Connecticut's high electricity costs are a nagging problem. What will it take to fix it?

Photo of John Moritz
Eversource Energy workers demonstrate the steps involved in power restoration at the company's training site in Berlin, Conn. on Wednesday, October 28, 2020.

Eversource Energy workers demonstrate the steps involved in power restoration at the company's training site in Berlin, Conn. on Wednesday, October 28, 2020.

Brian A. Pounds/Hearst Connecticut Media

Despite the shock of a nearly 50–percent increase in electric prices announced by Connecticut’s two largest utilities last week, ratepayers in the Constitution State are no strangers to paying more for electricity — a nagging problem that experts and state leaders say could take up to a decade or more to solve. 

Even before the proposed price hikes, Connecticut was saddled with some of the highest electricity costs in the country, according to the U.S. Energy Information Administration, which placed Connecticut within the top five states based on the average retail price of electricity in nine of the last ten years. 

Two states outside of the contiguous U.S. — Alaska and Hawaii — regularly top the agency’s annual rankings, while the rest of New England and New York frequently filled the next-highest spots. 

Much of the reason for those costs has to do with the region’s reliance on natural gas to fuel its power plants, along with a limited supply of cheaper, renewable alternatives such as hydroelectric or solar power. 

“As we’ve gotten more reliant on natural gas in New England, we are at the end of a pipeline that has significant limitations,” said state Sen. Norm Neddleman, D- Essex, who chairs the General Assembly’s Energy and Technology Committee. 

In explaining the rationale for raising prices last week, Connecticut’s power utilities — Eversource and United Illuminating — pointed squarely at the global spike in natural gas prices caused by Russia’s ongoing invasion of Ukraine. This winter’s increases, which amounts to about $80 on the average electric bill, come from the costs that distributors pay to purchase electricity from power generators and pass along to consumers at-cost under Connecicut’s de-regulated electricity market.

State officials have already said they have little authority to oppose the price increases, which will last from January until June. 

Reigning in the long-term costs associated with New England’s electric grid, however, will likely require a mix of regulatory changes along with investments in infrastructure and renewables that could take years to produce results, according to lawmakers and energy officials. 

“The reason why the Northeast is where it is today is in part decisions that were made 60 years ago on these generation choices.” said Catherine Stempien, the president and CEO of Avangrid Networks, the utility division of United Illuminating's parent company. 

For example, Stempien noted that New England is home to four nuclear power plants that have been decommissioned in recent decades. Around the same time, she said, many states in the region transitioned away from coal power to cleaner-burning natural gas, while the pipeline infrastructure that transports gas has not been updated to meet the region’s demand, particularly in wintertime.

In order to fill demand over the winter, New England power stations have traditionally relied on imports of liquefied natural gas, according to David Cadden, a business professor at Quinnipiac University. Those imports, however, have also been curtailed due to the war in Ukraine, leading to concerns of rolling blackouts should demand spike during a cold snap.

As a temporary solution, some energy officials have proposed waiving the Jones Act, a federal law requiring that cargo transported between U.S. ports be carried on American ships. In an October letter to President Joe Biden, Eversource CEO Joseph Nolan said that such a waiver would allow foreign-flagged vessels carrying liquid natural gas to stop at multiple U.S. ports, including import facilities in Everett, Massachusetts. Nolan also proposed using the Defense Production Act to boost domestic energy supplies. 

“We’d at least be able to increase our supply, albeit [with] more more expensive liquefied natural gas,” Cadden said. 

Natural gas and renewable energy

A longer-term solution to increasing the supply of natural gas to New England would likely require adding additional transmission pipelines beyond the three that currently serve Connecticut, officials said, though doing so would be a costly initiative that could take years and would likely meet fierce opposition from environmental groups. 

“If we had more pipelines into the region, which is something we may need to consider someday, that would I think help to stabilize prices,” said Frank Reynolds, the president and CEO of United Illuminating. 

