LIPA Raises Rates…Again.

Readers of this blog might be wondering if I’ll ever write about anything other than LIPA. I will. They just keep providing so much fodder that I can’t turn away.

Long Island Newsday reported that LIPA has recently raised its electric rates for the second time this summer. According to the article, rates have gone up 8% in two months. This is due to the increase in electric costs during summer peak demand season with air conditioners blasting. They also say that prices have gone down in other months this spring, but that is besides the point. If prices go up in the summer when electric use is also at its highest due to air conditioning, it is like a double whammy. But this is the nature of an electricity transmission system that relies on large, centralized power plants that burn natural gas, coal and other fossil fuels.

We are all subject to the sometimes wild fluctuations of this system. Getting off the grid entirely typically doesn’t fit with the modern conveniences of life that we’re all accustomed to.

There is one way to tame the roller coaster of this electric market: put solar panels on your roof. As long as the sun is shining, you’ll know exactly what you’ll be paying for your solar electricity. And for homeowners in Connecticut (CT), Massachusetts (MA), New York (NY) and New Jersey (NJ), state incentives enable you to put solar on your roof at no upfront cost and save money on your electric bills with a Solar Lease or Power Purchase Agreement.

Let me take a moment to explain how the electric grid works in New England, New York and the Mid-Atlantic. I’ll start backwards from your home. Your utility or electric supplier provides you all the electricity you need, exactly when you need it at a standard price no matter what time of day. Sometimes that price changes on a month to month basis, but Time of Use (TOU) rates are pretty rare. Your supplier has to purchase the electricity that you use on an hourly basis. If you use 1.75 kilowatt hours in a given hour, your supplier purchases that for you. Simple enough, you might say, but here’s the kicker.

The cost of your electricity changes hourly. So your supplier is selling you all the power you need, when you need it for one price, whether it is midnight or 4PM. The cost to supply you that power could vary wildly. At 2AM, the cost might be 4 cents/kWh and at 4PM on the hottest day of the year, the cost to supply you that power might be 90 cents/kWh. Whoa! That’s a big difference and remember, you are paying something like 12 cents/kWh at all times of the day. At some point you are paying that cost whatever it is. Regulated utilities don’t lose money selling electricity. That might as well be set down next to the law of gravity. And competitive suppliers don’t often lose money over extended time periods. No matter what the cost, you are going to pay it eventually.

Now I don’t want to oversimplify or hyperbolize. There are plenty of ways utilities and suppliers protect themselves and you from the wild swings of the market. But there is always some exposure to the market and whatever the cost, it ultimately hits your utility bills.

So why these wild swings you might ask? Well, the operators of the electric grid have one *simple* job. Keep the electric grid full of electricity, without letting it overflow. This is not an easy task. The demand on the grid is fairly predictable, but always changing. Electric heating and cooling is one of the biggest contributors to uncertainty. The demand on the electric grid from heating and air conditioning literally changes with the weather. And we all know how predictable the weather can be. On the supply side, certain generators, like Nuclear plants and hydroelectric plants, are almost always providing a steady stream of electricity, known as baseline capacity. But wind farms and solar farms also produce based on the weather. And when a wind farm is generating, that electricity is always used by the grid. When the wind is blowing and the sun is shining, the grid operators need to tell the coal and gas plants to slow down to maintain balance.

How does that impact prices? You might ask. All around the country there are little natural gas power plants known as peakers. They literally only run at times of peak demand. These power plants decide the cost of electricity in a given hour. Each plant provides the grid operators a price at which they will start producing electricity. The last peaker called is the most expensive. And the last one in sets the price for all generators, wind, solar, nuclear and hydro. So if the grid needs to call a 90 cent/kWh peaker, then that’s the price. You you are paying the cost, eventually.

Solar power for your home is the perfect antidote to chronic uncertainty for your electric bill. When you put solar on your roof, you connect behind your electric meter and so you use significantly less electricity from the grid, with all its price fluctuations. You can get a steady stream of clean power at a set price. Now that’s peace of mind.

And you are still connected to the grid because you still need power at night to run your refrigerator when the sun isn’t shining. This works really well for solar users because the utilities in CT, MA, NJ and NY will credit you at the full retail rate for any excess solar power that you don’t use in your home and send back to the grid. This is called Net Metering and it is a great benefit for solar power users.

Not everyone qualifies for solar power. You might not have the right roof or you might just get too much shade. But do yourself a favor and find out. Check to see if solar can work for you and get off the wild ride of utility electric prices. Nobody knows where it is going to go.