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Analysts: Electric hikes coming: Consumers may see winter rate increases by Jennifer Heldt Powell Saturday, August 26, 2000
Consumers beset with higher costs for oil, gasoline and natural gas also can expect to pay higher rates for electricity this winter, analysts and industry experts say.
Power plant owners will most likely be paying more for the fuel needed to generate electricity and that is expected to translate into higher electric rates for many.
``As we know, there is some volatility in the price of electricity,'' said Gary Markowitz, the president of Kilojolts, a Boston company that helps consumers make deals on electricity, natural gas and oil. ``If the price to produce it goes up, it's got to be passed on to the consumer.''
Electricity prices will remain stable this year for most Bay State consumers who pay the ``standard offer'' set by the state. But others must buy electricity on the open market or pay the ``default rate.''
Under deregulation approved two years ago, the standard offer will be in place for existing customers until 2003. But even consumers who pay the standard offer this year may have to pay later, consumer advocates say.
``If (power plant owners) lose money, they are authorized to charge future customers,'' said Rob Sargent, the legislative director for the Massachusetts Public Interest Research Group.
This year's potential price hikes were predicted by consumer advocates when the state was considering deregulation, he said.
``During the whole debate over deregulation, proponents said there would be abundant supplies of cheap natural gas and that would provide an abundance of cheap electricity,'' he said.
But now, natural gas prices are rising.
Groups that have locked in electricity prices for the year are breathing a sigh of relief. That includes the PowerOptions program, a buying group of 409 cities and nonprofit institutions organized by the Massachusetts Health and Educational Facilities Authority, or HEFA.
Part of the group is covered by a contract that runs two more years, but the rest will be looking for a new deal in March.
``If the market doesn't change, one would expect our institutions will be paying more,'' said HEFA chief Robert J. Ciolek.
Historically low oil inventories held by distributors have analysts concerned that oil and gasoline prices could go higher as colder weather sets in, which could in turn affect natural gas supplies.
Industry experts say they are concerned about the low stocks but believe there will be enough.
``As long as you don't have price controls, you generally don't have shortages - the market works,'' said John C. Felmy, the director of policy analysis and statistics for the American Petroleum Institute.
Higher prices for oil and natural gas would normally be expected to push up the costs for other goods, but that is less likely this year because of the strong economy, experts said.
-- Martin Thompson (email@example.com), August 26, 2000