On October 31st, the Boston Globe and other media outlets reported that most natural gas (methane) customers in Massachusetts are going to experience a big increase in the winter-time rates (November through May). Eversource was approved by state regulators for rate increases of 25% to 30%, while National Grid got approved to hike its rate by 11% to 13%.

The utility press releases and media coverage correctly pointed to increases in spending for programs like Mass Save and gas system infrastructure maintenance as the major causes for the rate increases. But we were surprised by the magnitude of the rate increases given that on October 9, the federal Energy Information Administration (EIA) published its Winter Fuels Outlook 2024/2025. According to the feds, wholesale natural gas prices are lower than last winter. For the Northeast, EIA projects just a 1% increase in consumer expenditures on methane for this winter, driven by a weather forecast showing temperatures 5% colder than last year. 

Given the big differences between what the EIA said and what state regulators (specifically, the Massachusetts Department of Public Utilities, or DPU) approved, we did a little research to ascertain more detail on the cost drivers. With all due respect to the media, we wanted to dig a little deeper. We focused on data presented to the DPU by the gas utilities for residential customers who are not low-income.  We looked most closely at rate changes for National Grid and Eversource’s NSTAR Gas unit (Greater Boston), but we found that similar changes were approved for customers of the smaller gas utilities – Eversource EGMA (Merrimack Valley and Southeastern Mass), Berkshire, Liberty, and Unitil.

What’s driving which increase? 

From our research, we conclude that: 

• Charges for gas supply changed very little from last winter, generally in keeping with the EIA’s assumption. However, the EIA outlook was general to the Northeast and did not cover some important issues specific to Massachusetts relating to policy decisions made by the legislature and Department of Public Utilities. 

• Factor #1: For National Grid and NSTAR Gas, more than two-thirds of the monthly increase is tied to an increase in the surcharge on gas bills for Mass Save, our energy efficiency program.

• Factor #2: The Gas System Enhancement Program (GSEP), described below, is responsible for another 14-18% of the increase.

• Factor #3: Increased costs for providing low-income consumers with rate discounts came to 6-9% of the overall rate increase. As you would expect, all else being equal, this cost would increase because of the overall rate increases. 

• Altogether, the three big factors causing an increase in gas rates this winter amount to about 92% of the increase. 

There is also Factor #4 pushing up all other gas rates for at least some utilities: shrinking gas sales. In NSTAR’s latest fillings, they stated that they expected to sell 387 million therms of natural gas between November 1, 2024, and October 31, 2025. This is a 3.2% decrease from the 399 million therms NSTAR expected to sell between November 1, 2023 and October 31, 2024. Since many expenses, like pipeline repair, cost ratepayers the same amount regardless of how much gas is sold, reduced gas sales translate into higher costs per unit of gas. 

Now that we know, what do we think?

No one likes to pay more for anything, but in these cases, it’s important to realize that ratepayers are paying for things that benefit us all at the local level. While it may be of minor solace, it’s better than if the rate increase was caused just by paying a lot more for fuel that this region imports from other states. So, what are we getting in return? 

Funding Mass Save is in all our interests.

First and foremost, the DPU has approved the rate increases in anticipation of approving the gas utilities’ Three-Year Plan for Mass Save. The DPU will act upon that soon and might make some adjustments that could result in some further minor changes to rates later this year. But let’s assume that the surcharge on gas bills for Mass Save is increased as planned. The Commonwealth needs Mass Save to ramp up to meet our climate targets. In our opinion, it’s better to meet our energy needs with locally sourced services providing insulation and heat pumps than with methane piped in from around the country. 

As it happens, Green Energy Consumers is intervening in the Mass Save cases before the DPU. We will be commenting mostly on how Mass Save needs to accommodate the development of a new state policy called the Clean Heat Standard. But we generally support the Three-Year Plan insofar as gas is concerned.  

Funding low-income rates is a matter of equity. 

Second, social equity demands that we help keep everyone warm in winter. That’s the purpose of the low-income discount, which Green Energy Consumers strongly supports. Note that weatherization programs funded by Mass Save and the federal government to reduce fuel costs paid by income-eligible families also help to reduce the cost of providing the discount. 

GSEP needs some reforms. 

Third and finally, we come to the Gas System Enhancement Program, which has been in existence for ten years. GSEP was put in place to stop methane leaks, which can be very dangerous and contribute to global warming. The program has grown over the years and we are seeing its rate impact beginning to bite. The legislature and DPU have both taken action in the last year to reform GSEP in ways that hopefully will slow down spending. But more needs to be done. Infrastructure investments made by gas utilities are generally paid for over their expected lifetimes. The problem is that many investments have an expected lifetime of decades and in twenty-five years, Massachusetts and Rhode Island are to be at net zero for economy-wide emissions. While we don’t want to see methane leaks, the trick is to make sure that GSEP is not a barrier to electrification and is not an unnecessary burden on ratepayers. That’s a blog for another day. 

In Conclusion 

Heating your home with natural gas is still cheaper than with heating oil, propane, and electric resistance. But the 2024/2025 winter rate increases might be the start of something that could last a while. This will be exacerbated as customers gradually leave the “gas grid” for heat pumps. When there are significantly fewer customers receiving gas service, those customers will have to carry the fixed costs of maintaining the infrastructure. 

Note for Rhode Islanders: We know that Rhode Island Energy increased gas rates effective November 1st. We are looking into the details and will report on those soon.