Rate Inflation in New England (perils of political electricity)

By Allen Brooks -- December 10, 2024

“Electricity bills in New England are poised to experience a sharp increase driven by the clean energy mandates in five of the six states, which require duplicative, overbuilt renewable energy.”

Connecticut ratepayers suffered sticker shock this summer when they opened their July electric bills. While their energy consumption was relatively flat, the “public benefits” component doubled for some and tripled for others. The culprit was not hard to find given a legislative requirement for utilities to itemize the cost components of monthly bills.

“Public benefits” cover the cost of subsidies the state provides for low-income electricity customers and energy-efficiency programs. They also include solar, electric vehicle, and other renewable energy incentives.

The wide array of renewable energy subsidies and aid to low-income residents who cannot afford high-cost electricity, growing everywhere, is an increasing cost burden for power users in the Northeast.

Connecticut: Worst of the Worst

The Northeast has become the most expensive region in the continental United States for electricity. Connecticut has the most expensive electricity in the 50 states outside of Hawaii. Connecticut’s overall electricity price for this September, according to the Energy Information Administration, was 27.08 cents per kilowatt-hour (ȼ/kWh), compared to Hawaii’s 35.46 ȼ/kWh.

Usually, the most expensive state for electricity is California, but its price fell 0.5 cents per kilowatt-hour behind Connecticut’s. When we look at residential electricity prices, California was nearly 1.5 cents behind Connecticut’s 33.01 ȼ/kWh price.

Connecticut had the highest price of the six New England states. Even the least expensive state’s residential power, Vermont, was over 22 ȼ/kWh. Compared to the U.S. price, New England Residential and All Sector prices were roughly 75% more expensive, and every state exceeded the national average by a healthy margin.

Connecticut State Senator Ryan Fazio of Greenwich (R) has been investigating the electricity market during his three years in office. Just re-elected, he is more intent on changing the law to have the expense of public benefits come from state taxes and not utility bills. His rationale is that while many of these programs are worthy, they should be subject to public hearings and vetting every two years for cost and benefit analysis rather than automatically being funded “through a hidden tax in your electric bill.”

Connecticut electricity customers are starting to understand the exposure they have to the growing cost of subsidizing renewable energy programs, which are key to the state’s decarbonization goal. Their concern played a role in Connecticut Governor Ned Lamont (D) declining to participate in the purchase of offshore wind this past summer despite being a partner in a ballyhooed tri-state offshore wind agreement between Connecticut, Massachusetts, and Rhode Island. His reluctance was due to the high cost of the power and the growing pushback from residents over their rapidly rising electricity bills.

A portion of the public benefits charge is to finance the continued operation of the state’s Millstone nuclear power plant, which legislators thought was a good idea in 2019. Lamont tried unsuccessfully to get his fellow governors in the offshore wind agreement to purchase some of the plant’s output, which would help Connecticut residents by having more power paid for by others. They turned him down.

At a presentation to the Stamford Board of Representatives’ State & Commerce Committee, Fazio discussed the public benefits charge and the “policy mistakes” Connecticut has made in its electricity market, contributing to the state’s high prices. He showed a chart breaking down the costs of electricity bills. Producing electricity represented 30% of the bill, while transmitting it from the generation plants to substations was 11%, distributing it to homes was 31%, and public benefits represented 28%.

As a Republican in a Democrat-controlled state, Fazio’s effort to revamp the regulation of the public benefits charge may not progress. While he has 64 co-sponsors, he still lacks 25 for the bill to get a hearing. However, his efforts to educate the public and his fellow legislators will keep the issue of who pays for what (and how much it will cost) in the renewable energy transition under state policy front and center with the public. And “green” politics is becoming a harder and harder sell.

Rhode Island

Rhode Island is experiencing rapidly rising residential electricity prices. The culprit? The renewable energy charge, which increased eightfold between 2017 and 2023.

In light of Fazio’s comments about the public benefits, consider my electricity bill for our summer home in Rhode Island. Using the same categories as Fazio, Rhode Island’s breakdown is notably different. Power generation represented 49% of our bill, distribution 24%, transmission 12%, public benefits was 15%. Some of these differences would be expected, given the difference in the geographic size of Connecticut versus Rhode Island. Additionally, Connecticut’s population is three times that of Rhode Island.

These differences help explain the higher distribution share in Connecticut. Surprisingly, the transmission shares are similar. The most surprising difference is the cost of the power, which is partly explained by the nuclear power supply in Connecticut, as Rhode Island has none. It appears Rhode Island isn’t spending as much on public benefits as Connecticut. That is probably because of its smaller population, so fewer people benefit from or need public support programs.

Massachusetts

Consider a recent study estimating the cost of “green” energy programs of New England, The Staggering Costs of New England’s Green Energy Policies, by Isaac Orr, Mitch Rolling, and Trevor Lewis (September 2024) found:

The annual cost of Massachusetts renewable energy policies has quadrupled in 10 years from $250 million in 2011 to $1 billion in 2020. Cumulatively, this has cost Massachusetts ratepayers $6 billion in increased electricity prices in that period.

This charge cost the seven million residents of Massachusetts $143 in 2020 and approximately $850 over 2011–2020. The 2020 cost is about $12 per month in ratepayer bills. We do not know if or by how much that charge has increased to 2024, but we assume it has. In Rhode Island, the equivalent program cost is about $18 per month in our electricity bill.

More Rate Hikes Ahead

Electricity bills in New England are poised to experience a sharp increase driven by the clean energy mandates in five of the six states, which require duplicative, overbuilt renewable energy. A new report outlines the cost of decarbonizing the Independent System Operator – New England (ISO-NE) electricity system that provides power to the six New England states by 2050. This effort necessitates renewable energy generation, increasing its share of total power generation from 6% in 2023 to 71% in 2050. That means adding 97 gigawatts (GW) of new renewable generation capacity.

The grid expansion is required to power the 106% increase in New England’s electricity by 2050 predicted by the shift to electric vehicles and heat pumps. This massive increase in power use will also shift the region’s seasonal peak from summer to winter. Additionally, winter days will experience two peaks a day – when people start their day and when they return to their homes in the late afternoon and early evening.

Conclusion

The Orr, Rolling, and Lewis study documents the staggering costs for New England residents’ decarbonization plans. This joins a two-year study by ISO-NE estimating the need for 97 GW of renewable power with projected blackouts calling for overbuilding capacity. Is the public aware of the cost tsunami heading their way courtesy of state decarbonization plans?

As the public becomes better educated about their electricity system’s current and future costs, expect increased resistance to state decarbonization efforts. Shockingly high electric bills are turning out to be a huge motivational push for people to learn more. An educated public is good, but not for the politicians and regulators pushing the decarbonization agenda.