February 12, 2024 – Utilities in Massachusetts have many long-term pipeline agreements negotiated to ensure adequate supply can flow into the region to support peak demands for their service areas. The cost of those agreements has been rising lately, so many utilities have adjusted their rates.

What happened?

Over the past several years, interstate natural gas pipeline companies have filed with federal regulators to adjust rates as the costs of operating their systems rise. Unfortunately, as those costs filter into utility cost calculations, the utilities have seen decreasing natural gas consumption due to a series of extraordinarily mild winters. That means the utility has higher costs and less usage to spread it across, making the impact of the increases even more dramatic.

 What is the impact?

The third-party suppliers of specific customers receive allocations to use the network of interstate pipelines under the contract rates negotiated by the utilities. Those allocated capacity rights can be highly advantageous to the supplier as it helps them mitigate local market volatility during peak demand periods, but the rights come at a cost.

The utilities allocate the costs of the pipelines on a pro-rata share of the total load, so as the costs have risen lately and the total use of gas has decreased, the effective cost per Dth has increased sharply. Some suppliers are now passing through those increases to the appropriate consumers.

It is important to note that customers on utility supply have also seen cost increases because of these factors. However, in their case, the utility hides the increases amongst many other rate changes made each year.

What happens next?

You may have already received a notice from your supplier about the pending rate increase, or you may receive one in the coming weeks.

Tradition has been working closely with all suppliers to ensure that any cost changes are fair and accurate. However, adjustments to customers’ facility budgets are advisable as the new rates will be in effect at least until the end of the year and likely longer given the mild weather again this winter.