As Connecticut braces for Jan. 1 electric rate hike, customers have short-term options but officials say long-term change needed

With sharp electricity rate increases less than one month away, state officials are scrambling to try to soften the blow for ratepayers as they approach the cold winter months.

Starting Jan. 1, the state’s two largest electric utilities will be enacting 100% rate increases on the “generation’' portion of their bills that will hike costs by about $85 per month for the average Eversource customer and nearly $80 per month for United Illuminating that covers 17 towns near the shoreline.

The increases can be traced all the way back to the state’s switch to electrical deregulation that was approved in 1998 under then-Gov. John G. Rowland. Deregulation reduced the powers of state officials to set electrical rates and opened the market to a wide variety of electrical “generators’' who sell power on a competitive basis.

Consumers started shopping around to get discounted rates from a variety of providers, but many ratepayers eventually gave up over the years after receiving short-term rates that were suddenly increased when their low rate expired.

As a result, 90% of Eversource customers now take the “standard rate’' that is offered by the company, according to the state’s consumer counsel. In the same way, 83% of UI customers currently take the standard rate instead of shopping around.

Those Eversource and UI customers will see an increase of about 100% in the generation portion of their bill, which is separate from the “distribution’' portion charged by the utilities.

Over the past five years, the supply rates charged by the utilities in a pass-through from the generators have been in a relatively narrow range of about 8 cents to 12 cents per kilowatt hour. The prices have been nowhere near the new rate of 24 cents — the level coming Jan. 1 that has sparked outrage around the state.

Gov. Ned Lamont says that Eversource customers will receive a monthly credit of about $10 on their bills, and the state will be working in future months to help low-income ratepayers who qualify for assistance.

While many consumers have fallen out of the habit in recent years, state officials say that they can avoid the price hikes by shopping around for a better price for their electricity.

Sen. Norm Needleman, an Essex Democrat who co-chairs the legislature’s energy committee, said there is an alternative with third-party suppliers that are outlined at energizect.com. The companies include North American Power and Xoom Energy CT, among others. Compared to the coming 24 cents per kilowatt hour for Eversource customers, Constellation NewEnergy, Inc. recently has charged $13.79 cents per kilowatt hour for three years.

As of Dec. 1, the rate increased to 16.59 cents for the three-year plan, according to the company’s website.

“Constellation is still a viable alternative in the market at below 14 cents — or at least they were‚’’ Needleman told The Courant. “This is likely to be a blip. No one can guarantee it. It’s a volatile market. If you lock in to get Constellation’s current offer, and rates go back to 8 cents or 9 cents or 10 cents, you’re going to be angry about it.’'

Some consumers have been burned over the past decade when trying to get the best generation rates.

“Part of the problem with the third-party providers is that they demonstrated over the last 10 years that their approach to selling to consumers has been less than stellar,’' Needleman said in an interview. “You have door-to-door sales. People who are predatory who provide you teaser rates. You do a 12-month contract and save a little bit of money, and in month 13, the average consumer isn’t following this. In month 13, any savings they had over the past 12 months, they give back in one month before the bill can be changed.’'

Attorney General William Tong, who was standing next to Needleman during the interview, added, “We pushed at least a couple of those bad actors out of the market in just the past 12 months — at least two.’'

Tong notes that Eversource and UI do not collect profits from the supply rates because those are pass-through costs from the electric generators. But from the distribution rates the utilities earn profits that totaled $540 million in net income for Eversource and $59 million for UI.

At the moment, the price has skyrocketed far beyond what consumers have seen in the past.

“It’s the dark side of deregulation,’' Needleman said. “I can’t tell you — if you go over the last 20 years — has the state benefitted from deregulation on the supply side? My feeling is that the ratepayers of the state, for an essential service like electricity, not only deserve as close to the best prices they can get, but they need stability. What you see in a deregulated market is an inherent amount of volatility. ... We’ve created a market for electricity that is half regulated and half deregulated.’'

Needleman and his fellow Senate Democrats have called upon the state’s Public Utilities Regulatory Authority to hold a joint, multistate hearing to examine Eversource operations in New Hampshire and Massachusetts, as well as Connecticut. No date has been announced for a public hearing.

“This is not a problem that Connecticut alone can solve,’' the senators said. “We do not live in a vacuum, and this crisis requires a regional solution. Connecticut must work with Massachusetts and New Hampshire, the other states in which Eversource operates. Together, we can hold Eversource accountable as our ratepayers demand.’'

Broader issues on electricity

State officials concede that far larger forces are at work that are impacting Connecticut.

“The main reason for the supply rate increase,’’ said state consumer counsel Claire E. Coleman, “is the global impact of Russia’s invasion of Ukraine, which has caused higher prices for oil and natural gas globally and here in the U.S. Connecticut, like all New England states, is heavily reliant on natural gas for electricity, and, therefore, when the market price of natural gas increases, supply rates also increase.’'

