Energy Musings - December 9, 2024
New England ratepayers are becoming educated about what is driving up their electricity prices. The region has the most expensive power in the continental U.S. The future will be more costly.
New Englanders Worry About Their Electricity Bills
Connecticut electricity customers suffered sticker shock this summer when they opened their July bills. While their energy consumption was relatively flat month to month, they found that the charge for the “public benefits” portion of their bill doubled and sometimes tripled. Their awareness came from a legislated requirement for utilities to itemize the cost components of ratepayer 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 is growing everywhere. It is increasingly becoming a cost burden for power users in the Northeast.
Ratepayers’ financial pain is caused by the Northeast becoming 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 September, according to the Energy Information Administration, was 23.70 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 $0.50 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 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.
See how expensive electricity is in New England.
Connecticut State Senator Ryan Fazio of Greenwich (R) has been investigating the electricity market during his three years in office. Having just been 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 is likely not to 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.
Last spring, we wrote about the Rhode Island electricity system and its rapidly rising residential electricity prices. We highlighted the renewable energy charge, which increased eightfold between 2017 and 2023.
In light of Fazio’s comments about the public benefits, we examined our recent 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 was 24%, transmission was 12%, and 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’s. 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.
Earlier this year, a study was published about the cost of “green” energy programs for New England, focusing on Massachusetts ratepayers. One of the conclusions from the study was: “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.
Electricity bills in New England are poised to experience a sharp increase driven by the clean energy mandates of five of the six states and what the overbuilding of renewable energy for the region will cost. 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 return to their homes in the late afternoon and early evening.
Electric heating demand will drive power consumption.
The study found that building only 97 GW of renewable power will leave ISO-NE vulnerable to blackouts that could last 18 hours. Therefore, the study calculates that 225 GW of renewable capacity must be built at a total cost of $815 billion. That magnitude of renewable capacity is needed to ensure power 24/7 if the weather patterns in the future mirror those of 2023. The study also noted that weather patterns for wind and solar were worse in 2019 than in 2023, but the authors did not estimate how much more renewable capacity would be needed.
The study forecasts that the region must build over 6,600 offshore wind turbines, over 5,600 onshore wind turbines, and over 129 million solar panels, which are estimated to cover over 200 square miles, to reach 225 GW of new renewable energy generation in the most efficient way. How much will this denigrate New England’s beauty?
According to the study’s model, to pay for this massive renewable capacity buildout, electricity prices will double between 2023 and 2050. The average residential ratepayer will see their electricity price increase by nearly $99 a year, while the average commercial and industrial ratepayer should expect their prices to increase annually by $489 and $5,280, respectively.
On a per-capita basis, the cumulative cost for these new assets will cost each person in New England an additional $2,061 in 2030, $15,552 in 2040, and $51,914 in 2050. The study broke down the cumulative cost for each of the six New England states using the population estimates for 2030, 2040, and 2050.
The 2050 costs for state residents are shockingly high.
As the study's title suggests, these are staggering costs for New England residents' decarbonization plans. When we wrote earlier about the two-year study by ISO-NE leading to the projection of having to build 97 GW of renewable power, we analyzed the weaknesses in the plan’s options. Blackouts were evident, and only by substantially overbuilding the capacity needed would they be minimized. Lacking the necessary data, we could not conduct a detailed analysis like the one used in this study. It confirms a much worse expectation than we had, but it points out how unaware the public is 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, we 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 about what is driving them. An educated public is good, but not for the politicians and regulators pushing the decarbonization agenda.