Low Supply, High Demand: The Effects of Fossil Fuel Supply on Electricity Costs

It’s that time again. No, it’s not the back to school season or the end of your vacation. It’s the time of the year when electric bills traditionally begin to rise, and you get that first bill after the prices have gone up. Have you ever noticed that you’ll see a certain price range on your electric bill from January to June, and then that price will change from July through December? This is because most major electricity companies such as and NStar (now EverSource) and National Grid here in Massachusetts purchase their electricity in six month blocks. The prices for these bulk purchases are affected by a number of different market factors: 1) the availability and the cost to produce the electricity and 2) the cost and availability of those materials that are used in generating this electricity. All these costs, in addition to the ever increasing costs of maintaining one of the nation’s oldest electrical grids, means that year by year the price of electricity steadily rises.

But, that’s no surprise. The surprising thing is in the past year and a half electric companies, namely EverSource and National Grid, have raised their rates sharply between 20 to 30% within as little as six months. National Grid recently announced that they will be raising their rates another 20% again, even though they lowered their rates a bit from the last pay price hike. The question still remains on everyone’s mind: What exactly is the cause for all these rate hikes? You can find the answer at your nearest gas station.

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