An economist who specializes in the energy industry said a major electric rate slated to hit Connecticut ratepayers boils down to two things: Higher natural gas prices due to Russia's war in Ukraine, and Connecticut's reliance on natural gas to simultaneously generate electricity and heat our homes in the winter.
The rate hike, slated to take effect Jan. 1, could result in an average hike of $80 per month on a customer's bill — although lawmakers are working to reduce the increase.
Kenneth Gillingham, an economics professor at Yale University, said he believes high natural gas prices should come down soon. But he said elected leaders should work to move Connecticut away from its dependency on natural gas.
These interview highlights have been edited and condensed for clarity.
John Henry Smith: Is there anyone who rightfully deserves anger in this situation?
Kenneth Gillingham: Putin. The leader of Russia deserves our anger right now. The true source of this really does come down to the war in Ukraine. But it also comes down to some poor long-range planning in New England. This reliance on natural gas for our electricity [and] for our heating puts us in a situation where we have to worry every winter about whether prices are going to skyrocket.
John Henry Smith: If you were advising our elected officials, what would you tell them they need to do going forward to avoid a situation like this?
Kenneth Gillingham: That would be switching buildings out from natural gas and also making sure that we have adequate peaking, electricity, generators, electricity power plants that don't run on natural gas. We don't want to really go back to coal or to fuel oil, but batteries and other new technologies may be able to help us there.
John Henry Smith: This coming energy rate surge is playing out across New England. Is there something about our region that makes us particularly susceptible to higher energy costs?
Kenneth Gillingham: A big part of it is that it's difficult to get enough natural gas into New England. There's very inexpensive natural gas, predominately from fracking and in Pennsylvania, but we have very severe pipeline constraints, pipelines just aren't large enough to get that natural gas to us in the middle of winter.
John Henry Smith: Across the state, there are around five municipal utility companies. Their prices are going up, [but] apparently, they're not going up nearly as high as they are for companies like Eversource. Why doesn't every city do this?
Kenneth Gillingham: It's a lot of work to set up a municipal utility. Going back to poor planning, this summer, there were contracts that were going for $40 per mmbtu [a unit of measurement for natural gas] when, usually, you're talking about $5 to $7 per mmbtu for delivery during the winter. And that's just a huge, huge, huge increase. But the executives at the utilities were scrambling to try and make sure that they had resources to keep the lights on. Whereas some of the executives at smaller municipal utilities have longer-term power contracts set in place.
John Henry Smith: How permanent or how entrenched do you think these high natural gas prices appear to be going forward?
Kenneth Gillingham: The good news is that I think these natural gas prices are going to come down. When the war in Ukraine started, Europe found itself in deep trouble and desperately was looking for any source of natural gas it could get, and that raised an international crisis. Now they're in a better state. They're still worried. So the prices are still high, but they're actually coming down somewhat and — depending on what our winter looks like and what their winter looks like — we may have some hope that these price increases are not going to continue.
Note: Gregory B. Butler, who is an executive with Eversource Energy, is a member of Connecticut Public's Board of Trustees.
