Higher prices for natural gas and coal continue to make winter heating more expensive this year, but the projected price hikes are turning out to be less expensive than originally forecast for customers of the Tennessee Valley Authority.
In fact, TVA will lower its electricity prices next month compared with current rates due to a drop in the monthly fuel cost portion of consumer power bills. In Chattanooga, EPB said residential electricity prices will be nearly 5% lower in February than their current price, saving a typical homeowner who uses 1,295 kilowatt-hours of electricity a month about $6.30 on their February power bill.
“Gas prices have started to trend back down but remain volatile,” TVA spokesman Scott Brooks said. “Lower gas rates have helped to lower fuel costs when compared to recent months.”
TVA has kept its rates relatively flat and even provided pandemic relief credits to its local power companies last year, this year and into 2023. TVA also projects it will keep base rates constant for the next decade.
But TVA adjusts a portion of each month’s bill based upon the cost of the fuel it uses to produce electricity.
For residential consumers, TVA now anticipates the actual impact to monthly bills will be approximately $3 per month this winter, rather than the expected $5 – $10 impact projected back in November, Brooks said.
(READ MORE: Chattanooga Gas Co. customers to pay an average of $27 more a month this winter)
The February fuel cost portion of TVA bills is still 17% higher than the average for the past three years during the COVID-19 pandemic that depressed gas prices when many businesses were shut down. Electricity prices by TVA are still up nearly 4.6% from a year ago, costing the typical residential EPB customer in Chattanooga an extra $5.59 for heating bills next month compared with the same period a year ago.
Still, the increase is below the increases first expected last fall when natural gas prices remained elevated.
Natural gas prices surged through much of 2021 but gas futures plunged by 36% in the fourth quarter when warmer-than-expected temperatures lessened demand and the omicron variant sent jitters through the market.
(READ MORE: Frigid January weather forces some school closings)
“Due to the cold weather, and realistic worries about tighter supply, prices are moving higher across the North American complex,” Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, told CNBC News. “Overall there just isn’t the extremely slack supply of natural gas in the market that has been the prevailing trend over the past 10 years.”
TVA President Jeff Lyash said TVA has helped moderate some of the higher fuel costs by shifting more of its production to nuclear and renewable fuels that are not subject to the variability of fossil fuel prices.
“Over 60% of our generation year-round now comes from sources other than the burning of fossil fuels, and we have taken steps, including hedging some of our coal and gas purchases, to ease the impact of these price increases,” Lyash said last year.
Homes heated with natural gas should also benefit by the recent drop in gas prices, but gas prices remain well above last year. Chattanooga Gas Co., which supplies natural gas to about 69,000 customers in Hamilton and Bradley counties, projected last fall that its typical residential customer would pay about $27 more a month during this winter season than a year ago.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.