Say What About Natural Gas Prices?
I read a story in the media today where an electric utility is justifying a large rate increase based on the notion that the price of natural gas for electricity generation has risen by 20% in the past 2 1/2 months. Hmmm. Price data for natural gas for electricity production isn’t available in NH because of the small number electricity producers means releasing it would violate disclosure regulations. Price data for the U.S. and for Massachusetts is available though, and while it does stop at the end of September 2012, it suggests that natural gas prices for electricity generation have been substantially lower for the most of the past two years. As of September 2012, the year-over-year change in natural gas prices for electricity production in the U.S. and in Massachusetts averaged -30% for the preceding 12 months. It is hard to see how a 2 1/2 month increase will negate average reductions of 30% over the preceding 12 months. But a lot of the calculations used in setting electric rates doesn’t conform to mathematical laws.
One would think years of natural gas price declines would have prompted greater price reductions if a 2 1/2 month rise warrants a large increase. Looking at price changes over the same month of the prior year year (to avoid any seasonal distortions that can occur), you can see the prices fell by as much as 40% or more in 2012. Prices do vary by state but not enough to negate these trends. Sure, prices do rise and have very recently, but not enough to offset the tremendous drop they have experienced over the past several years.