Why is Connecticut electricity so pricey?
Here are 7 reasons why it leads lower 48 states in cost
Connecticut’s electricity prices are the highest among the lower 48 states, exasperating consumers and business owners and hampering economic development.
Jet engine manufacturer Pratt & Whitney, for example, cited lower electricity costs when the subsidiary of Raytheon Technologies Corp. announced last year it will build an energy-devouring manufacturing plant in North Carolina rather than in its home state of Connecticut.
In 2019, the most recent year for which data are available, electricity in Connecticut cost about 18.7 cents a kilowatt hour, according to the U.S. Department of Energy. It’s cheaper than what residents of Alaska and Hawaii paid, but is more than double the price in Idaho, Louisiana, Montana, Nebraska and elsewhere.
Cold winters, end of the line and zero-carbon power
Cold winters drive up demand — and the cost — of natural gas to fuel power plants; being at the end of natural gas pipelines adds to transit costs; and public policy is boosting costlier low- or zero-carbon power such as solar and nuclear. That’s only the start.
Ironically, electricity is increasingly expensive as wholesale
prices fall due to lower demand, improved energy efficiency and rising use of renewable energy such as solar power. Transmission costs have soared more than six-fold between 2004 and 2019, according to the New England Power Generators Association.
Costs related to the electricity transmission and distribution systems that connect power plants with consumers are for construction, which is higher in the Northeast where land for generators is costlier and the price of labor is higher; operation and maintenance that includes repairing damage related to accidents or extreme storms; and improving cybersecurity, the power generators group said.
Another cited by the state Department of Energy and Environmental Protection is that federal energy regulators allow an “unreasonably high” return on equity — a measure of the profitability of a corporation relative to stockholders’ equity — for transmission costs, ranging from 10.5% to nearly 12%.
Transmission costs in New England have risen from $869 million in 2008 to $2.3 billion a decade later, DEEP said.
In addition, electricity customers pay for transmission congestion that cost $205 million from 2015 to 2019, said Amy McLean, Connecticut director and senior policy advocate at the Acadia Center, a clean energy advocacy group.
Located between two much larger “load zones” — Boston and NewYork — Connecticut is subject to transmission constraints making a kilowatt hour more expensive, she said.
Natural gas and winter price spikes
Natural gas accounted for nearly half of New England’s fuel mix in 2019, the largest component, according to ISO-New England, the region’s grid operator. Nuclear accounted for 31% and renewable energy such as wind power and solar panels were the source of 11% of the region’s energy produced by generators.
The sizable share of natural gas has helped reduce the region’s carbon footprint as generators shifted from oil. But it leaves New England vulnerable to price spikes during the winter, according to Eversource and UI, Connecticut’s dominant publicly traded utilities.
“New England has a gas supply problem,” said Jim Shuckerow, director of electric supply at Eversource Energy. “There’s a limited amount of natural gas pipelines.”
During winter cold spells, the first users are home heating and industrial customers, and whatever remains is for natural gas generating plants, leading to rising prices, he said.
The Public Utilities Regulatory Authority said it explains “why the supply charge on customers’ bills is always higher” from Jan. 1 to June 30 than during the second half of the year.
Pat McDonnell, vice president for regulatory affairs for Connecticut at UI, said “gas constraints,” or the lack of capacity on pipelines, drive costs higher in NewEngland than in neighboring states. Customers in Danbury pay 6 cents a kilowatt hour more than electricity users across the state line in Brewster, NewYork, “just because you’re in the NewEngland pool vs. the New York pool,” he said.
The Connecticut Department of Energy and Environmental Policy said the region’s wholesale market’s “overreliance on natural gas generation” are partly to blame for putting Connecticut ratepayers at risk of “paying unreasonable and duplicative costs for energy supply.”
Connecticut vs. the regional grid
DEEP says ratepayers pay twice to receive the same service: once for Connecticut’s share of the costs of markets within ISO and again through a component of United Illuminating and Eversource Energy distribution rates for clean energy that Connecticut contracts with to adhere to the state’s laws and requirements, DEEP says.
ISO said a concern about paying twice has been lessened partly because several hundred megawatts of renewable energy procured by the states — solar and wind power — have received credit through 2021. And it could grow when large-scale offshore wind power is bought. The projects have not yet been built, and consumers are not paying twice, ISO said.
Environmental policies
Environmental policies established by states also are responsible for higher costs.
“Where we are seeing a major shift is the drive for decarbonization,” said Dan Dolan president of the New England Power Generators Association. “It’s seen as appropriate public policy goals because we’re looking to decarbonize.”
Doug Horton, vice president of distribution rates and regulatory requirements at Eversource, said public policy in New England recognizes the “importance of those reducing greenhouse gas emissions and prioritizing that, acknowledging there’s a cost to not doing anything.”
“It just may not be that same priority elsewhere in the country,” he said.
Millstone power plant
Another factor cited in higher electricity prices in Connecticut is a 10-year contract with the Millstone Power Station in Waterford required by state law. The General Assembly and Gov. Ned Lamont approved the deal in 2019 after Millstone’s owner, Dominion Energy Inc., lobbied to compete with wind and solar energy for state power procurement. Nuclear plants also struggled to compete with natural gas.
Rep. David Arconti, House chairmanof the legislature’s energy and technology committee, criticized the deal that leaves Connecticut to solely bear the cost of the deal.
“Noone else in NewEngland has to support that contract,” he said.
“It should be a regional solution.”
Connecticut environmental officials said the state “reluctantly entered into a 10-year contract” backed by Connecticut ratepayers to prevent Millstone from shutting before the end of its operating licenses in 2035 and 2045. “No regional ISO-NEmechanism” was available to keep Millstone operating, and it “was imminently at-risk of retirement,” the state said.
ISO said Dominion did not submit an application to retire the plant, and the ISO was not directly involved in negotiations between Dominion and the state.
What’s next?
Arconti, a Danbury Democrat, said newpolicies by the state Public Utilities Regulatory Authority will lead to rate approvals based on performance rather than the utilities’ cost to provide service, he said.
Customers’ bills are separated into two components, supply and delivery, but over time electric bills have expanded to reflect other cost drivers that leave customers confused. The state Public Utilities Regulatory Authority has directed its staff to submit a redesigned electric bill by Sept. 30.
If there’s a consolation, other New England states are not far behind Connecticut in electricity prices.
“It’s a very, very close race,” said Shannon Laun, staff attorney at the Conservation Law Foundation, an environmental group.
Still, Connecticut’s rank as No. 1 is a “dubious honor,” she said.