all power must be converted
from its natural/source form into AC current (Alternating Electrical Current)
in order to be useful.
The generation methods used here in New England are 52% by
natural gas generators, 26% from nuclear power plants, 12% solar farms and wind
turbines, 7% water dams, 2% fuel oil generators, and .31% coal-fired plants.
Each of these methods are located in different geographic locations so it is
expensive to bring the power from different locations to the grid.
Additionally, when distributing power from the source to
homes, power is lost. On average, a power plant must generate twice as much
energy as is needed, meaning that a plant must produce 200 watts of power to
light a 100-watt bulb in a home or business.
What’s been happening in energy prices this winter?
Because it is a harsh winter, there is less sunlight than
previous recent winters so solar farms aren’t producing as much power this
winter as usual. And because of this year’s harsh weather, demand for power is
up. For instance, on Jan. 19 this year, at 6 p.m., there was a peak demand for
19,600 megawatts of electricity in the five New England states.
Because of higher demand for electricity, the power company
had to use more oil and coal generators than normal to make up the difference.
The next two days, Jan. 20-21, during daytime peak hours, there was more power
generated for New England by oil and coal-fueled plants than by natural gas
(the usual leader at 52%). Because the natural gas plants, nuclear plants,
solar and wind farms, and water dams almost always run at maximum capacity
year-round, the only way to make up for a spike in electricity demand is
through the use of fuel oil and coal-fired plants, which are more flexible to
start up and stop.
Because demand is higher, costs are also higher. Research
indicates that even if the electricity rates do not increase, consumers see
higher electricity bills because of more use. However, now that more fuel oil
and natural gas is being used to generate power for the grid, the price of fuel
oil delivered to homes and businesses increases on each fill, and the price of
natural gas has risen accordingly. Oil and gas prices are not regulated by the
government, so they change with demand. Electricity prices come from a grid and
are regulated by the government.
What is the reason for delivery charges being higher than
the cost of energy and what can consumers expect to see in their energy bills
going forward?
There are two costs involved: a cost to generate the
electrical power and a cost to deliver the power. It is more costly to deliver
power this winter because labor, and material and equipment (wire,
transformers, service trucks, etc. due to inflation) costs are up due to the
harsh weather and a shortage of spare parts. In harsh winters, more material
and equipment are damaged and need replacing and repairing. More labor hours
are needed on overtime pay. This year the distribution maintenance costs rose faster
than the power generation costs. Long-term, people can add solar panels that
can replace electricity from the grid, and while the costs for solar panels are
dropping, there is an upfront cost of adding a solar system to your home. In
Rhode Island, the power company will pay you for unused solar energy that your
panels produce, but this has consequences that users should investigate before
installing.
What can New Englanders expect to see in energy use and
changes in our area?
In the short-term, harsher winters here in New England
equate to more power usage. While rates for electricity won’t change, the
amount of power used will increase in harsh winters. But the rates for natural
gas and oil aren’t regulated so their prices can change on every fill up.
Is there anything you recommend consumers do, to save
money or be better informed on energy issues?
Electricity rates are regulated so they won’t change within
a season, so power bills are in full control of the user. Keeping control of
the thermostat is essential. The recommended level is between 66 and 68
Fahrenheit for heat. Check for heat loss through drafts from windows and doors.
Insulation in the walls, attic and floor can help. Electric or gas hot water
heaters with temperatures set at 115 to 120 F can save substantial energy over
those set at 125 to 130 F. A few degrees can make a huge difference on power
bills. Consider turning the temperature in your home to 60 to 62 F when no one
is at home for a few hours, and if you are leaving for a few days, consider
turning your hot water heater down to 100 to 105 F.
Electric clothes dryers are one of the largest users of
power in a home. Make sure that clothes from the washer are spin-dried as much
as practical and the electric dryer is full to manufacturer recommendation when
running. Too many small loads can increase electricity waste. This is true for
electric dishwashers as well. Because dishwashers have electric pumps, heaters,
and spin motors, too many small loads can increase electricity bills. Fuel oil
and natural gas rates are not regulated and can change at any time, so these
bills are partially out of control of the user.
Lang adds that it’s important for consumers to look at their
bills and assess if they’re getting the best rate.
“These rates are regulated and only change every six months,
and even then are fairly consistent. The cost of electricity is almost
independent of the cost of distribution. Some customers pay more for
electricity than distribution, and some vice versa,” says Lang.
“Rhode Island Energy allows customers to choose their energy provider, so it’s important for customers to determine if their rates are better or worse than the state’s ‘Last Resort Service’— the guaranteed rate provided by Rhode Island Energy. If their rate is higher, then they might want to consider switching.”
