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Spiking Natural Gas Costs Lead to Bigger Electric Bills

Arkansas Electric Cooperative Corporation uses coal, hydro and gas for its various generation stations.
LITTLE ROCK, AR (News release) - Arkansas electric cooperatives are setting new peaks for power consumption this winter as it is the coldest winter the state has experienced in 20 years. Higher-than-normal usage results in higher-than-normal bills, and this year higher prices in the natural gas market have added to the burden on consumers. 

“The cold weather and increasing demand has caused natural gas prices to jump 18 percent in the last month and approximately 47 percent in the past year,” said Duane Highley, president and CEO of the Electric Cooperatives of Arkansas. “Natural gas that was priced at $4 per million BTU not quite a year ago was recently offered for electric generation in Arkansas at almost $40 per million BTU. This represents a 1,000 percent increase, which is unimaginable.” 

Highley said that the level of coal-based generation in Arkansas Electric Cooperative Corporation’s (AECC) generation resources protected electric cooperative members from the full effect of the spike in natural gas prices.  

“AECC’s mission is to provide electric cooperative members with reliable and affordable electricity,” he said. “AECC owns coal, hydro, and gas-based generation stations throughout Arkansas, plus the cooperative has agreements for wind energy. This fuel diversity provides reliable supply, and it also helps moderate pricing levels. Furthermore, AECC uses an economic dispatch approach to selecting the generation sources that are used. If we can purchase energy from another provider at a rate less than our generation cost, then we pursue this option to ultimately obtain savings for cooperative members. Our membership in the MISO (Midcontinent Independent System Operator, Inc.) market enabled AECC to purchase wholesale energy below AECC’s gas production cost this past month, thus shielding our members from the full effect of rate volatility caused by the spike in natural gas costs.” 

According to Highley, the good news is the high natural gas prices are hopefully temporary, and will return to normal as demand decreases. However, natural gas prices are based on regional and national demand levels and priced by commodity markets. “Unfortunately, the natural gas commodity market is the most volatile of all commodity markets. This is one of the reasons that AECC and other electric cooperatives employ diverse fuel sources in our generation portfolio and why we are fighting hard to keep coal plants as part of this mix. We dispatch our coal units as much as possible, because they provide our members with lower prices than gas. Although the EPA’s goal is to shutter coal plants, this year’s winter proves that such a move would diminish our reliable and affordable electric supply in Arkansas.” 

The Electric Cooperatives of Arkansas comprise 17 electric distribution cooperatives that provide electricity to about 500,000 homes, farms and businesses in Arkansas and surrounding states.
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