At Bryant Gardens, Con Edison is our friend. The first Con Ed bills for gas for our boilers show substantial savings — nearly 50% — over the cost of oil. Wow!
But the glow turned to glower when we opened our personal Con Ed bill for January. The bill jumped 40% from December to January, although we used the same amount of gas and less electricity. A Con Ed conundrum!
The cause of the increase? Electricity rates. Our EL1 residential rate jumped from 8.11 cents/kilowatt-hour to 19.10 c/kwh in January. Con Edison offered to enroll us in their level billing plan to ease the pain, but had nothing to say about the record high rates.
A quick Google search revealed a spike in electricity rates due to higher costs for natural gas. Sound like a Con Ed con? Yes, but here’s how it happens. Electrical energy is manufactured by giant turbines powered by a natural source of energy such a water, wind, coal, oil, nuclear fission or — you guessed it — gas. Con Ed gets most of its electricity from suppliers whose plants are fired by natural gas.
Large users of natural gas, like factories and utilities, have long term contracts to buy gas at low rates year round — a level buying plan. But when demand spikes — as it has during this year’s arctic freeze, Con Ed’s suppliers are forced to buy the extra gas they need on the spot market and pay the “going rate.”
But wait you say, why should the going rate be high when we’ve got all that natural gas next door in the Marcellus shale formation of Pennsylvania and New York. Ah yes. All that gas in the ground. But almost no pipelines to Con Ed’s suppliers and other Northeast users — yet. Coming soon, but “under construction” now.
So when demand spikes, natural gas users ask the Texans who have it to supply more gas. But there’s a limit to how much gas you can push through a pipe, and prices skyrocket.
So don’t bother calling Con Ed to complain. Blame it on the cowboys.
To read more about this problem, head over to Bloomberg Businessweek for “Northeast’s Record Natural Gas Prices Due to Pipeline Dearth.”