Why are electric rates in Connecticut among nation’s highest?

Eversource and United Illuminating are seeking regulator approval for upward rate adjustments to cover rising costs of electricity they purchase on behalf of Connecticut customers. The utilities expect bills to drop significantly this summer as prices ease for natural gas that is used to generate more than half of New England’s electricity.

The state is likely to remain among the highest in the country for electric rates, as well as in the region. December 2004 was the last time Connecticut had the lowest monthly price of electricity on average among the New England states, at 9.1 cents a kilowatt hour according to calculations published by the U.S. Energy Information Administration.

By August 2006 the switch would flip for Connecticut ratepayers, however, beginning a run in which households and businesses began absorbing the biggest electric bills in the region for extended stretches. Between 2006 and 2022, the average price of electricity in Connecticut ranged anywhere from 3 cents to 6 cents a kilowatt hour above the lowest cost states in the region — most often Maine and Vermont — with Connecticut prices topping the region in eight-and-a-half months of each year on average.

Why the wide differentials between adjacent states under the same ISO New England market that oversees electricity sales by power plants servicing the region? Partly it is the result of different times of the year that utilities purchase electricity from power plants. Connecticut law requires Eversource and United Illuminating to purchase power at sixmonth intervals for resale to customers on “standard offer” service.

Utilities purchase those power commitments in January and July, coinciding when prices tend to be at their most volatile whether due to competition for available natural gas supplies that is also used to heat homes and businesses, or during spikes in electricity demand during hot weather to run air conditioners.

State Sen. Norm Needleman, D-Essex, and other officials have joined Eversource and United Illuminating in promoting the idea of changing those purchase windows to the spring and fall, when prices reflect more normalized electricity use.

“What you see month-tomonth from one state to another is more a function of technicalities,” said Needleman, who co-chairs the Energy and Technology committee of the Connecticut General Assembly.

The utilities are projecting another significant decline in prices this summer for standard-offer customers, given current outlooks for the price of natural gas used to produce electricity. In Connecticut and other states in the region, ISO New England oversees the wholesale market for electricity purchases from natural gas plants.

Eversource and Avangrid executives say Connecticut is carrying extra costs not being borne by neighbors, however, to include a contract to purchase power from the Millstone nuclear power plant in Waterford operated by Dominion Energy, and a COVID-19 pandemic moratorium on any terminations in service to force customers in arrears to pay their bills. The utilities want those losses spread among the larger customer base.

There have been stretches where Millstone purchase contracts have benefited Connecticut, including for six months in 2021 when Millstone electricity prices dipped far below those for natural gas power plants that other states rely on for power.

While Millstone generates regular headlines for its importance to the Connecticut grid and economy as a major employer in southeastern Connecticut, the state also purchases power from the Seabrook nuclear plant in coastal New Hampshire operated by NextEra Energy. That contract runs through 2030, with Seabrook charging a lower rate than Millstone.

Vermont also purchases electricity from the two nuclear plants. Over 13 months through last December, Vermont had the lowest average electricity prices in New England, according to EIA, and has seen comparatively minimal swings in prices on a yearover-year basis.

Vermont was the lone state in the Northeast not to have forced utilities to sell off their power plants during the 1990s. Vermont’s decision has not proven a magic wand, with the American Public Power Association reporting the state ranks among the 10 most expensive nationally for electricity prices.

But in the same study, APPA determined that in deregulated states where utilities like Eversource and United Illuminating focus on transmission and distribution of electricity, prices have been higher on average nationally since 1997.

“The original promise of greatly reduced prices has not materialized,” analysts with the American Public Power Association wrote in the report. “Rates in Connecticut, Massachusetts, and Rhode Island have increased at least double the national average.”

A New Hampshire official told CT Insider that the state saw a short spike in prices last year that has since subsided, similar to Connecticut’s experience reflecting the timing of default electricity service and accompanying volatility in natural gas prices.

“Connecticut has imposed a number of public policy decisions that New Hampshire has not engaged in, often associated with decarbonization,” stated Christopher J. Ellms Jr., deputy commissioner of the New Hampshire Department of Energy, in an email. “All public policy decisions come with a cost. Presumably, policymakers in Connecticut believe the benefits of those decisions are worth the cost to their constituents.”

Needleman says he struggles to this day with the idea that neighboring states have differentiated policies and systems, given their shared grid infrastructure, economic ties and experiences from major weather events.

“The reality is, operating as little jurisdictions in a country our size — when we have global problems going on with regard to climate — is kind of backwards,” Needleman said. “You can’t fix problems one state at a time, one power plant at a time. The systems is a patchwork of regional grid operators . ... You try to do the right thing for the big picture of climate and reliability and cost.”

“The original promise of greatly reduced prices has not materialized. Rates in Connecticut, Massachusetts, and Rhode Island have increased at least double the national average.”

AMERICAN PUBLIC POWER ASSOCIATION REPORT