Natural Gas Prices Drive Entergy Rate-Increase Plan

Natural Gas Prices Drive Entergy Rate-Increase Plan

With gasoline prices at an all-time high and natural gas prices about double what they were in July 2019, the energy cost surge is spilling over to the electric bill for Entergy Arkansas’ 700,000-plus home and business customers.

The utility announced late last week that it is seeking an increase that would add about 7.5% to the average residential customer’s bill, starting April 1. That request is under review by the Arkansas Public Service Commission, which regulates utilities in the state.

The company cited higher natural gas prices in seeking the increase. At about $4.50 per million British Thermal Units, the cost is about double what it was in September 2019, though still a fraction of the heights it hit between 2000 and 2008, when it peaked above $17 three different times. In September 2005 the price hit $21.18 before a boom in hydraulic fracturing unleashed a torrent of new gas supplies, glutting the market. In April 2020, as the pandemic took its huge economic toll, natural gas was at $1.80 per million BTU.

Entergy’s request would raise the utility’s fuel charge on customers’ bills, known as the Energy Cost Recovery Rate. The ECR, as it’s known, accounts for about 9% of the average residential customer’s monthly bill. The rate is usually adjusted each spring under the PSC’s oversight, and was designed to fluctuate along with the cost of the fuel the utility uses to generate electricity, as well as wholesale prices for additional energy generated elsewhere.

According to a news release from Entergy, the ECR will rise from the current rate of just under a penny per kilowatt-hour to about 1.8 cents per kWh. That rate would remain through March 2023, unless an interim adjustment is called for, the company said.

“The total increase that customers could see on their bill will vary based on their individual energy usage and the kilowatt-hours consumed at their home,” said Ventrell Thompson, the utility’s acting vice president of customer service. “Our estimates show, however, that the average residential customer who uses 1,000 kilowatt hours per month will see a total bill increase of 7.5%, or roughly $8.”

Customers enjoyed a decreased ECR rate for two years, and the current rate, the utility points out, is lower than it has been in more than 10 years. Natural gas has historically been a lower cost fuel for electricity generation, the release said. But natural gas prices were 93% higher in 2021 than they were in 2020, according to the industry standard Henry Hub.

“At Entergy Arkansas, we carefully plan and invest our resources to provide reliable power and keep rates as low as possible,” Kurt Castleberry, director of resource planning and market operations, said in a statement. “Fuel diversity pays off, and so does our investment in our nuclear fleet to keep them producing electricity at historically high levels.”

Castleberry noted that Arkansas Nuclear One in Russellville was the workhorse in generating power for Arkansas customers. “Last year, our nuclear generation sources set a record,” he said. “Low cost, emission free power provides about 70% of the electricity our customers consume,” helping insulate them from cost swings in fuels like natural gas. This kept the ECR rate from going even higher.”

Entergy Arkansas has about 722,000 customers in 63 counties and is a Entergy Corp. of New Orleans. The parent company has annual revenue of $10 billion and 12,500 employees.

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