Coleman added, “Even though the United States only imports a small amount from Eastern Europe, the disruptions are affecting prices worldwide, including in the United States and particularly in New England, where we still rely heavily on natural gas and on Liquified Natural Gas (LNG), which has been in higher demand in Europe resulting in significant increases to the price of LNG, which sets the market price.’'

On the broader issues of energy policy, state officials say they have been working on the problem in a variety of ways.

“The state has taken several actions to help insulate residents from situations like this, which is why we kept the Millstone Power Station online, providing a cheap, reliable, and carbon-free source of electricity online that is generating net profits that are being returned to Eversource and UI customers,’' said Katie Dykes, the state environmental commissioner. “This is why we employ strategic electricity procurement practices, and why the governor has kept our energy efficiency programs funded. It’s also why the state is working hard to diversify its energy mix and has pursued past and ongoing procurements for clean energy resources such as solar and offshore wind that will reduce our reliance on fossil fuel resources over time.”

Tong has been following the developments closely and speaking with utility executives.

“The challenge for us in the office of the attorney general is this is unconscionable right now to double the price from 12 cents per kilowatt hour to 24 cents per kilowatt hour,’' Tong said in an interview. “People are getting punished. We expected some change from summer to winter in the cost of natural gas and the cost of the commodity, but we didn’t expect a doubling. We’re essentially at the mercy of the global energy market. This underscores how important it is to move away from natural gas and to other sources. I just toured Millstone, by the way, not that long ago.’'

Tong has agreed to settlements with Eversource and UI in the past on the “distribution’' portion of the bill.

“That’s where we can really lean on them, and that’s where we’ll fight the utilities at PURA on the distribution side,’' Tong said. “But on the fuel side, it’s ugly.’'

“Specifically, I have asked them to contribute a percentage of shareholder earnings commensurate with the percentage increase their customers will pay this winter to keep their lights and heat on. To date, they have refused,” Tong said. “We need to take a hard look at who is profiting and who is harmed as we search for long term reform.”

Senate President Pro Tempore Martin Looney of New Haven and Senate Majority Leader Bob Duff of Norwalk jointly condemned the hikes.

“Eversource has doubled its stock price in the past 10 years, and Avangrid posts billions of dollars in profit each and every year,’' they said. “It never ceases to amaze us how quarterly shareholder dividends and multimillion dollar CEO payoffs are always paid on the backs of consumers, no matter what the circumstances, no matter what the profits, no matter what the payouts. Eversource and Avangrid have failed their customers, and we will explore every available avenue to oppose these rate hikes. We cannot expect these profit driven, out-of-state companies to do what’s right for Connecticut residents.’'

Ways to get help

Based on income, various assistance is available from the Connecticut Energy Assistance Program. Online applications can be found at ct.gov/heatinghelp/apply. Assistance is also available at Operation Fuel Assistance by calling 860-243-2345 or operationfuel.org/gethelp.

Eversource is hosting a webinar at noon Dec. 8 that covers options for help. Registration is required by calling 800-286-2828 or at Eversource.com/Billhelp.

Looking ahead

Legislators realize that consumers are highly concerned about their rates with less than one month before the price hikes take effect.

“The average ratepayer,’’ Needleman said, “cannot tolerate a doubling of rates, and it has us all scrambling to figure out what we can do as legislators. As the policymakers, we have an obligation to look at that volatility and decide what the right approach is.’'

House Republican leader Vincent Candelora of North Branford said the state needs to take a more comprehensive view and develop more generation sources in order to solve its electricity problems.

PURA, he said, needs to be removed from the Department of Energy and Environmental Protection and become a completely independent agency once again. Previously known as the Department of Public Utility Control, the DPUC was independent until it was folded into DEEP in 2011 by then-Gov. Dannel P. Malloy. Critics say that relationship represents a conflict of interest.

The solutions, he said, can only come through creative ideas on a larger scale.

“It’s about the state of Connecticut not supporting policies like fracking, like piping liquefied natural gas, and like hydropower,’' Candelora said. “New England has put itself on an island by not looking at those alternative energy sources to supply our generation plants. We should be looking at more nuclear, but you mention that word and the environmentalists go crazy. ... I think it’s a much broader problem than deregulation. Connecticut has to get serious about diversifying and stop focusing just on solar and wind.’'

Candelora, who will be the third-longest serving House Republican when the new session starts, concedes the solutions are not simple.

“No one reads these energy bills,’' he said, “and it’s one of the more complicated issues in Connecticut.’'

While the major issues remain unresolved, many customers will be paying higher rates on Jan. 1.

“Short-term, the public is going to be left in the dark,’' Candelora said. “There are no good short-term solutions.’'

Christopher Keating can be reached at ckeating@courant.com