Atlantic City Electric customers will see their bills drop 5 percent in June — or about $9.50 for the average monthly residential bill of 1,000 kilowatts — because natural gas has driven down energy prices, the state Board of Public Utilities said Thursday.
The results came from February’s annual electricity auction, where New Jersey utilities buy some of their wholesale energy from suppliers.
The average residential customer of Atlantic City Electric currently pays about $182 a month.
The state’s four major electric utilities pass on the wholesale prices of electricity directly to customers, a state requirement.
Increased U.S. production of natural gas affects costs since the lower-priced fuel powers many of the generators that produce electricity. But this may be the last year to expect a price decline, BPU President Bob Hanna said in a conference call.
Electric utilities in New Jersey buy power in three-year cycles, purchasing one-third of their needs a year to cushion against dramatic market swings.
So this month’s auction replaces contracts from 2010, when natural gas was more expensive and Atlantic City Electric paid about 12 percent more per kilowatt hour at auction than this year.
But natural gas has since been leveling off — it actually slightly increased from last year, Hanna said.
“I foresee a period of stability for now,” he said.
Frank Felder, the director of the Center for Energy, Economic & Environmental Policy at Rutgers University, expects natural gas prices to rise slightly or stay relatively flat in the next few years.
The down economy has helped keep prices lower, but if the economy continues to recover, it would create more power demands and higher prices, he said.
And environmental regulations targeting coal-fired plants in the coming years may also generate more demand, he said.
“Who knows? You could have a hot summer. But there really is a large supply of natural gas and not only is there a lot of it, it’s nearby and that reduces the transportation costs,” he said.
In Atlantic City Electric’s territory of eight South Jersey counties, the auction means lower rates for wholesale electricity, which represents three-quarters of the typical bill.
Atlantic City Electric, a subsidiary of Pepco Holdings Inc., in December filed a $70 million request to increase the other part of the bill, which is what the company charges to deliver electricity across its lines and maintain the system.
This request to the BPU seeks to raise rates 7 percent, mostly to pay for infrastructure costs and for Hurricane Sandy-related damages.
If approved as is, the average monthly bill would rise by about $12. However such requests are often negotiated to lower amounts.
February’s energy auction was the 12th in New Jersey.
Atlantic City Electric, Jersey Central Power & Light and Rockland Electric will pass on lower costs, with declines ranging from 3 percent to more than 5 percent.
PSE&G was statistically unchanged, predominantly due to costs of transmission reliability projects ordered by the Federal Energy Regulatory Commission and deemed necessary by regional grid operator PJM, the BPU said.
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