To provide relief for utility customers in Connecticut, officials must confront at least one obstacle they cannot change: the state’s location squarely within one of the nation’s most expensive electric markets.
Electric prices were front and center in Gov. Ned Lamont’s annual State of the State address earlier this month, when the Democrat challenged lawmakers to look beyond “cosmetic changes,” and focus on increasing electric generation through a combination of both renewables and — somewhat controversially — fossil fuels.
“These high prices impact all of us: working families, seniors on fixed incomes, small businesses, big manufacturers,” the governor said. “Everyone was mad as hell looking at their bills following the hottest July in recorded history, and I can see why.”
Others who have called for reforms are quick to note that Connecticut residents are saddled with some of the highest electric rates in the nation. In the most recent rankings published by the U.S. Energy Information Administration, the state landed with the ignominious distinction of being third, behind only Hawaii and Rhode Island.
Less frequently mentioned is how those prices compare with Connecticut’s neighbors.
Just a few spots down the list stood the rest of states in the New England power grid: Massachusetts at 4th, and New Hampshire, Maine and Vermont at 7th and 8th, and 9th, respectively.
To the west, in its own separate grid, New York landed 10th on the list.
House Minority Leader Vincent Candelora, R-North Branford, has acknowledged that Connecticut is hardly alone in the challenges it faces procuring and distributing electricity to customers at affordable rates.
“There’s no question we are a cul-de-sac when it comes to energy,” the Republican leader said.
‘End of the pipeline’
Within the state legislature, members across the political spectrum seem to agree that much of the problem stems from the fact that Connecticut, like its neighbors, draws the bulk of its power from natural gas that is fed to power plants through a network of pipelines that stretches thousands of miles across several states before reaching New England.
The gas from those pipelines is also used to heat homes and power stoves, hot water heaters and local industries, increasing demand and — with it — prices.
In the winter, when cold snaps send the demand for gas even higher, those pipelines can become strained and force older plants, known as “peakers,” to come online for short periods of time burning fuel oil. This can drive up costs even further.
“It’s New England, end of the pipeline, more than anything else,” said state Sen. Norm Needleman, D-Essex, who co-chairs the Energy and Technology Committee. “I think we’re trying to make the best of a situation that has little room to maneuver.”
Needleman and other lawmakers also refer to what they call the “original sin” of deregulation — a process by which Connecticut and other states forced utilities to shed their ownership of generation plants and instead purchase power on the competitive market, with the costs passed directly along to ratepayers absent any profit.
Today, every state in New England except for Vermont, as well as most states in the northeast, have deregulated electricity markets.
Despite his criticism of deregulation, Needleman said that undoing that decision would require a labyrinthine process of trying to force the utilities to buy back the plants they sold nearly two decades ago, or build new ones.
“I’ve thought about that that a lot,” Needleman said. “I don’t think that you can put the cat back into the bag.”
As a region, New England lacks abundant resources for hydroelectric, wind or solar power — as well as fossil fuels — that have helped to drive down the costs of electricity in other parts of the country. For instance, the state with the cheapest electricity according to the EIA, North Dakota, generates the bulk of its power from coal and wind, both of which are locally-available resources.
One potential exception to the dearth of local resources is the presence of offshore wind, available in abundance just a few dozen miles off the coast in the Atlantic Ocean. Harnessing that power, however, requires the construction of gigantic turbines and transmission lines to bring the electricity on shore.
The first wind farm serving Connecticut, Revolution Wind, is currently set to come online sometime in 2026, at a cost of roughly $1.5 billion.
To make it easier for developers to cover those costs — and to promote carbon-free power — states like Connecticut have directed their utilities to enter into long-term power purchase agreements at set rates, rather than the fluctuating prices found on wholesale energy markets. When the set rates are lower than wholesale prices, utilities can sell electricity back to the market at a credit to their customers. When the set prices are higher, customers must make up the difference through a portion of what’s known as the public benefits charge, which appears as a line item on customers’ bills.
Late last year, officials in Connecticut took a pass on entering into any new purchase agreements with offshore wind projects, a move that was widely seen as bowing to public pressure over the potential costs for ratepayers.
Each state’s utilities are responsible for procuring the electricity to meet their customers’ demands, but the power they contract for is not necessarily confined within their borders.
An electron that flows into the grid from a gas-fired power plant in Connecticut, for example, may end up turning on a lightbulb in Boston. Likewise, users in Connecticut may consume power generated by the Seabrook Nuclear Power Plan in New Hampshire, or a solar array in Maine.
