Beatrice Lang
Rhode Island residents have experienced a sharp increase in electricity rates, with monthly bills rising by nearly 23% in 2024. This surge is attributed to various factors, including the cold weather, inflation, and the impact of the war in Ukraine on fossil fuel markets. The situation is further exacerbated by the state's reliance on natural gas for power generation, which results in wholesale electric prices rising alongside gas prices. While rates typically decrease during warmer months, they haven't dropped significantly due to these compounding factors. Rhode Island Energy, the state's dominant utility company, has proposed raising rates for residential customers during the winter period, impacting around 70% of its electric customers. The company has also faced scrutiny for its spending on infrastructure improvements, with regulators questioning the necessity of certain projects.
| Characteristics | Values |
|---|---|
| Electric rates in RI | Increased in 2023 and 2024 |
| RI electric bills | Lower than last winter |
| Increase in percentage | 22.8% in 2024, 25% in 2023 |
| Residential electric rate | Climbed to 16.4 cents per kilowatt-hour in 2024, 17.7 cents in 2023 |
| Average monthly bill increase | $31.30 in 2024, $33 in 2023 |
| Reason for increase | Higher costs for energy, inflation, war in Ukraine, and higher demand for natural gas |
| Refund from Rhode Island Energy | $68.60 one-time refund in December for last resort service customers |
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What You'll Learn
Electric rates in RI increased by 22.8% in 2024
Electric rates in Rhode Island (RI) increased by 22.8% in 2024, with residents facing higher bills as a result. This increase was driven by several factors, including the wholesale costs of natural gas, a primary fuel for power generation, and inflation. The war in Ukraine also played a role, as global demand for gas increased, affecting energy prices in New England.
The state's dominant utility, Rhode Island Energy, proposed raising the residential rate for the period from October 1 to March 31, which was approved by the Public Utilities Commission. This saw the residential electric rate climb to 16.4 cents per kilowatt-hour, a significant jump from the previous rate of 10.4 cents per kilowatt-hour. The average monthly bill for a residential customer using 500 kilowatt-hours increased by $31.30, to a total of $168.84.
While the rates increased, they were still lower when compared to the previous two winters. Additionally, customers who had been overbilled in 2023 received a refund from Rhode Island Energy, providing some relief. The company had overbilled customers by more than $27 million due to lower actual prices on the spot market than projected. The standard refund amount was $68.60, while low-income customers received a total of about $140 spread over six monthly payments.
The electric rates in RI are typically adjusted every six months, on April 1 and October 1. The rates usually drop during the warm-weather period from April 1 to September 30 when demand for natural gas decreases. However, in 2023, rates didn't drop significantly due to factors such as inflation and the war in Ukraine. Rhode Island Energy's staggered energy purchases also contributed to the higher rates.
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Wholesale energy prices drive rate increases
Electric rates in Rhode Island are driven by the wholesale costs of natural gas, which is the primary fuel for power generation and heating. Market prices for natural gas are typically lower in the summer when demand is lower, and higher in the winter when demand is higher. In the upcoming colder months, electric bills for most Rhode Islanders are expected to increase by 22.8%, with the residential electric rate climbing to 16.4 cents per kilowatt-hour. This is a significant jump from the current rate of 10.4 cents per kilowatt-hour.
The proposed rate increases are directly linked to wholesale energy prices, which Rhode Island Energy is legally required to pass on to customers without any markup. The utility is only allowed to profit from the costs of delivery. Last year's high winter rates were largely due to volatile global energy markets, with Europe's demand for liquefied natural gas pushing up wholesale electric prices. Rhode Island Energy's advance purchase of supplies did not fully shield customers from these increases.
The cost of natural gas is a key factor in wholesale prices in many regions, as the marginal generator is often fueled by natural gas. The Energy Information Administration (EIA) predicts that the cost of natural gas delivered to U.S. power generators will average $3.37 per million British thermal units in 2025, a 24% increase from 2024. This rise in natural gas costs will contribute to higher wholesale power prices in most U.S. regions, with the exception of the Northwest and parts of Texas.
Looking further ahead, rising demand is expected to drive up wholesale electricity prices even more. By 2028, wholesale electricity prices in the U.S. are projected to increase by 19%, with the mid-Atlantic region experiencing the largest increase of 68% by 2050. To meet this growing demand, utilities will need to adopt new technologies and integrate a diverse mix of energy sources and customer programs.
While the upcoming winter electric rates in Rhode Island are expected to be lower than the previous two winters, they will still be significantly higher than the rates in previous years. The state's reliance on natural gas for power generation, along with factors like inflation and the war in Ukraine's impact on fossil fuel markets, have contributed to the persistent high rates.
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Cold weather and high rates frustrate customers
Electric rates in Rhode Island are set to increase by 22.8%, causing frustration among customers already dealing with high rates and cold weather. The rate hike, approved by the state Public Utilities Commission, will see the residential electric rate climb to 16.4 cents per kilowatt-hour from October 1 to March 31. This is a significant jump from the current rate of 10.4 cents per kilowatt-hour. While the rates are lower compared to the past two winters, they are still higher than the rates from over two decades ago. The primary reason for the increase is the higher demand for natural gas as temperatures drop, which is the primary fuel for power generation and heating. Rhode Island Energy is required by state law to pass on wholesale energy prices to customers, resulting in higher rates during the winter months.
The cold weather in Rhode Island has been unusually chilly, contrasting the recent mild winters. The weather, combined with the high energy rates, has led to frustration among residents. The situation has gained the attention of state policymakers, who are considering legislation to reduce profit margins for Rhode Island Energy and provide extra assistance to customers struggling with their bills. The discussion also includes turning the company into a public entity.
