NSTAR CUSTOMERS EAGER to support the development of green power are paying a steep price to do so right now.
Since 2008, NStar, which distributes electricity across eastern Massachusetts, has offered a program that allows customers to buy power supplied by a pair of wind farms in Maine and upstate New York. Initially, customers paid a tiny bit more than the market price of electricity for the wind power. The expectation was that the market price of electricity would continue rising and the premium being paid for the wind power would diminish and eventually disappear.
But the opposite has happened. As relatively cheap American-produced natural gas has become plentiful, the market price of electricity, which is primarily generated using natural gas, has fallen. Since NStar has to cover the cost of its wind power purchases, the premium paid by NStar Green customers has had to increase sharply.
In 2008, the market price of electricity distributed by NStar was 12.5 cents per kilowatt hour. NStar Green customers paid an extra 1.4 cents, bringing the total cost of their power purchases to 13.9 cents a kilowatt hour.
Starting January 1, the market price of electricity distributed by NStar will be 7 cents a kilowatt hour. To cover the cost of its wind power contracts, the utility is seeking state approval to charge its NStar Green customers a premium of 8 cents a kilowatt hour. The overall cost of power for NStar Green customers will be 15 cents a kilowatt hour, which isn’t much more than it was in 2008. But it’s more than twice as much as customers not on the Green option are paying now.
According to the company’s filing with the Massachusetts Department of Public Utilities, the typical NStar Green customer will pay about $9 more a month for electricity than a customer not on the Green service.
Not surprisingly, the number of customers going green through the NStar program is dropping, which in some ways makes the financial burden greater on those who remain. Participation in the NStar Green program hit a peak of 8,368 customers in January 2010, but that number has been steadily declining ever since. Today, there are 6,163 people using the NStar Green service, less than 1 percent of the utility’s eligible customer base.
The struggles of the NStar Green service are partly a reflection of the changing marketplace for power. Cheap natural gas makes higher-cost renewable energy seem less attractive, which is why supporters of green power would like to see a tax on carbon that would help equal the playing field.
NStar Green is also struggling because the program asks customers to pay the premium for going green directly. Subsidies for renewable energy are typically rolled into a customer’s utility bill in ways that hide them from view. NStar Green, by contrast, requires customers to make up the difference between the cost of the green power and the cost of electricity produced with fossil fuels. Right now that difference is very big.
“Clearly folks who are on or getting on NStar Green are doing so for the environmental benefit of supporting wind power as opposed to the price,” said NStar spokesman Michael Durand.