And while customers are only on the hook for the power purchased by their utility or electric supplier, both lawmakers and industry experts say that adding new sources of generation to the mix in the long run has the potential to increase competition and lower costs throughout New England.
For example, Frank Reynolds, the chief executive of Orange-based United Illuminating, pointed to the efforts by the utility’s parent company, Avangrid, to connect to large-scale sources of power such as hydroelectricity from Quebec and a new wind farm off the coast of Martha’s Vineyard. The cost of both of those projects is being borne by the utility’s customers in Massachusetts.
“What Avangrid is attempting to do is inject more supply into the region,” Reynolds said. “Go back to your fundamental supply and demand curve. If you’re putting more supply in, and your demand remains somewhat constant, your price should come down.”
Managing expectations
Legislative leaders on both sides of the aisle have declined to set clear expectations ahead of their promised campaign to address widespread fury over electric bills. Building the new infrastructure necessary to get those sources of power online, some warned, will take years and is unlikely to lower costs in the short term.
“To say that somehow rates will magically come down at a certain number, nobody can predict any of those kinds of things,” said Senate Majority Leader Bob Duff, D-Norwalk.
For their part, Republicans are pitching a six-point plan, the centerpiece of which involves shifting public benefits charges — which currently account for between 15% and 27% of most bills — onto the state budget.
Democrats argue that the bulk of those charges are associated with the state’s deal to prop up the Millstone Nuclear Power Plant in Waterford, and they’re expected to decrease in May, offering some measure of relief whether or not lawmakers act.
As for the generation, transmission and distribution that accounts for the bulk of ratepayers’ bills, the exact amount of savings on the horizon will depend on the details worked out over the next five months.
Lawmakers are holding a forum Thursday featuring the heads of the state’s Public Utilities Regulatory Authority, Department of Energy and Environmental Protection and the regional grid operator ISO New England to discuss a potential framework for their agenda.
Not included in the list of speakers were represenatives from the two electric utilities that service the vast majority of Connecticut residents: Eversource and United Illuminating.
In a conversation with the Mirror, Reynolds advised customers not to expect “significant changes,” in their bills right away based on the actions of lawmakers. Asked what can be done at the state level to lower costs, Reynold’s referred to a simmering feud between utilities and Connecticut’s regulatory agency, PURA, which he said has placed financial strain on the utilities and led Wall Street to reduce their credit ratings, increasing the cost to borrow money and invest in infrastructure projects.
“I think they should be able to take some action so that we can bring some more predictability and stability to the regulatory environment,” Reynolds said.
Eversource, the state’s other major utility, cited supply costs as the main driver of New England’s electric prices in a statement released this week by spokeswoman Jamie Ratliff.
“As the legislative session continues, strong collaboration will be critical to addressing these issues, and we would love to have a seat at the table to provide the expertise on what investments will be necessary to deliver safe, reliable power in the most cost-effective way possible for our customers,” Ratliff said.
A spokesperson for PURA declined to comment.
Needleman, however, defended the agency, which he said has kept costs down for customers by reducing requested rate increases and forcing the utilities to return money to ratepayers following a widely-criticized storm response in 2020.
“Whatever the reasons… they [the utilities] have continually gotten less than they asked for, because somebody’s actually working hard to look very closely at what they do,” Needleman said. “The screaming and yelling and whining on the part of the utilities tells me that they’re doing a pretty good job with it. They don’t like it and I get it.”
Needleman also pointed to the success of lawmakers’ efforts to increase energy efficiency in Connecticut, which can reduce the overall cost of customers’ bills even when rates are high. According to the EIA, Connecticut ranks ninth out of all states in total energy consumption per capita.
The Office of Consumer Counsel, an independent state agency that represents utility customers before PURA, also weighed in on the debate over energy prices by calling for a “comprehensive approach” from lawmakers that addresses supply costs as well as the price of distribution — the portion of the bill on which utilities earn a profit and are regulated.
Brooke Parker, a spokeswoman for the office, said in a statement that those distribution costs “have been on a consistent upward trajectory,” underscoring the importance of PURA’s oversight.
“We face a myriad of challenges in our region and there isn’t one single solution that will easily provide rate relief, as different components of consumer electric bills are impacted by different regulatory, geographic, and market constraints,” Parker said.
“Fixing our energy supply shortage is a regional problem requiring regional solutions,” she said.