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CUB to FERC: What’s behind the January energy price spike?

20110128_RollerCoasterEnergy prices skyrocketed in January, and CUB suspects the reason might be more than just the record-breaking cold. Recently, we joined with consumer advocates from 10 other states in a letter urging the Federal Energy Regulatory Commission (FERC) to examine the root causes behind the price spike.

“No doubt, January’s ‘polar vortex’ cold snap caused people to use more natural gas and electricity to stay warm,” CUB Executive Director David Kolata said in a news release Tuesday, “but we have identified other possible problems that raise questions and need to be investigated.” 

The “polar vortex” cold snap in January brought record wholesale gas demand, storage withdrawals and prices, according to the Energy Information Administration. But consumer advocates have raised some red flags that may indicate “significant and systemic inefficiencies,” including “forced outages” at power plants and constraints on interstate gas pipelines. The result: Less energy available to consumers just as temperatures took a nosedive.

Advocates asked FERC to “conduct a comprehensive root cause analysis” of the high prices and issue a report of its findings that includes a process to implement proposed solutions.

The stakes are high for this investigation: Some business and residential consumers are reporting utility bills up to four times what they were during the same period last year, or the month before, advocates said. In particular, real-time pricing–an hourly pricing program that has been a money-saver for most Illinois customers who participate–saw rates rise to $2 per kilowatt-hour for a time on Jan. 6.  Even if consumers didn’t immediately see rates impacted, “all consumers are at risk of higher prices in the future as a result of the events that occurred in January,” according to the letter.

“Market prices will go up and down, but it’s important for federal regulators to act now to identify any preventable problems,” Kolata said.

Signers of the letter included consumer advocates and/or state officials from Delaware, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.

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