RadioBDC Logo
R U Mine? | Arctic Monkeys Listen Live
 
 
< Back to front page Text size +

Demystifying electricity pricing

Posted by Chad O'Connor  November 15, 2012 11:00 AM

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Any business needs to budget for electricity. Extrapolating from the past is probably the only easy way to do it. Very few businesses have the wherewithal to actually understand. But at least for large budgets, it can pay off to do so. Staples, for example, has a Department of Energy and Environmental Management.

One important aspect of energy management is the rate we pay for electricity. We barely think about it, because making sense of it is enough to make anyone's head spin. Hand on your heart: do you understand how the price for electricity is determined?

Wikimedia
The electric grid
New England's grid is a part of the so-called Eastern Interconnect which covers all the states except Texas from the Atlantic Coast to the Rockies, and also some Canadian provinces. So an outage in Oklahoma may well impact the grid in Maine. Some utilities are investor owned, others are municipal. New England has a wholesale market for energy, but many other states have vertically integrated utilities. The energy sources (mainly natural gas, coal, nuclear, hydro, wind, and solar) all have their political champions and receive subsidies of some kind. The price that utilities pay for electricity varies with time and can spike significantly. But the price that industrial, commercial and residential consumers differs, and is decided upon in a regulatory process – different in each state. And investments in the grid are even more complex: investments cost money now but what will the benefit be down the road? And what are the relevant metrics: low rates, stable rates, consumer choice, low carbon usage, health impact, visual impact?

Because it is so complex, many decisions are taken by experts, but of course it would be desirable to have a democratic process involving the input of customers. In 2008, the Federal Energy Regulatory Commission issued Order 719, encouraged regional administrations to commit “to responsiveness to customers and other stakeholders, and ultimately to the consumers who benefit from and pay for electric services.” The relevant body here is the ISO New England, whose remit is to “ensure the day-to-day reliable operation of New England's bulk power generation and transmission system, to oversee and ensure the fair administration of the region's wholesale electricity markets, and to manage comprehensive, regional planning processes.”

This has led to a Consumer Liaison Group (CLG) in New England, meeting four times a year mainly with a view to “examine and inquire about quantitative and qualitative information about cost impacts of proposed initiatives in the region”.

The CLG meets next time on December 6, 2012. Large consumers, trade associations, and chambers of commerce should probably get involved. Organizations from Maine, New Hampshire, Vermont, Rhode Island and Connecticut are particularly welcome, since they are currently underrepresented.

Arne Hessenbruch is a Danish expat and the founder of Boston Denmark Partnerships, where he connects Danish companies with an interest in doing business in Boston.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

ABOUT GLOBAL BUSINESS HUB
Boston World Partnerships' expert "Connectors" discuss business strategy, entrepreneurship, Boston's place in the world economy, and much more. Using their insider perspective, they illuminate how Boston's innovative companies start, grow, scale, and go global.

Meet Boston's coolest, smartest and most dynamic founders in our REEL Innovators video series!
archives