Last year's energy inflation, this year's shivers

January 31, 2009|By JAY HANCOCK

Sam and Heather Travaglini turn down the heat pump when they're away or asleep. They bought efficient fluorescent bulbs.

They never put the thermostat higher than 70 degrees, even though the basement has trouble making it into the 60s. Heather "always has a blanket on," even when she's upstairs, her husband says.

So what did they do to deserve a $265 Baltimore Gas and Electric bill this month?

"It is the highest bill that I have received" since they bought their Columbia townhouse three years ago, says Sam Travaglini. "I kind of anticipate that the next one is going to be even higher."

Metro Baltimore is freezing, worried about the recession and wondering why BGE bills are higher than ever even as the cost of gasoline, electricity and other energy has plunged.

Blame a cold winter and BGE's purchase of electricity last year when energy prices were hitting record heights. The popped energy bubble should eventually mean moderately lower BGE bills.

"In 2010, I think we'll see in the range of 5 to 10 percent potential drops in retail electric rates," says Mark Case, BGE's senior vice president of strategy and regulatory affairs. Natural gas rates could go down by much more.

But the long-term trend for all energy prices is still upward.

This winter's electric bills include costs for carbon emissions and renewable fuels that are likely to grow as the country tackles climate change. Marylanders will also pay for new generation at Calvert Cliffs, where BGE parent Constellation Energy plans to add a third nuclear unit, and elsewhere.

Many would be thrilled with a $265 BGE bill. The Baltimore Sun's weather blogger, Frank Roylance, says his passed $300 for only the second time in a dozen years. (Blog post title: "Yeeoweee!") Mine was $357, the highest I can remember. Tales of $700 bills and higher from people in older, poorly insulated homes are common.

Deregulation is still a factor, of course. BGE used to sell relatively inexpensive electricity from its own coal and nuclear plants. But Maryland lawmakers allowed BGE's unregulated parent to take over the generators while BGE has to shop for more-expensive juice on the open market.

Full deregulation, however, kicked in almost three years ago. Today's extra-high bills come from last year's energy inflation and this year's shivers.

This winter, temperatures are 8 percent lower than normal, BGE says. That translates into as much as 10 percent more kilowatts burned - or higher if you have a heat pump or baseboard heaters.

At the same time, household kilowatts are about 10 percent more expensive than last winter because BGE locked up its supply in advance, before prices dipped. While not purchasing at the peak in June and July, it still bought above today's depressed levels.

Likewise, BGE bought much of this winter's natural gas last summer, during the boom.

So neither natural gas nor electricity customers have yet benefited from the crash in energy prices. The wholesale cost of both decatherms and kilowatts has fallen by 40 percent or more from last summer's highs, mimicking the price of gasoline.

Gas consumers will see bigger and sooner relief than electricity customers because BGE is locked in longer for electricity costs. Gas users should see a big decrease by late spring. Electricity prices will come down gradually as BGE's older, expensive contracts expire.

But probably not for long.

Although the recession has diminished growth in electricity consumption and postponed the day of Maryland blackouts and brownouts, at some point we have to build new generators. One way or another electricity customers will pay.

We're also beginning to pay for the considerable carbon emitted by coal-powered generators that have powered the mid-Atlantic economy for a century. The Regional Greenhouse Gas Initiative, a consortium of Maryland and nine other nearby states, auctioned the first carbon-emissions permits last fall and builds the cost into what BGE users and other customers pay.

Tougher federal proposals to cap carbon emissions could raise wholesale megawatt costs by about 10 percent to 65 percent, calculates PJM Interconnection, which manages the mid-Atlantic grid. That's pocketbook pain beyond what anybody is experiencing now. And this is bad enough.

Denise Miller's latest BGE bill was $560.

"Paying this much for gas and electricity - you don't have that extra to do anything else" like go to restaurants, says the Columbia nurse. "I feel like we're paying all this money and not getting our money's worth" because the power frequently dies during storms.

Her family turns off lights when they leave rooms. They don't keep the night porch lights on anymore. They're talking about lowering the thermostat from 69 degrees to 67.

"I'm thinking this is crazy," she says.

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