Newark officials are warning residents to brace for significant increases to the cost of electricity later this year and again next year.

“I want to make sure people know,” City Manager Tom Coleman said. “I don’t want them to be surprised.”

The increases are due to rising natural gas prices due to the war in Ukraine, inflation and other factors, as well as a more local issue involving a power plant in Sussex County.

The first increase will be voted on by city council in the coming weeks and will go into effect in late summer or early fall.

Officials are still determining how big of an increase will be needed. Coleman said the minimum is a 7 percent increase, but it could reach double digits. A 7 percent increase would equate to an additional $8 to $11 per month for the average residential customer.

That increase is due to fees associated with the Indian River Power Plant, a coal-fired plant operated by NRG in Millsboro. The plant only runs during times of peak demand.

Coleman said NRG determined the plant is not cost-efficient to run and decided to permanently shut it down. However, PJM, which operates the regional power grid, determined that shutting down the plant could cause grid reliability issues.

“PJM did an analysis and determined that if they take that plan offline, at least some hours out of the year there’s going to be some grid stability issues,” Coleman said.

While NRG can't be forced to keep the plant open, concerns about grid reliability mean it can submit a proposal to the Federal Energy Regulatory Commission for how much money it would take to make it worthwhile for NRG to keep the plant online, Coleman said.

The cost of keeping it open then must be split among all grid users in the region.

The total cost of running the plant is approximately $70 million per year, though that fixed cost will be reduced by the revenue generated by the power sold. Newark’s share works out to approximately $2.2 million.

“We anticipate this will result in an increase of around 7 percent for all customers, but we won’t know for sure until we have some actual data, since part of the bill will depend on future market revenues,” Coleman explained.

The increased cost to consumers is expected to last for two to five years until new transmission lines between Delaware and Maryland are completed and the Indian River Power Plant can be decommissioned.

Meanwhile, Newark is anticipating a second rate increase due to the rising cost of wholesale power. Natural gas prices were already trending up, and the war in Ukraine exacerbated that, Coleman said.

Some of the increase will be mitigated by the fact the Delaware Municipal Electric Corporation, of which Newark is a member, produces some of its own power and has already locked in some power purchases at lower rates. Still, consumers likely will feel the effects of the increased wholesale cost.

Coleman does not yet have an estimate of what the second rate increase will look like. It will be discussed as part of the 2023 budget this fall and likely implemented early next year.

“We will have a better feel for the wholesale power market in time for 2023 budget approval in November,” Coleman said.

Correction: An earlier version of this article incorrectly stated the yearly cost to the city due to the Indian River Power Plant issue. Incorrect information was provided by the city. The article was also updated to clarify that PJM cannot force the plant to stay open. 

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