Several of the state’s top officials, including Gov. Ned Lamont and his commissioner of the Department of Energy and Environmental Protection, Katie Dykes, have instead pointed to the state’s efforts to transition away from fossil fuels entirely by 2040 as a vital component to reducing energy costs. 

“The State has and will continue to diversify our energy mix and reduce our reliance on fossil fuels, which are subject to global markets and extreme price volatility,” Lamont spokesman Anthony Anthony said in a statement Tuesday. “In addition to past and ongoing procurements of offshore wind and solar, other long-term actions the State has taken to insulate ratepayers from volatility in the market include keeping the Millstone [Nuclear] Power Station online, which has generated profits that are being returned to Eversource and UI customers; employing strategic electricity procurement practices that spread procurements out over time, and not only keeping our energy efficiency programs funded, but providing supplementary funds to those programs specifically for those most in need.”

The earliest estimates for the completion of grid-scale renewable energy projects — such as a wind farm slated to be built off the coast of Rhode Island — are measured in years, however, and even then they are likely to account for only a fraction of the region’s energy needs.

Regulation vs. de-regulation

The last major reform undertaken by Connecticut lawmakers in response to soaring energy prices was the de-regulation of electricity markets in 1998, which forced the utilities to sell off their stake in power plants and allowed customers to buy directly from third-party providers. 

While the move to de-regulation has not proved effective at lowering electricity costs relative to the rest of the nation, lawmakers have expressed skepticism about a return to vertically-integrated utilities that produce, transmit and distribute electricity. 

Nearly all of New England exists in de-regulated markets. The sole exception, Vermont, currently has the slightly lower electric costs than the rest of the region at 20.2 cents per kilowatt hour, according to Choose Energy That was still enough to put Vermont in the top 10 states nationally in terms of electricity prices heading into winter. 

Stempien, the CEO of Avangrid Networks, said that de-regulation left agencies like Connecticut’s Public Utilities Regulatory Authority with little power to investigate and intervene with prices set by power generators, which are passed along to utilities and ultimately ratepayers. Instead of returning to a fully regulated market, she said lawmakers should consider adopting a hybrid model that gives the state regulators more authority over supply costs. 

“I don’t have the exact answer, but I think it’s that combination that ultimately is the way that we all as the policy makers, the regulators and the utilities need to have a conversation around the table on how do we get the best of both worlds,” Stempien said. 

Norm Needleman, the co-chairman of the Energy and Technology Committee, said this week that lawmakers are “going to put all options on the table,” as they meet in the coming months to discuss potential solutions following the recent spike in prices. While he said that de-regulation may have resulted in slightly lower costs when averaged over a period of 20 years, the model has exposed residents to the volatility of global markets. 

“I would argue that stability for our ratepayers is as important as anything else,” Needleman said.

Cadden, the Quinnipiac professor, said that states can also consider taking action to require power generators to enter into longer contracts with their suppliers of gas and other fuels, in order to avoid sudden fluctuations in the spot market. The potential downside of that, however, would be that power plants — and thus utilities and ratepayers — would be stuck with higher costs if the price of fuel drops. “It’s a bet,” he said. 

In a statement Tuesday, Eversource spokesman Mitch Gross said that the utility was open to working with lawmakers to develop long-term solutions to lowering the cost of electricity in Connecticut. 

“We’re always ready to work with state agencies and lawmakers and are ready to provide objective analysis for any proposals the Executive and Legislative branches might consider,” Gross said. “We agree with Governor Lamont’s request to the legislature to bolster current energy assistance programs in the state to ensure they’re fully funded to help customers during these times.”

In the meantime, utility officials like Stempien said that New England states should be taking steps to avoid compounding the region’s challenges, such as working together to avoid the anticipated closure of Massachusetts' Mystic Generating Station, which sits adjacent to the liquid natural gas import facility in Everett. 

If the station is allowed to close, Stempien said, it could impact the rest of the region’s ability to import gas from overseas, leading to more shortages and higher costs.