WESTFIELD – The Westfield Gas & Electric Department has submitted a projection of the city’s energy use for the upcoming year, information needed for the 2014 fiscal year budget now being developed by Mayor Daniel M. Knapik. This municipal budget that will be presented to the City Council on May 16.
Two factors, weather and energy market volatility, can have a great impact on the projection of the city’s energy consumption and the cost of that energy.
The Municipal Light Board discussed the projection last night, with several members arguing that cost projections based on the past two years need to be adjusted higher to more conservative budgetary numbers.
The report notes that the heating season of the winter of 2012 was “historically warm” and resulted in a downward turn for gas and electric prices which persisted through the fall, the first half of the 2013 fiscal year which began on July 1, 2012.
But the heating season of 2013, just completed, “reflected normal weather patterns” and pushed both gas and electric prices higher, since the New England region is dependent on electricity produced by gas generation. While the price of gas was relatively low because of abundant supply, the cost of gas in New England was pushed to historic high prices because of limited pipeline capacity.
The report to Knapik, produced by the WG&E Energy Service Risk Management Group, provides two estimates, one based on the actual energy cost for 2013 and one based on the original 2013 cost estimate presented in May of 2012.
That original 2013 estimate anticipated that the cost of electricity would be $2,091,612, while the actual consumption is $1,926,120. The original estimate for the price of gas was $817,494, while the actual cost is $687,153.
The group projected that electricity cost for 2014, based on actual consumption, will be 4 to 9 percent higher, while the cost based on the original estimate will range from minus 3 percent to plus 2 percent. Likewise the cost of gas based on actual consumption is projected to increase by 3 to 8 percent, while estimates based on the original 2013 estimate will reflect a decrease of minus 11 to minus 5 percent.
Commissioner Robert Paul argued that the energy cost estimate should be based on “the higher estimate because of the volatility in the energy market.”
WG&E General Manager Daniel Howard supported that approach.
“We suggest that the city go (with cost projections) on the high side,” Howard said, noting that the “FY 2014 budgets reflect normal weather patterns and market pricing which reflects tighter gas supplies and higher Northeast energy prices due, in part, to pipe line constraints.”
Howard said that energy prices may be affected by “regulatory, global and geopolitical factors (which) affect wholesale energy markets” and which “make prices highly volatile and difficult to control.”