The high rates and cold weather have impacted customers in various ways. Some have expressed their frustration, while others have looked for ways to reduce their energy consumption. Rhode Island Energy offers free energy assessments to help customers identify methods to lower their usage. Additionally, those in communities with electric aggregation programs may benefit from slightly lower rates due to their collective bargaining power with competitive suppliers.
The impact of the rate increase is significant, with the average monthly bill for a residential customer using 500 kilowatt-hours expected to rise by $31.30 to $168.84. To ease the burden, Rhode Island Energy will provide a refund to last resort service customers for overcollection of payments in 2023. The company overbilled customers by more than $27 million due to lower spot market energy prices than initially projected. Low-income customers who qualify for discounted rates will receive their refunds in six monthly installments, effectively canceling out the rate increase.
The cold weather has further consequences on energy usage. During cold snaps, gas demand for heating increases, and companies with contracts to supply heating get priority on pipeline supplies. This restricts the availability of natural gas for power generation, leading to higher prices for electricity on the spot market. As a result, older, more expensive, and dirtier coal or oil-fired plants are sometimes used to meet energy demands, as seen on January 20 and 21 during a three-day cold snap.
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RI Energy's infrastructure spending scrutinized
Rhode Island Energy's infrastructure spending has come under scrutiny by the Public Utilities Commission, which has questioned the need for some of the company's proposed infrastructure projects. The commission has expressed concern about the escalating costs of capital investments in energy infrastructure, which have led to increased costs for ratepayers.
In March 2023, the PUC held public hearings on Rhode Island Energy's annual Infrastructure, Safety, and Reliability (ISR) plan. The Attorney General, Neronha, raised concerns about the company's spending plan, arguing that it failed to fully account for the Act on Climate, which sets decarbonization goals that the PUC must consider when making decisions. The Attorney General also noted that Rhode Island Energy had not provided a full analysis of its long-term plans for the gas distribution system in light of this legislation. Despite this, the company sought approval for increased spending over the next twelve months, which would result in an $18 million increase in costs for ratepayers compared to the previous fiscal year.
The PUC's decision on infrastructure spending was complicated, as infrastructure improvements are necessary to ensure safe and reliable energy delivery. Since Pennsylvania-based PPL Corporation took over the Rhode Island company three years ago, it has significantly invested in infrastructure, improving delivery and pushing system reliability to its highest-ever level in the state. However, these investments have also resulted in tens of millions of dollars in additional costs for ratepayers, including returns for Rhode Island Energy's investors.
In response to the concerns raised, the PUC reduced the gas infrastructure plan from $208 million to $165 million and cut the main budget for the electric plan from $129.9 million to $105.6 million. While Rhode Island Energy expressed disappointment with the reduced funding, they committed to continuing their work to improve the energy systems within the approved framework. These cuts are expected to temper cost increases over time, although they may not have an immediate significant impact due to the long-term nature of infrastructure investments.
While the reduced infrastructure spending is a step towards alleviating the financial burden on ratepayers, it is important to address the underlying factors contributing to the high energy costs in Rhode Island. The state's reliance on natural gas for power generation, volatile global energy markets, inflation, and the impact of the war in Ukraine on fossil fuel markets have all played a role in driving up energy prices. Additionally, Rhode Island Energy's practice of staggering energy purchases and purchasing supplies ahead of time has also influenced the rates charged to customers.
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RI lags in the shift to electric vehicles
Rhode Island has been lagging in the shift to electric vehicles, ranking 19th in the nation on the 2023 scorecard from the American Council for an Energy-Efficient Economy (ACEEE). While the state has shown some progress, with a 55.27% increase in registered zero-emission vehicles from 2022 to December 2023, it still lags behind its neighboring states in the Northeast.
One of the factors contributing to the slow transition is the lack of public charging stations in Rhode Island. The state has only 317 charging stations, while it would need tens of thousands to meet the demand for electric vehicles. Additionally, Rhode Island falls short in providing incentives for buyers compared to other states, which offer time-varying charging rates and other cost-reducing measures.
However, the state is making efforts to catch up. The Driving Rhode Island to Vehicle Electrification project, launched in July 2022, offers rebates of up to $2,500 per purchase and an additional $2,000 for low-income applicants. The state has also committed to phasing out the sale of all gas-powered vehicles by 2035, in line with other states like California. As of 2024, there are 8,228 electric cars in Rhode Island, a nearly 50% increase since the previous summer.
The state has also been utilizing settlement money from the federal government’s lawsuit against Volkswagen for cheating on emissions tests to invest in electric chargers and buy electric buses. The Rhode Island Public Transit Authority has deployed 14 electric buses in low-income communities and communities of color that are disproportionately affected by air pollution.
While Rhode Island is taking steps towards electrification, more aggressive actions are needed to address the climate crisis and enable a faster transition to electric vehicles.
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Frequently asked questions
Yes, electric rates in Rhode Island have gone up.
Electric rates in Rhode Island went up in October 2023 and are expected to go up again in October 2024.
Electric rates in Rhode Island went up due to higher costs for energy, inflation, and the impact of the war in Ukraine on fossil-fuel markets.
Electric rates in Rhode Island went up by 25% in 2023 and nearly 23% in 2024.
Yes, communities with electric aggregation programs, such as Narragansett, Newport, and Providence, may have lower rates as they rely on their collective bargaining power to negotiate prices with competitive suppliers.
