WESTFIELD – The Westfield Gas & Electric Department is submitting its annual energy cost estimate to city officials working on the 2015 fiscal year budget, with an asterisk this year because of the volatility of natural gas prices.
The energy cost projections are intended for city and School Department officials as a tool when building their departmental budgets and are based upon the historic consumption of electricity and natural gas, with market pricing factored into the equation.
The energy cost projections usually include a relatively small margin of error, percentages spread plus or minus. This year’s electrical cost forecast has a plus 3 to 6 percent range left for wiggle room. That margin of error for the cost of municipal gas is plus 14 to 24 percent.
The gas forecast factors in a projection of volatility in the price of natural gas, which is also impacting electrical generation because nearly half of the electricity generated in New England is by gas-fired turbine plants. The regional reliance on gas is only expected to increase dramatically, as coal-fired and nuclear plants in the region are taken offline, fueling even greater volatility of energy costs in the New England market, resulting in even high gas prices.
During the severe winter weather this year, natural gas prices soared to more than $120 per million British Thermal Units (BTUs) up from about $5 per million BTU last summer. The spike was blamed on strong demand, a lack of pipeline systems, limited regional liquefied natural gas deliveries and inadequate storage.
Energy prices in New England often are “very volatile and much higher than other parts of the country,” US Secretary of Energy Ernest Moniz said recently in Hartford at a conference on New England energy issues.
“A combination of many factors including a sustained cold 2014 winter and increased gas-fired electric generation created high levels of natural gas demand on already constrained gas transmission systems,” said WG&E General Manager Dan Howard, the report’s author.
“These factors, many of which are expected to persist for several years, caused New England wholesale natural gas and power prices to exhibit unprecedented price volatility. FY 2015 budget figures take these factors into consideration,” he said.
That price volatility may have the most significant effect on the School Department which entered into a gas supply energy contract with the WG&E in 2012. That type of contract enabled gas customers with the ability to use either natural gas or #2 heating oil to obtain a lower price for natural gas.
The WG&E then has the ability to order those dual-fuel customers to burn oil when demand for natural gas is highest, saving the utility money by reducing the volume of gas that it needs to purchase at market prices.
Municipal Light Board Commissioner Robert Sacco said that the energy forecast should suggest that budget planners factor in the cost of oil, as well as natural gas, when developing their 2015 budgets. The School Department was ordered to switch to heating oil on 11 days this past winter.
“This is a false report in the sense that the School Department had to switch to oil, the cost of which is not reflected in this report,” Sacco said. “I think we have to put something in this report so the schools know they have to include exclusion days when they’ll be using oil in their budget.”
